Good Evening,

Welcome to Equity Espresso

We’re here to catch you up on the day’s stock market news in Australia and abroad.

Here’s a sample of what you may have missed today:

1. 💕 A Costly Right Swipe 

2. 🩻 Pro Medicus 10-year delight

3. 🏘️ Byron Bay Caps Short Stay Rentals

4. 👀 Mineral Resources eyeing expansion

5. ✈️ Qantas pilots call for chairman to stand down

The Recap

ASX Falls As
Qantas' Chairman Challenged

The ASX200 index fell by 38.3pts. today to 7,038.2, despite the positive lead overnight from Wall Street. Nine of the 11 sectors fell, with Tech (-1.9%) and Materials (-1.7%) the biggest laggards.

Iron ore futures fell by 1.2% to $US114 a tonne. The price of Uranium continues to sit above US$65.0, with beneficiaries Paladin Energy (+3.8%), Boss Energy (+0.4%) and Deep Yellow (+6.2%) all continuing their upward momentum.

The Healthcare sector was the big winner today thanks to Pro Medicus popping 12% after announcing it has secured a 10-year $140 million deal with U.S.-based Baylor Scott & White Health. Mineral Resources is another to keep an eye on; they will be raising US$850 million in five-year debt for finance expansion.

We take a closer look at the Healthcare sector later in the Newsletter and what is driving the sector underperformance.

Asian markets also fell across China, Hong Kong and South Korea as the prospect of higher U.S. rates weighed on the tech sector. Property developer China Evergrande Group sank by a further 5%, extending losses from Monday after it said it could not issue new debt due to an ongoing government investigation into one of its units.

Outlook

U.S. futures are trading lower, with both the S&P 500 (-0.48%) and NASDAQ (-0.60%) in the red, implying a negative start to the session.

Key economic data overnight to keep an eye on in the U.S. include:

• New Building Permits Granted

• Consumer Confidence

• New Home Sales

Economic News

• Overnight, the president of the European Central Bank (ECB), Christine Lagarde, said that interest rates will remain high enough to limit business activity for however long it takes to combat inflation. She did express empathy towards homeowners who have experienced an increase in mortgage payments. Lagarde explained that rates will remain high due to the persistent inflationary pressures in the 20 countries utilising the euro currency.

Wall Street

Wall Street posted gains on Monday to break its four-day losing streak. This came despite a surge in treasury yields as investors await the Federal Reserve policymaker’s remarks. Both the S&P 500 (+0.40%) index and NASDAQ (+0.45%) finished higher.

Among the S&P 500 sectors, Energy (+1.3%) led the way, while Materials (+0.8%) also finished higher. Defensive sectors lagged, with the Consumer Staples group dropping 0.4%.

In company news, Amazon stock rose 1.7% after announcing it will invest up to $4 billion in startup Anthropic to compete with growing cloud rivals in the artificial intelligence space.

Aluminium producer Alcoa fell 6.1% after the company said executive vice president William Oplinger would succeed Roy Harvey as CEO and president.

Broker Jefferies downgraded Nike stock to a “Hold” recommendation from a “Buy”, revising its target price down to $100 per share. The broker cited a combination of factors for the decreased rating, including macroeconomic challenges in China and reduced consumer spending in the U.S.

Sponsor

The Worlds #1 Visual Newsletter

Data-driven insights into business, tech, entertainment and society.

Our visual newsletter takes 5 minutes to read and is entirely free.

Join over 400,000 other visual thinkers and data-driven professionals.

Sponsorship Opportunities

Do you want to advertise your business here?
Reach out to us at [email protected] 

Quick Singles

🪃 Local News

• The Australian government announced that visa applications for Chinese tour groups have resumed this week after being suspended during the COVID-19 pandemic. Chinese group tours contributed almost $600 million to the Australian tourism industry in 2019.

• Qantas pilots want the Chairman to stand down - Australian and International Pilots Association President Tony Lucas says the union is disappointed with Qantas's reputational damage, calling for chairman Richard Goyder to step down.

• The Australian government is incentivising aged pension recipients and eligible veterans to return to work without impacting their pension.

• The New South Wales government has sanctioned a new regulation regarding short-stay rental homes in Byron Bay. Non-hosted rental accommodations available for short-term stays will now be restricted to 60 days per year, a significant tightening from the previous allowance of 180 days per year.

🌏 Around The Globe

• How much does love cost? - Tinder is introducing a new subscription service called Tinder Select, which will cost $499 monthly. The service will be offered to less than 1% of its members, giving them access to exclusive "VIP" search, matching, and conversation features not available with the current paid plans.

• Amazon’s AWS will invest $4 billion in Generative A.I. startup Anthropic, making it one of the significant deals under the Web Services division.

• The WSJ journal reported that Meta plans to release A.I. chatbots with their own personalities this week.

• Tyson Foods and Perdue Farms are under federal investigation over their alleged use of migrant child labour at their slaughterhouses.

• McDonald’s is raising royalty fees for operators opening new franchise restaurants in the U.S. and Canada. The increase, from 4% to 5%. This change won’t affect existing franchises.

• Starting in 2024, Amazon will insert ads in Prime Video content. However, for an additional $2.99 per month, U.S. Prime members can choose to watch ad-free.

• The White House announced on Friday that U.S. President Joe Biden would head to Michigan on Tuesday to meet with striking United Auto Workers union members. "The President will join the picket line and stand in solidarity with the men and women of UAW as they fight for a fair share of the value they helped create," his account stated on X.

₿ Crypto Corner

• Microstrategy purchased another 5,445 Bitcoins during August and September at an average price of $27,503 per Bitcoin. The software company now owns 158,245 BTC.

• Coinbase announced on Monday that it has registered with the Central Bank of Spain to offer exchange and custody services in the country.

Enjoying The Recap?

Forward this e-mail to a friend, family member, or work colleague who would benefit from getting up to speed on the day’s news ⬇️ 

Markets

ASX200 Company Movers

Index & Commodity Prices

Bond Prices

ASX By Sector

ETF Watch

Newsletter Recommendation

ASX News

ASX Company Announcements

Coronado Global Resources (CGN) announced that Czech-based company Sev.en Global Investments will acquire a 51% stake in the company. Coronado produces and exports metallurgical coal with mines in Australia and the United States.

Eroad (ERD) completed its retail entitlement offer, raising approximately NZ$5.6 million, with retail shareholders taking up 26.9% of their entitlement. 

Gina Rinehart has increased her stake in Liontown Resources (LTR), with Hancock Prospecting now holding a 10.69% stake, up from the 7.72% disclosed on September 11. Liontown remains under a takeover offer from battery chemical giant Albemarle.

Mineral Resources (MIN) is seeking to raise $US850 million in unsecured notes due in 2028. MinRes said it intends to use the cash to finance capital expenditures.

ProMedicus (PME) shares rocketed 12% today after announcing it secured a 10-year $140 million contract with not-for-profit Texas-based healthcare provider Baylor Scott & White Health.

Suncorp Bank (SUN) CEO Clive Van Horen will depart the company on December 24 this year. Mr van Horen has led the group’s banking arm since joining Suncorp in August 2020.

Transurban’s (TCL) current CFO, Michelle Jablo, will be replaced by Henry Byrne. Byrne currently leads the Victorian business and strategy team and will take over as CFO on October 19. Meanwhile, Jablo will be assuming the role of CEO.

Deep Dive

A Closer Look at the
Health Care Sector

Health Care is one of only two sectors on the ASX that are in the red over the last 12 months, down by 7.1%. As a comparison, Utilities (+30.1%), Tech (+23.3%) and Energy (+17.2%) have provided stellar returns during the same period.

Often seen as a defensive sector, Health Care seems to have fallen out of favour in the last few years. Before the Covid pandemic in February 2020 - the sector index was as high as 47,922.
Today, the sector trades at 37,836 - a 21% fall. Over the same period, the ASX200 index is down 1%. The fall in Healthcare is even more staggering when you consider that the sector is trading close to the March 2020 low of 37,230 - back when we thought the world was ending.

At face value, a global pandemic would be seen to benefit healthcare companies. However, mandated lockdowns and global supply chain restraints during 2020/2021 made operating difficult for some companies.
Whilst Sonic Health Care benefitted from government-paid COVID-19 testing, hospitals like Ramsay Healthcare saw their patient numbers dwindle as elective surgeries came to a standstill.

Now, it must be said the fall in the sector can almost be entirely attributed to the poor performance of CSL and ResMed. However, within the sector, some shining lights have been flying under the radar. ⬇️ 

One common theme amongst the more prominent Healthcare players that helps explain the declining share price is the fall in margins between FY23 & FY22.

Inflation and a tight labour market have squeezed companies, which have been unable to pass on cost increases to their customers in full.

Ironically, both CSL and ResMed recorded double-digit revenue growth, and in ResMed’s case, only lost 50bps in the margin - much better than some of the other companies.

From a valuation perspective, ResMed’s recent share price fall has seen its Next 12 Months (NTM) estimated P/E drop below 20 - making it the “cheapest” stock on this list. This is despite analysts’ estimates of an almost 10% revenue growth and profit growth of 9%.

ResMed has come under pressure of late thanks to Novo Nordisk’s wonderdrug Ozempic, which suppresses your appetite and has led some to believe it will solve global obesity - making ResMeds sleep apnea machines superfluous.

If this does not happen, then one could argue that the share price drop is an overreaction - particularly if you consider that the current valuation sees it trading below Sonic Healthcare - a company that reported a 12% drop in revenue in FY23. See the full valuation list below based on analysts earnings estimates into FY24 ⬇️ 

What The?

NASA's Historic Journey to Bennu

NASA has achieved a monumental milestone by successfully returning a sample from the asteroid Bennu, marking the conclusion of the OSIRIS-REx mission's 1.2 billion-mile voyage, which began in 2016.

The science capsule, containing potentially several hundred grams of asteroid material, made its descent into Earth's atmosphere, landing at the Department of Defense’s Utah Test and Training Range.

This mission's significance lies in its potential to shed light on the solar system's earliest stages. Melissa Morris, OSIRIS-REx program executive, emphasised the importance of such missions, stating they offer insights into the solar system's formation and evolution, essentially narrating "our own origin story."

The precision required for this mission was unparalleled. Sandra Freund, OSIRIS-REx program manager, highlighted the meticulous navigation needed to orbit Bennu and collect the sample, noting they were less than a meter away from their target during the collection.

But why is an asteroid sample so crucial? Dante Lauretta, OSIRIS-REx principal investigator, explains the interest in trace organic molecular chemistry. The widely accepted theory suggests that organic compounds, the fundamental building blocks of life, might have been transported to Earth billions of years ago by asteroids. To validate this theory, scientists require pristine asteroid samples, uncontaminated by Earth's environment, which OSIRIS-REx promises to deliver.

This mission is not an isolated endeavour. NASA's efforts complement the Japanese space agency JAXA, which previously collected samples from asteroids in its Hayabusa missions. The combined efforts of these missions provide a comprehensive understanding of asteroids, as each sample offers unique insights into the mysteries of our solar system.

Daily Quiz

Test Your Knowledge

Yesterday’s Daily Quiz Question. Which of these ASX200 companies has risen the most in the last 12 months?

Answer: Telix Pharmaceuticals. That was a tricky one. Only 11% of you got that correct. Telix is up by over 108% in the last year, making it #3 on the ASX200. Uranium producer Boss Energy (+105%) was the most popular answer. Give it another week, and it might be number #1.
Megaport (+50%) and Altium (25%) trail behind.

A Little Extra

📉 Going Down?

Top 10 shorted stocks on the ASX - as of September 20

1. Pilbara Minerals (PLS) - 11.53%

2. Flight Centre (FLT) - 9.50%

3. Genesis Minerals (GMD) - 9.07%

4. Core Lithium (CXO) - 8.80%

5. Syrah Resources (SYR) - 8.68%

6. IDP Education (IEL) - 8.53%

7. Elders Limited (ELD) - 8.49%

8. Select Harvests (SHV) - 8.00%

9. Sayona Mining (SYA) - 7.71%

10. Appen (APX) - 7.40%

📊Broker Ratings

What do the brokers have to say?

1. Allkem (AKE) - Upgraded to Add from Hold (Morgans). Target price reduced from $19.60 to $17.50.

2. Technology One (TNE) - Upgraded to Buy from Hold (Bell Potter). Target price $17.75

Read what the brokers had to say about each company here

👨‍💼 Director Transactions

What are the insiders doing? (On-market only)

💲Dividends

Companies trading ex-dividend today

📅 Economic Calendar

Data to keep an eye on this week

DISCLAIMER: None of the information provided in this newsletter should be constituted as financial advice. This newsletter is strictly for educational purposes only. It should not be taken as investment advice or a solicitation to buy or sell assets or make financial decisions. Please do your research.