Good Evening,

Welcome to Equity Espresso

We’re here to catch you up on all the day’s news both in Oz and abroad.

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

1. ✈️ QANTAS CEO Makes Early Exit

2. 📈 RBA Holds But Issues Warning

3. 🍷 Ororas Shiny New Acquisition

4. 🚗 Are Driverless Cars Safe?

5. 👷‍♂️ Gas Prices Set to Rise?

The Recap

QANTAS CEO Bids Farwell
In Early Exit

It was a slow start to the day as the ASX traded as much as 46.8 pts lower but then regained ground in the afternoon as the RBA played to the script, deciding to keep rates on hold at 4.10%. The ASX200 finished the day down only 4.5 pts to 7,314.30.

Six sectors finished lower, with Utilities (-1.18%) falling the most as Origin Energy (-2.9%) dropped after trading ex-dividend. Meanwhile, Health Care (+0.8%) stocks rose, with CSL (0.9%), Cochlear (+0.8%) and Sonic Healthcare (+0.8%) all posting modest gains.

The RBA meeting went as expected, with the cash rate remaining unchanged at 4.10%. Since last May, interest rates have increased by four percentage points in an effort to achieve a more sustainable balance between economic supply and demand. Holding off on a decision today will give the RBA time to evaluate the impact of these rate hikes.

Whilst inflation has “passed its peak” and July CPI slowed, the RBA warned that inflation is still too high and will remain so for some time due to elevated services and rent prices. Forecasted CPI inflation is still expected to decline and be back within the 2–3% target range by late 2025. Reiterating last month’s statement, further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe. This will depend upon the data and the evolving assessment of risks.

In other news, Chevron liquefied natural gas workers have warned of two weeks of 24-hour rolling outages at two major export plants starting mid-September. This escalates the ongoing dispute that can potentially impact global fuel supply. The Offshore Alliance group announced on Facebook that the workers had notified Chevron of their plan for full stoppages from September 14, following partial strikes that began on September 7.

ASX200 Stock Snapshot

Economic News

• China's services sector growth slowed in August, with the Caixin services purchasing managers' index dropping to 51.8. However, the reading still indicates expansion in the sector. The decline was due to a weaker increase in overall new work, with new business from abroad experiencing its first drop this year.

• Australia’s current account surplus fell by $4.8 billion to $7.7 billion (seasonally adjusted, current prices) in the June quarter of 2023, according to figures released today by the Australian Bureau of Statistics (ABS). Grace Kim, ABS head of International Statistics, said: “The decrease in the current account surplus reflected the fall in prices for Australia’s key export commodities, partly offset by a drop in the net primary income deficit.”

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Quick Singles

🪃 Local News

• Orora has announced its long-awaited acquisition of Saverglass SAS for €1.3bn (A$2.2bn). Saverglass designs and manufactures high-end bottles for spirits and winemakers. Orora will raise $1.3bn in equity from institutional and retail investors and refinance and $875m from debt refinancing.

• According to Energy One, the potential business opportunity in Europe that was highlighted in their 4E report has been put on hold by the customer. However, this delay is not attributed to any issues with Energy One’s technology. Instead, the customer faces a shortage of internal resources and capabilities, hindering their ability to progress with the project.

• Qantas CEO Alan Joyce will bring forward his retirement by two months after a turbulent few weeks after the ACCC commenced proceedings against the airline, claiming they sold tickets on already cancelled flights. Mr Joyce advised the Qantas board that he would bring forward his retirement “to help the company accelerate its renewal”, claiming he is leaving the company “fundamentally strong” and with a “bright future”.

• Westpac acknowledged the civil penalty processings commenced by ASIC in the Federal Court. Proceedings relate to a technology failure in which ASIC alleges 229 applications for hardship assistance between 2025 and 2022 were not assessed within 21 days.

• The NSW government will begin negotiations with Origin Energy to prolong the lifespan of Australia's largest coal-fired power plant following a comprehensive review.

🌏 Around The Globe

• Novo Nordisk has introduced its weight-loss injection, Wegovy, in Britain. This marks the company's second European launch in just over a month. Despite struggling to meet the high demand, the drugmaker seeks to expand in Europe.

• Country Garden's agreement with creditors to extend onshore debt payments worth 3.9 billion yuan ($537 million) helped increase its share price yesterday and provided relief to China's troubled property sector.

• Sam Altman is the first person to get an Indonesian “golden visa.” The new visa allows foreigners who make substantial investments in the country to remain for five to 10 years.

• Airbnb and Blackstone's shares rose last week after the announcement that they will be added to the S&P500 as part of the quarterly rebalance on September 18.

₿ Crypto Corner

• Mayur Kamat, the Global Head of Product at Binance, has resigned, becoming the latest in a string of top executives to depart the cryptocurrency exchange.

Markets

Index & Commodity Prices

Bond Prices

ASX By Sector

ETF Watch

Movers and Shakers

✅ Biggest Gainers

Seven West Media’s (SWM) share price rose 6.5% as the company continued its share buy-back program, which it kicked off in FY23. Seven West has repurchased over 407,000 shares in the last four trading days. The company repurchased $15 million worth of shares in FY23. As of the end of June 23, Seven West had 1.5 billion in shares on the register.

Auckland International (AIA) climbed 1.4% after announcing that Chief Infrastructure Officer André Lovatt had resigned after five years with the company. Mr Lovatt will take up his new role in December 2023 at Kiwi Rail as Auckland International commences recruitment for this replacement.

🔻Biggest Fallers

Tietto Minerals (TIE) - fell by 20% after revising its gold production for the second half of FY23 to 75,000 - 85,000/oz. This is well down from the 105,000 - 120,000/oz it guided for in its July update. Tietto also increased its all-in-sustaining costs (AISC) guidance from US$875 - US$975/oz to $1175 - $1350/oz. An update to the company’s Adujar reserve model showed an approximately 10% increase in ore tonnes mined - meaning it will cost more to extract the gold. Tietto is still forecasting to generate cash flows of US$50m - $60m during H2 FY23.

Chalice Mining (CHN) continues its’ downtrend, shedding another 13.4% today to close at $2.90 after a broker downgrade from Morgans to a Hold rating with a target price of $3.45 - slashed from $8.20. Morgans cited differences in the scoping study of the company Gonnerville project as the main driver of the reduction, specifically average feed grades, expected recoveries and the cost of the mine. Chalice presented two options with different production and costs behind each option. Morgans noted the nickel recoveries as an example, where it forecasted recoveries of 65% and 62% for the two production scenarios; Chalice said it is expecting this to be 43% and 41%.

Post of The Day

The Cost of Housing

We all know housing is expensive in Australia, but how do we stack up against the rest of the world?

What The?

Driverless Cars - How Safe Are They?

San Francisco has become a testing ground for the future of transportation, with Waymo and Cruise's driverless taxis taking to the streets. August marked a significant milestone as both companies received approval to charge for their services. However, the journey hasn't been without challenges. Shortly after the announcement, Cruise faced scrutiny following two significant accidents, prompting a review by the California Department of Motor Vehicles.

Collectively, Waymo and Cruise have covered an impressive 8 million driverless miles. Their safety data reveals 102 reported incidents over 6 million miles, translating to one incident every 60,000 miles. This frequency is notably lower than the average human driver, suggesting a promising trajectory for autonomous vehicles.

One of the inherent challenges autonomous vehicles face is human drivers' unpredictability. While the technology can be programmed to follow traffic rules to the letter, human drivers often rely on intuition, making split-second decisions that can be hard for machines to anticipate. This unpredictability, combined with the myriad of scenarios on urban roads, makes the task of ensuring safety even more complex.

While the reported incidents are relatively low, the nature of these incidents provides insights into areas of improvement. For instance, Waymo's challenges with inanimate objects highlight the need for better object recognition, especially in dynamic urban environments. Cruise's intersection challenges emphasise the importance of predictive algorithms that anticipate and react to sudden changes.

Waymo's safety record stands out. In its initial million miles, the company reported 20 minor incidents, predominantly caused by human drivers. Their primary challenge remains the detection and avoidance of inanimate obstacles.

Cruise, while showcasing potential, has faced challenges at intersections, with several incidents involving other vehicles or cyclists disregarding traffic signals. Such incidents underscore the complexities of urban driving and the need for advanced predictive algorithms.

Waymo's vehicles demonstrate a commendable safety record compared to national averages, indicating a promising future for autonomous transportation. As the technology continues to evolve, regulators and companies must collaborate, ensuring the safety and efficiency of driverless vehicles on our roads.

Daily Quiz

Test Your Knowledge

You thought food was getting more expensive here

Yesterday’s Daily Quiz Question: Which retail company has a Gross Margin >60%, much larger than the other three?

Answer: Premier Investments. A tricky one, with only 16% getting it right.
JB Hi-Fi was the most popular response.

 
Peter Alexander's high-priced pyjamas helped Premier achieve a 64% Gross Margin in its half-year earnings, with JB Hi-Fi (23%), Breville (35%), and Super Retail Group (46%) trailing behind.

A Little Extra

📉 Going Down?

Top 10 shorted stocks on the ASX - as of August 30

1. Flight Centre (FLT) - 10.47%

2. Pilbara Resources (PLS) - 9.80%

3. Elders Limited (ELD) - 9.03%

4. Syrah Resources (SYR) - 8.91%

5. Lake Resources (LKE) - 8.30%

6. JB Hi-Fi (JBH) - 8.29%

7. IDP Education (IEL) - 8.19%

8. Brainchip (BRN) - 7.96%

9. Appen (APX) - 7.69%

10. 29Metals (29M) - 7.54% 

11. Mesoblast (MSB) - 7.50%

📊Broker Ratings

What do the brokers have to say?

1. Liontown Resources (LTR) - Downgraded to Speculative Hold from Speculative Buy (Bell Potter)

2. Liontown Resources (LTR) - Downgraded to Neutral from Outperform (Macquarie)

3. Sandfire Resources (SFR) - Downgraded to Neutral from Buy (UBS)

👨‍💼 Director Transactions

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

💲Dividends

Companies trading ex-dividend today

1. Codan (CDA) $0.095

2. Corporate Travel Management (CTD) $0.22

3. Clinuvel Pharmaceuticals (CUV) $0.05

4. Heartland Group Holdings (HGH) $0.055

5. Helia Group (HLI) $0.14

6. Ironbark Capital (IBC) $0.013

7. Lynch Group Holdings (LGL) $0.07

8. Link Administration Holdings (LNK) $0.04

9. Northern Star Resources (NST) $0.155

10. Origin Energy (ORG) $0.2

11. Pilbara Minerals (PLS) $0.14

12. Qualitas Real Estate Income Fund (QRI) $0.012

13. Summerset Group Holdings (SNZ) $0.089

14. Thorn Group (TGA) $0.19

15. Viva Energy Group (VEA) $0.085

16. Veem (VEE) $0.005

17. Yancoal Australia (YAL) $0.37

📅 Economic Calendar

Data to keep an eye on this week

Reader Review

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.