Good Evening,

Welcome to Equity Espresso's Daily Recap. Markets rebounded ever so slightly today, but it wasn’t enough to prevent the second worst-performing October since 2008. In company news, it was another busy day of acquisitions, so let’s get stuck in.

The Recap

Markets began on a positive night after a bumper night on Wall Street but gradually lost momentum as the day progressed. Weaker then anticipated purchasing data from China reignited concerns that the Chinese economy still requires further support. The ASX200 index eventually finished the day 0.1% higher, closing at 6,780.7. The ASX200 ended October 3.80% lower, marking it the second worst-performing October since the GFC, with a 6.1% drop in 2018, performing worse than the past month.

Real Estate (+1.06%) and Staples (+0.84%) were the largest movers of the eight sectors to finish in the green. The Materials sector saw the largest fall, with BHP (-1.6%), Rio Tinto (-0.7%) and Fortescue Metals (-0.1%) all finishing the day lower.

In company news, Treasury Wine Estates revealed plans to acquire DAOU Vineyards, a luxury wine business in Paso Robles, California, in a deal worth up to US$1.0 billion, including earn-out add-ons should certain targets be met.

One other takeover might be in trouble as Australian Super said it will reject Brookfield and EIG’s $18.7 billion takeover bid for Origin Energy - disputing the independent expert’s assessment. Aussie Super holds an estimated 13.68% stake in Origin.

Economic Data

• German Inflation continues to cool, falling to a 3.8% YoY increase in October, down from 4.5% in September, marking the lowest inflation rise since August 2021, as food inflation hit its lowest point since February 2022.

• The Bank of Japan kept its short-term interest rate unchanged at -0.1%, in line with expectations.

• China’s Manufacturing PMI unexpectedly dipped back into contraction territory, decreasing to 49.5 in October from 50.2 in September - missing estimates of 50.2.

• Chinese Services PMI remained in positive territory, with a 50.6 read in October, but was below estimates of 51.8.

Wall Street

U.S. markets rebounded on Monday, kicking off a busy week of economic data, including a Fed Reserve meeting where it is all but certain rates will remain on hold at 5.50%. The S&P 500 (+1.20%) and NASDAQ (+1.16%) both finished higher, with mega-cap companies Amazon (+3.89%), Apple (+1.23%) and Microsoft (+2.27%) leading the way.

All 11 major sectors of the S&P 500 ended the session higher, with the Communication Services (+2.1%) sector seeing the largest gain.

Some of the companies who reported overnight included McDonald’s (MCD), SoFi Technologies (SOFI), ON Semiconductor (ON), and Western Digital (WDC).

Outlook

Futures markets are trading only marginally in the red this afternoon, with the S&P 500 and NASDAQ both 0.05% lower.

A busy 24 hours on the economic data front. Locally, we get Building Approval numbers for September, which are expected to be flat month-on-month. Eurozone CPI and GDP are also set to be reported along with U.S. Consumer confidence data.

The never-ending quarterly earnings season rolls on, with Pfizer, AMD, Amgen and Caterpillar all reporting tonight.

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Quick Singles

🪃 Local News

• Superannuation fund Australia Super said that it plans to vote against the Brookfield-led consortium's $18.7 billion takeover of Origin Energy - saying the bid undervalues the energy producer. According to LSEG data, Australian Super owns a 13.68% stake in Origin.

• Australia has rejected the EU’s proposed free trade agreement, causing a significant delay in reaching a deal due to concerns over limited access to European markets for Australian agricultural products.

• According to a KPMG report, the number of “zombie“ companies on the Australian stock exchange is increasing due to higher interest rates, rising costs, and tightening capital markets, putting pressure on struggling businesses.

🌏 Around The Globe

• Stellantis has become the second Detroit automaker, after Ford, to agree to a tentative deal with the United Auto Workers union amid a six-week strike.

• Pharmacy staff from Walgreens, CVS, and Rite Aid are staging a walkout from Monday to Wednesday in response to what employees consider unsafe working conditions.

• China’s aviation regulator will increase domestic flights by 34% above pre-pandemic levels in an effort to aid airline recovery, while international flights have also seen a rebound.

• Uber now offers fully autonomous rides in Waymo self-driving cars in Phoenix, with customers able to accept or reject the option. Expansion plans and the number of available Waymo cars have not been disclosed.

• Around 230 workers in Italy's "Motor Valley" have begun striking over the planned closure of their auto parts factory.

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Markets

ASX200 Company Movers

Index & Commodity Prices

Sector

Bond Prices

ETF Watch

ASX News

🗞️ Company Announcements

• Alcidion (ALC) went into a trading halt this morning pending the announcement of a capital raising. It also deferred a scheduled earnings call “until further notice”.

• Arafura Rare Earths (ARU) said in an update today that it has completed early construction works on its Nolan Project site - with total costs to first production expected to be approximately $1,680 million.

• Burgundy Diamond Mines (BDM) reported a 13% increase in revenue to $91.2 million as the company saw a 29% uplift in the average realised price of $116 per carat. The diamond miner did report a 13% drop in carats sold, as the company said there was less demand in certain segments of lower-value rough diamond goods.

• BCI Minerals (BCI) said it has secured $981 million in credit approval to fund its Mardie Salt Project in a quarterly update today. The project gained environmental approval, with its Reconciliation Action Plan endorsed in September. The company reported a cash balance of $121.4 million at the end of the quarter.

• Inghams (ING) reported a strong start to FY24, with increased demand for poultry and improved operational performance across farming and pricing. Underlying NPAT and EBITDA for H1FY24 are expected to be $71 million and $138 million, respectively.

• InvoCare (IVC) shareholders have approved a $1.8 billion buyout offer from TPG Capital, with over 81% of voters approving the deal, just above the 75% hurdle required. InvoCare will delist from the ASX on November 3.

• Liontown (LTR) says that its Kathleen Valley Lithium project is now more than 50% complete, as it remains on track for production in mid-2024.

• Meteoric Resources (MEI) completed the sale of the Juruena Gold Project to Keystone Resources for US$20 million, leaving the company with an A$35 million cash balance for near-term funding and advancing the Tier 1 Ionic Clay REE Project.

• Treasury Wines (TWE) is set to acquire DAOU Vineyards for $900 million to establish a leading luxury wine business in the U.S.

• St.Barabara (SBM) reported higher than expected AISC, with its PNG project recorded at US$4,548/oz due to lower production and two plant shutdowns. The company’s Atlantic project in Canada recorded an AISC of US$2,994/oz for the quarter due to lower production.

• Vicinity Centres (VCX) will acquire the remaining 49% interest in Chatswood Sydney for $307 million, with the transaction to settle in March 2024.

 📱 Post of The Day

The National Retail Federation estimates that total Halloween spending in the U.S. will reach a record $12.2 billion in 2023 — only slightly less than the entire GDP of Namibia — surpassing last year’s $10.6 billion.

Technical Indicators

Chart Watch

A bullish chart to keep an eye on - Winsome Resources (WR1)

Notes

• A slight double bottom has formed on a daily time frame.

• A bullish divergence has played out - which saw the price jump to $1.35.

• The current share price is still trading under the 100 and 200 EMA on a daily time frame.

• If this rally can continue, a $1.50 price target could be achievable, where it has acted as an area of support and resistance.

Newsletter Reccomendation

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Analyst Report

Wrkr Limited

Code: WRK | Market Cap: $32.7m  | Current Price: $0.026
Price Target: $0.08 | Sector: Technology| Broker: RaaS

Wrkr Ltd (ASX:WRK) offers compliance solutions for Australian superannuation contributions and payroll, including member onboarding, super payments, messaging and employee validation. The company operates under three separate products which serve different parts of the Australian superannuation sector.

The company released September quarterly earnings last week:

September Quarterly Highlights

• Cash Receipts growth of 43% vs. the pcp. With a 42% increase in revenue. The revenue increase was due to development and planning work for major customers ART and Link Group.

• Cash on Hand was $3.2 million. The broker estimates Wrkr has eight quarters of cash before any R&D tax rebates or new customer transactions are considered.

Broker Recommendation 

The broker believes that the near-term multiples of Wrkr do not reflect the medium-term revenue and earnings potential from Link customer migration.
As a result, they deem a DCF as the most appropriate valuation methodology for Wrkr, which remains unchanged at $0.08/share.

If you like the full copy of the report, reach out to us at [email protected] 

Daily Quiz

❓️ Test Your Knowledge

Yesterday’s Daily Quiz Question. Which company had the lowest share price growth in the past 10 years?

Answer: AMP. As one reader put it in their poll response, AMP has been a disaster for investors, losing 75% over the last 10 years, with 53% of you getting that correct. Qantas (+282.0%), Telstra (-25.0%) and QBE (+1.2%)

A Little Extra

📉 Going Down?

Top-10 shorted stocks on the ASX - as of October 25

📊 Broker Ratings

What do the brokers have to say?

1. Azure Minerals (AZS) - Downgrade to Hold from Buy (Bell Potter)

2. IGO (IGO) - Upgrade to Equal-weight from Underweight (Morgan Stanley)

3. Paladin Energy (PDN) - Upgrade to Neutral from Sell (Citi)

4. Pilbara Minerals (PLS) - Downgrade to Sell from Neutral (UBS)

5. Ramelius Resources (RMS) - Downgrade to Neutral from Outperform Macquarie

👨‍💼 Director Transactions

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

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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.