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Issue 183 | March 2019
Welcome to the 183rd edition of the Deloitte WA Index, a monthly review of Western Australian stocks and indices.
- Download WA's Top 100 listed companies
- Performance of WA Index and global indices
- Top performers of the month
- Contact us
- Related topics
The market capitalisation of Western Australian listed companies increased by 5.1% to close the month at $175.9 billion for February. The increase was driven by growth in WA’s key resources and mining services companies, with many announcing strong results for the 31 December reporting season along with the successful award of new contracts during the period.
Download the list of WA’s top 100 listed companies, as of 28 February 2019, explore the sections below and if you do not currently receive our WA Index, please register to be added to our distribution list.
- Commodity review
- Performance of WA Index and global indices
- WA Index movement
- Top performers of the month
If you have any questions in relation to the Deloitte WA Index please contact Dave Andrews.
The commodity market experienced mixed price movements in the month of February. This month the WA Index Commodities Review focuses on crude oil, Nickel, Liquid Natural Gas, Cobalt, Palladium and copper.
- The record-breaking momentum of Palladium continued as prices increased by 12% to close at US$1,544 per ounce. The surge in the palladium price is attributed to a fundamental imbalance in the market’s supply and demand outlook. Critically low above ground supply levels and strong demand from the automotive industry are primarily responsible for the continued improvement in spot pricing.
- Platinum increased by 6% to US$871 per ounce as a benefactor of the rally in Palladium prices. Mined directly with Palladium, the precious metal has been favoured by strong demand from the automotive industry for palladium, as the focus of the manufacturers turns towards reducing emissions and the size of vehicles.
- Copper prices reached their highest in nearly eight months having increased 6% to US$6,546 per tonne on the back optimism around China-US trade and diminishing supply levels. US President Donald Trump’s announcement that the March deadline for his tariffs on Chinese imports had been postponed following advancements in negotiations underpinned the price rise, assisted by rapidly eroding stockpiles which plunged to their lowest in over five years.
- The Crude Brent Oil price saw a closing price of US$66 per barrel, representing a 6% increase on the back of OPEC supply cuts and optimism surrounding a potential deal that would see the end to the trade war between the US and China. The market signal issued by Saudi Arabia’s Energy Minister to cut production to around 9.8 million barrels per day in March, being 500,000 barrels per day below the commitment in the January OPEC deal, further supported the rally in oil prices.
- Nickel prices increased by 5% to close at US$12,972/tonne. This month saw the furtherance of the 2019 surge attributed to ever-increasing demand levels from the electrical vehicles market, which is could escalate five-fold in the coming decade. LME nickel inventory levels continued to fall across the month, which has been the case since mid-2017. The high nickel price has incentivised investment in the supply of nickel sulphate as market entrants look to accommodate future demand.
- The oversupply of Cobalt resulted in a 6% fall to a closing price of US$32,000 per tonne, continuing the persistent decline in prices from the 10-year high of early 2018. The movement in the cobalt price is considered a perfect example of the boom-bust nature of the mineral commodity industry, with the notable decrease in price brought about by the rush to mine the metal and supply Chinese demand. Unexpected excess cobalt production coming out of the politically unstable Democratic Republic of the Congo and refined supply from China exerted downward pressure on the price.
- Liquid Natural Gas (LNG) fell by 23% to a closing price of US$6/mmbtu, continuing its trending decline attributable to the wavering of global demand in the context of steady supply. Unseasonably warm temperatures across Europe during February contributed to the decline in prices, which were assisted by weakening Chinese demand which is only expected to diminish further as the Chinese winter approaches its conclusion in the coming months.
Performance of WA Index and global indices
The global indices surveyed displayed positive growth during the month of February, led primarily through the resurgence of the All Ordinaries which recorded their largest monthly percentage gain since 2016. The release of the highly anticipated Banking Royal Commission report boosted the local Australian share market, with the banks reacting strongly after the Royal Commission recommendations put less than expected pressure on the existing business models of the big 4 banks.
Furthermore, a number of strong results were announced across the mining and resources sector with BHP, South 32, Rio Tinto and Fortescue all closing 5-10% higher at the end of February. Broad gains for the mining sector helped the WA Index performance mirror the All Ordinaries this month, with the WA Index up 5.1% against the All Ordinaries rise of 5.3%.
Other global indices continued to show positive growth, primarily driven by the expectation that a resolution of the trade stand-off between China and the US was nearing.
WA Index movement
Major index players in February:
- Ausdrill’s market capitalisation has risen 38.1% over the month of February to end at $1,191.45m Ausdrill released its half year results in the period, reflecting major improvements in comparison to the previous year’s performance. Highlights included a 45.7% increase in revenues, with the market reacting positively to improvements within subsidiaries and the integration of Barminco. Barminico also announced a new underground mining contract at Rampura Agicha mine, and subsidiary African Mining Services was awarded a contract extension with Ghana Manganese Company.
- NRW Holdings Limited has grown significantly in February, with a market capitalisation increase of 23.6%, closing at $894.60m. The market has reacted positively to the announcement of the acquisition of RCR Mining and Heat Treatment, with the $10m consideration paid out of existing cash reserves. Market sentiment was further boosted by the signing of a new contract with Fortescue for the Eliwana Rail project.
- Monadelphous Group Limited increased its market capitalisation by 20.6% in the month rising to $1,676.81m. Monadelphous recently released its half year results which outlined $830m of revenue, and over $770m of new contracts secured since the beginning of the financial year. Monadelphous was also awarded a major construction contract for BHP’s South Flank project. This is said to have strengthened the relationship with BHP and is expected to provide over 400 employment opportunities.
Top performers of the month
Western Australian top performers over the past month by growth in market capitalisation
The top Deloitte WA Index Movers and Shakers in February were as follows:
- Otto Energy Limited market capitalisation has improved 59.5% from $78.76m to close at $125.64m at the end of February 2019. The positive growth of this explorer is on the back of the announcement that drilling has commenced at the Don Julio 2 and Winx-1 exploration wells, and that the Gulf Coast discovery at Lightning was expected to be in production by the end of March 2019. Otto also announced it was expecting to generate free-cash flow in excess of US$27m in 2019, and is expected to continue executing its exploration programs.
- Automotive Holdings Group Limited displayed strong growth in February, increasing its market capitalisation by 47.9% to close at $762.73m. Although the company released half year results reflecting difficult trading conditions and a statutory loss following impairment charges, investors were lifted by the company’s decision for a strategic review of its struggling refrigerated logistics business.
- Talga Resources Limited’s market capitalisation increased by 44.1% during February 2019 off the back of December 2018 quarterly results and an announcement of positive test results from its high energy graphene silicon lithium ion battery anode product. The results indicated approximately 50% additional anode capacity over commercial graphite which correlates to increased battery life in portable and EV market usages.