WA Index

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WA Index

Issue 185 | May 2019

Welcome to the 185th edition of the Deloitte WA Index, a monthly review of Western Australian stocks and indices.

The aggregate market capitalisation of Western Australian listed companies remained largely unchanged this month, decreasing by 0.1% to close April at $179.3bn, with the Australian market seeing much of its performance led by the financials sector.

Download the list of WA’s top 100 listed companies, as of 30 April 2019, explore the sections below and if you do not currently receive our WA Index, please register to be added to our distribution list.

Highlights:

If you have any questions in relation to the Deloitte WA Index please contact Dave Andrews.

As of 30 April 2019

Commodity review

The commodity market experienced mixed price movements in the month of April. This month the WA Index Commodities Review focuses on LNG, Iron Ore, Crude Oil, Cobalt, Tin and Thermal Coal.

  • LNG rose by 20% to a closing price of US$5.3/mmbtu due to China’s ongoing incentive to move away from coal and towards alternative energy sources such as LNG. China’s LNG 2019 demand is expected to expand by 30 to 40 billion cubic meters (BCM) from the 2018 consumption total of 280bcm.
  • Iron Ore prices increased for the fifth consecutive month, with the overall price rising 11% to close at US$95/MT at the end of April. This movement is attributed to a greater demand for steel in China as inventories among steelmakers decreased. The increase in the iron ore price is also attributable to the lingering impact of the supply halt caused by the Brumadinho dam disaster, and subsequent mine closures in Brazil.
  • Crude Oil (Brent) prices have risen 8% over the month to close at US$72.90 per barrel. This increase is on the back of the US stating it planned to remove all exemptions for sanctions for importing Iranian oil, in an attempt to drive Iranian oil exports to zero. As a result, major oil importers such as China and India must halt imports from Iran to avoid US sanctions. In Europe, there has been a temporary halt of oil supply from Russia to Poland and Germany due to contamination in the pipeline.
  • Cobalt has closed 15% higher in April at US$34,500 per tonne as a result of an increase in demand for non-Democratic Republic of Congo cobalt. This has been caused by the erratic economic conditions in the DRC, uranium contamination in DRC cobalt and the alleged use of child labourers in DRC mines. Cobalt mines in Australia and Morocco are attracting attention as they offer sustainable prices and long-term supply security.
  • Tin prices closed at US$19,745/MT at the end of April, representing an 8% fall from March. This decrease shows the effect of China’s poor economic activity over the past couple of months is still taking its toll on metals. China’s ability to export tin over the rest of the year has been questioned as there have been reports of reduced imports of raw materials. Despite this decline, the demand for tin is expected to increase over the next decade as it becomes more relevant in high-tech productions such as electric vehicles.
  • Thermal Coal has closed 7% lower in April to US$86.90/MT. This movement is a result of the ongoing transition towards renewable energy sources, particularly in the US, with electricity produced from US renewable energy sources expected to exceed that from US coal sources for the first time ever. The coal price is also impacted by the seasonal coal plant shutdowns during spring and autumn, to allow complete repairs and improvements to the plants.

Commodity and Precious Metal Prices
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Performance of WA Index and global indices

Performance of WA Index and global indices
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Global indices displayed positive growth during April, with the 5% growth of the Nikkei market leading the surge. Japanese stocks were pushed higher as concerns over an economic slowdown in the US and China eased.

Increasing hopes of a resolution of the US-China trade war has led to a 3.9% rise in the US S&P 500 during April. This was complemented by increasing consumer spending, strong corporate profits and the Federal Reserve's recent decision to hold off on further US interest rate hikes this year.

Other indices remained relatively stable over the month, with FTSE 100 up 1.9% and All Ordinaries up 2.5%, which almost reached their highest level since December 2007. The strength of the big 4 banks and positive outlook from the rest of the financial sector drove this growth, particularly led by Westpac (3%) and AMP (3%).

WA Index movement

WA Index movement
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  • Mount Gibson Iron has continued its strong start to the year, with market capitalisation increasing 28% in April to close at $1,348m. Announcements that sales of high grade Ore from the Koolan Island Operation had recommenced, and that Mount Gibson Iron has become Australia’s highest grade exporter of direct-shipping Hematite fuelled the increase in share price. The company is expecting 21 million tonnes to be mined over the next five and a half years.
  • NRW Holdings made two significant announcements throughout April which saw market capitalisation increase 24% from $895m to close at $1,105m. Its subsidiary RCR Mining Technologies (RCRMT) has been awarded numerous contracts in Western Australia to supply process equipment and support for $22m. At the same time, another subsidiary, Goldings Contractors, has extended mining plans at the Curragh Main Mine through the addition of a fourth fleet to existing operations. This award adds $50m to the contract with Coronado Curragh Pty Ltd, now totalling $230m.
  • Ship builder Austal is reaping the rewards of major investment in its Philippines yard, with the delivery of two ships during the month resulting in a market capitalisation increase by 19% from $784m to $931m. Austal delivered the second of 21 Guardian Class Patrol Boats to the Australian Department of Defence at the start of April, followed by the delivery of the final contracted 50 metre high-speed catamarans to Brave Limited.

Major index players in April 2019
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Commodity Review

Top performers of the month

Western Australian top performers over the past month by growth in market capitalisation

Top performers of the month
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The top Deloitte WA Index Movers and Shakers in April were:

  • ResApp Health Limited’s market capitalisation increased by 103% to close at $121.3m. The company announced strong commercial opportunities and positive top-line results from its Australian Breathe Easy adult prospective and double-blind clinical study. The company also submitted its De Novo application to the FDA, which marked a significant step towards the launch of its first product in the US.
  • Silver Lake Resources Limited saw a 54% increase to market capitalisation across the month of April to close at $642.3m. This was in response to the completion of a Merger with Doray Minerals. Doray is now a wholly-owned subsidiary of Silver Lake, establishing Silver Lake as a multi-asset, mid-tier gold producer.

    This month also saw an agreement between Silver Lake and Canadian firm Sarama Resources for subscription of 29.5m ordinary shares (12% ownership) in Samara through a share placement valued at approximately CAD$2.5m (approx. AUD$2.6m). The investment represents a strategic stake consistent with Silver Lake’s strategy to support well credentialed gold projects.
  •  Strong test work results drove Atrum Coal Limited’s market capitalisation 40% in April to close at $152.1m. The results confirmed the Tier 1 Hard Coking Coal quality of Elan South, raising confidence in the company’s 100% owned coal project in southwest Alberta, Canada. The coal is expected to be highly competitive with premium hard coking coal currently exported from Canada and Australia.

 

Top performers of the month

If you don’t currently receive our WA Index, you can register to be added to our distribution list.

If you have any questions in relation to the Deloitte WA Index please contact Dave Andrews.

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