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Signs of recovery
Deloitte WA Index
12 April 2016: The Deloitte WA Index rose during March, with the market capitalisation of Western Australian listed companies increasing by 5.9%, closing the month at AU$125.0bn.
By comparison, the All Ordinaries increased by 4.1%.
Deloitte Clients & Markets Partner Western Australia, Tim Richards, said the market improved in the last month due to increased commodity prices combined with a number of WA companies outside of the energy and resources sector performing well.
“The performance outside of WA’s main sector demonstrates the states commitment to other industries and technologies,” he said.
“The Deloitte WA Index movers and shakers for the month were in a range of sectors, demonstrating the continued diversification of the State’s economy. However, the performance of key commodities was a key driver behind this month’s overall positive performance.”
Significant movements in the Index during March:
- Fortescue Metals Group Limited and South 32 Limited increased their market capitalisation by AU$1.6bn (25.0%) and AU$1.1bn (17.2%) respectively during the month following the rebound in commodity prices. The iron ore price in particular has enjoyed a positive month, helping Fortescue to regain 3rd place in the WA Index.
- Tox Free Solutions Limited’s market capitalisation rose by AU$104m (31.3%) following the successful completion of a AU$20m fully underwritten placement to institutional investors to partially fund the AU$70m acquisition of Worth Corporation Pty Ltd. The company is also expected to issue new shares to a maximum value of AU$4m, via a share purchase plan.
- Paladin Energy Limited’s market capitalisation increased by AU$94m (29.7%) despite the 13.0% drop in uranium prices during the month. The market capitalisation surge follows talk of recapitalisation plans, with the company rumoured to be in talks with Chinese and Russian interests regarding potential takeover bids.
Key commodities surveyed during March included:
- Palladium was the best performer, experiencing an increase of 15% or US$75.0 per troy ounce. The rally comes as a result of positive automobile sales in Europe, and encouraging sentiment from the Chinese market surrounding the positive intentions of the Chinese Government to support future economic growth.
- Iron Ore also performed strongly, increasing 10.9% from US$49.40 to US$54.80 per tonne. The price surged after the Chinese Premier pledged to spend a combined 2.45 trillion yuan (US$378 billion) on road and railway construction to help China achieve a minimum GDP growth rate of 6.5% for the next five years.
- Crude Oil posted the third largest increase for the month, up 10.0% to US$39.95 per barrel. The increase was due to declining US production as a result of a fall in the number of active rigs, coupled with OPEC hinting that Iran may, in the near future, agree to cap production levels to support prices.
- Uranium was the worst performer this month, down 13.0% to US$29.15 per pound. The decrease appears to have been based on a long-running theme of oversupply to the market post the tsunami and Fukushima nuclear power station disaster in 2011.
Equity markets surveyed posted positive results across the board in March:
- The All Ordinaries increased by 4.1% as the Australian market rebounded in response to positive movements on Wall Street. The big four banks also benefited as the financial sector climbed.
- The FTSE 100 rose by 1.3%, after the US Federal Reserve confirmed interest rates would remain stable. The increase is also in line with the positive movement in commodity prices during the month.
- The S&P 500 increased by 6.6% on the back of the US interest rate hold. Optimism sparked a rally causing the majority of sectors to conclude the month in positive territory.
- The Nikkei rose by 4.6% on a weakened yen which improved sentiment as investors purchased stocks with high dividend yields, and improved the prospects for exporter focused sectors.
Top Deloitte WA Index Movers and Shakers in March included:
- ResApp Health Limited (RAP), which posted a 92.3% increase in market capitalisation from AU$75m to AU$145m. The company is currently developing smart phone medical applications for the diagnosis and management of respiratory disease. It announced the signing of a non-binding memorandum to enter into a partnership with UniQuest to field test the smartphone-based pneumonia diagnostic tool in the developing world.
- Avenira Limited (AEV) posted a 77.1% increase in market capitalisation from AU$50m to AU$89m following the announcement that joint venture and placement transactions with Groupe Mimran companies had achieved financial close, raising approximately AU$28 million. Avenira is expected to enter the buoyant global nutrient and fertiliser sector, with first production set for 2016.
- CV Check Ltd (CV1) posted a 63.5% increase in market capitalisation from AU$62m to AU$102m after releasing its half-year financial statements, highlighting 185.0% revenue growth in 1H FY2016 and a revision to revenue forecast, up 11.0% from the prospectus issued in July. The company processes more than 100,000 verification checks every year for private and government organisations, employers and individuals.
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