Deloitte WA Index: Strength in the face of adversity

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Deloitte WA Index: Strength in the face of adversity

12 June 2018: The Deloitte WA Index strengthened during May as the market capitalisation of Western Australian listed companies increased by 1.2 percent to close the month at AU$187bn.

Deloitte Clients & Markets Partner - Western Australia, Tim Richards, said: “The WA Index has strengthened in line with major global Indices, even when faced with political turmoil surrounding North Korea. Rising investor confidence off the back of strong quarterly results, and exciting business developments through acquisitions and internal growth assisted the Index in striving forward during May.”

Major index players in May:

  • Saracen Holdings Limited’s market capitalisation increased by AU$221m (14.3 percent) to $1.8bn during May. The share price soared off the back of strong drill results evidencing thick, high-grade gold and pointing to further mine life extensions at both the Carosue Dam and Thunderbox mines. The resulting increase to gold production, FY18 cash flow, reserves and bullion predictions has boosted investor confidence in the company
  • Seven West Media Limited had an incredible month with market capitalisation increasing by 47.7 percent to AU$1.2bn. The company announced it had achieved the highest ever television market share of any network nine weeks into the ratings season, boasting a 38 percent share. A key contributor to the company’s success is traceable to the broadcasting rights deal for cricket secured until 2024 and AFL until 2022
  • Emeco Holdings Limited exceeded AU$1bn market capitalisation during the month, soaring 42.3 percent. The acquisition of Matilda Equipment, a national equipment rental business, was announced providing Emeco niche rental services to complement the existing fleet of heavy earthmoving equipment.

Key commodities surveyed during May:

  • Thermal Coal prices saw a 11.7 percent increase in the month to US$108.65/tonne, credited in part to China’s intentions to reduce its merchandise trade deficit of AU$375bn by increasing spending on US agricultural and energy exports, such as coal
  • The price of nickel increased 8.9 percent in May to US$15,067/tonne, as supply surged in China for nickel ore in stainless steel production and refined nickel to be used in super alloys and lithium batteries
  • Uranium’s price increased 8.6 percent to US$22.65/pound, with rising demand and dependency on nuclear energy as many countries transition to more sustainable forms of energy production
  • Crude Oil prices increased to US$77.09/bbl, representing a 3.3 percent rise against April 2018 due to limited supply, with disruptions in Nigeria, Venezuela and Libya affecting production
  • Cobalt rose 2.3 percent during May reaching US$90,500/tonne due to a supply deficit. The price increase was exacerbated by stockpiling at different levels of the supply chain as demand remains strong
  • The price for iron ore fell 3.8 percent to US$64.00/tonne during May primarily due to increased supply from China, and uncertainty following US tariffs to be introduced to steel imports from Europe, Mexico and Canada.

The equity markets surveyed posted mixed results during May:

  • The US S&P 500 recorded its best month since January, increasing by 2.2 percent. The Trump Administration’s trade war with China and denuclearisation of North Korea created uncertainty in the market. However, volatility in Europe and Italy’s political turbulence led investors to find solace in the world’s largest equity market and the safe haven of the US dollar
  • The FTSE 100 continued its growth, also rising by 2.2 percent during the month. The US-China trade truce aided by a weaker pound assisted the FTSE 100 to rise to new heights. In addition, consumer confidence in the market was signalled by the Bank of England announcing UK consumers borrowed over £1.8bn in April. 
  • The All Ordinaries finished May 0.9 percent higher than April, coming within half a point of a 10 year high during the month. The heights of early May were corrected towards the month’s end as geopolitical tensions and poor performance from the banking sector resulted in a decrease to the index
  • The Nikkei faced a difficult month, falling 1.2 percent during May. The only index surveyed to decrease during the month, the Nikkei felt the brunt of trade tensions between the US and China, uncertainty over North Korea and the political struggles in Italy which all contributed to the poor result.

The top Deloitte WA Index Movers and Shakers in May included:

  • Kangaroo Resources Limited increased market cap by AU$106m (147.6 percent). Investor interest grew as the release of its March 2018 quarterly activities report boosted investor intrigue as the report detailed drilling contractors had been finalised for the Pakar North concession project and that drilling will commence in Q2 of 2018
  • Botanix Pharmaceuticals experienced a 48.6 percent increase in market cap to AU$126.7m, primarily due to the announcement that its investigational new drug application for acne treatment drug BTX 1503 was approved by the Food and Drug Administration. The approval allows Botanix to commence phase 2 of trials of BTX 1503
  • Kogi Iron Limited increased its market capitalisation by 65.2 percent to AU$118.1m through May. The company’s share price rise is the result of the release of glowing results for the quarter ended March 2018. The success of a private placement raised AU$2m in the quarter, as well a hugely effective share purchase plan raising AU$0.9m. The funds are budgeted to fund test work activities and provide working capital for the growing business.

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