Good Evening,

Welcome to Equity Espresso. We’re here to catch you up on the day’s important stock market news in Australia and abroad. Here’s a sample of today’s top stories:

1. 🗽 Credit Corps United States Disaster

2. 🕓 Liontown Gets Time Extention

3. 🔥 BHP Shifts From Coal

4. ⛩️ China's Economic Rebound

5. 🏛️ RBA Governor Commentary

The Recap

The Rising Dragon:
China’s Economic Revival

It was an up-and-down day on the market, with the ASX200 trading in the red before an array of positive Chinese economic data gave markets an afternoon shot in the arm. The ASX200 index finished the day 21.5 points or 0.31% higher to close at 7,077.60

The Energy (2.4%) sector was the place to be today, leading the five sectors that finished higher. WTI crude futures jumped almost 2% to $88 per barrel, hitting the highest levels in two weeks with a larger-than-expected drawdown in U.S. oil stockpiles fueling supply-side concerns. Commodities continued to rally as Gold prices rose to US$1,940 after the conflict in the Middle East intensified overnight. Iron Ore futures also breached the US$120.00 mark.

New RBA Governor Michelle Bullock spoke at the Australian Financial Security Authority's (AFSA) inaugural annual summit in Sydney today.
Some of her key points of note:

1. The strength of the housing market has been a surprise. The sharp increase in the cost of construction has made buying existing homes relatively more attractive than building new homes.

2. Inflation expectations in the near term, i.e. next year, are expected to be elevated with petrol prices, food prices, and rents increasing.

3. Medium-term inflation expectations are at around 2.5%.

4. The economy has not seen the full effect of the interest rate rises delivered since May 2022.

5. Shoppers are cutting back on non-essential spending and trading down to cheaper brands to cope with the rising cost of living.

Outlook

Australian Job data will be released tomorrow, with unemployment expected to remain at 3.7%.

The S&P 500 (-0.16%) and NASDAQ (-0.26%) futures are trading slightly lower this afternoon.

Some of the larger global companies reporting overnight include Tesla, Netflix, Morgan Stanley, ASML, P&G and Discover.

Economic Data

China reported a litany of economic data today that sent markets higher:

• Q3 GDP expanded 4.9% YoY, down from 6.3% in Q2 but above forecasts of 4.4%

• Sep. Retail Sales grew 5.5%, an increase from 4.6% in August and above estimates of 4.9%. The largest rise since May.

• Sep. Industrial Production was 4.5%, which was in line with August and above estimates of 4.3%

• Sep Unemployment Rate was 5.0%, down from 5.2% in August.

U.S. Retail sales were 0.7% higher in September (MoM), which beast estimates of 0.3% and followed a 0.8% rise in August. Sales from miscellaneous store retailers (+3%) had the most significant increase (3%), followed by nonstore retailers (+1.1%).

Wall Street

The S&P 500 (-0.01%) traded flat, while the NASDAQ (-0.3%) fell slightly as chipmakers dragged the market down after the Biden administration said it planned to halt shipments of advanced artificial intelligence chips to China. Nvidia shares lost more than 4%, while AMD (-1.2%) and Broadcom (-2.0%) also finished lower.

Quarterly Earnings:

• Defence company Lockheed Martin (+0.16%) rose marginally after it posted Q3 results that beat expectations. The company reported $6.73 in earnings per share on $16.88 billion in revenue.

• Johnson & Johnson fell 0.9% despite posting better-than-expected earnings and sales for Q3. J&J reported adjusted earnings per share of $2.66 on $21.35 billion in revenue.

• Goldman Sachs fell 1.6% following the bank’s Q3 report of $5.47 per share on revenue of $11.82 billion, a 33% and 1% year-over-year drop on the bottom and top line, respectively.

• Bank of America stock added 2.3% after the bank’s Q3 earnings report of 90 cents per share on $25.32 billion of revenue beat estimates.

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Quick Singles

🪃 Local News

• Labour unions halted plans to strike at Chevron Corp.’s liquefied natural gas facilities. Workers accepted Chevron’s proposed settlement on pay and working conditions and will not proceed with the labour action that was planned for tomorrow.

• The Victorian Government has introduced legislation to authorise a trial examining whether individuals who use medicinal cannabis can safely operate a vehicle. A controlled driving environment, isolated from public-use roads, will be established for the experiment. Medicinal cannabis was first legalised in Victoria in 2016.

🌏 Around The Globe

• According to a report by Counterpoint, Apple’s iPhone 15 is selling poorly in China compared to its predecessor due to weak consumption and competition from Huawei.

• Worldsteel says it anticipates a stabilising Chinese property market in the latter half of the year, which it expects to lead to a slight increase in steel demand due to government measures.

• HSBC Holdings is blocking staff from texting on their work phones. The firm is turning off the function on employees’ company-issued phones, meaning they cannot send or receive text messages. The move comes amidst regulatory probes into the industry use of unauthorised communication methods.

• Pharmacy chain Rite Aid filed for Chapter 11 bankruptcy and plans to close stores due to debt and opioid lawsuits.

• LinkedIn is laying off 688 employees, around 3% of its 20,000 global workforce, across its engineering, product, talent, and finance teams. This announcement follows a previous reduction of 716 jobs in May.

• Citigroup won a wrongful termination lawsuit filed by an analyst who was terminated for submitting personal meal expenses on a business trip and falsely claiming he had consumed them all himself.

• Spotify has introduced a merchandise hub to enable easier purchasing of band merchandise and records.

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Markets

ASX200 Company Movers

Index & Commodity Prices

Sector

Bond Prices

ETF Watch

ASX News

🗞️ Company Announcements

AMP Ltd. (AMP) shares fell as it reported a 0.1% increase in Assets Under Management to $68.3bn, with an increase in its Pension segment offset by falls in Super and Investments.

Cettire (CTT) provided a trading update today where it reported sales revenue of $127.1 million, up 92% from the pcp. as active customers rose 69% to 487,289. Adjusted EBITDA during the quarter was $8.7 million.

Credit Corp (CCP) revised its FY24 NPAT guidance lower by $55 million due to an impairment of $45 million associated with the carrying value of its U.S. Purchased Debt Ledger assets. Additionally, the company has lowered its guidance for its U.S. operations by a further $10 million, citing flat performance in Q1 compared to the previous year.

Evolution (EVN) reported its production numbers for the quarter, which were in line with the company’s previously guided FY24 production. The company produced 158,304 ounces with an All-in Sustaining Cost (AISC) of $1,612 per ounce (US$1,056/oz), down 16% from the previous quarter.

Liontown (LTR) has requested more time to finalise funding arrangements for its Kathleen Valley project. The company will remain in a trading halt until Friday.

Lithium Power International (LPI) has entered into an agreement with state-owned Chilean company Codelco, which will purchase the company for $385 million. LPI shareholders will receive $0.57 per share.

Mirvac Group (MGR) will acquire land lease operator Serenitas in partnership with two other firms for $1,010million. Mirvas will have 47.5% ownership in a Joint Venture with Pacific Equity Partners Secure Assets, which will hold the same stake. Tasman Capital Partners will hold the remaining minority interest.

Paladin (PDN) increased its stake to 100% in its’ Michelin advanced exploration project in Labrador, Canada. Paladin has recently completed an extensive geological review on the site, including an on-ground review of historical data and an airborne gravity-gradiometry survey.

Southern Cross Media (SXL) rose after receiving a takeover offer from ARN Media and Anchorage Capital at $0.94 per share.

Woodside Energy (WDS) lowered its full-year production guidance to 183 to 188 million barrels of oil in a Q3 update to the market today. Quarterly production was 47.8 MMboe (Million barrels of oil) - up 8% from Q2 following the completion of maintenance activity. Revenue was $3,259 million, up 6% from Q2 2023, due to higher production offset by lower realised prices.

Xtek (XTE) announced it has secured a $1.6 million Ballistics Armour Order from a European customer. We published an article earlier this week covering three other companies with exposure to the defence sector.

Post of The Day

Deep Dive

Whitehaven Secures Preferential Bid
For BHP's Coal Mines

Whitehaven Coal has emerged as the lead bidder for BHP Group's Daunia and Blackwater coking coal mines in Queensland, further signalling BHP's push to divest from coal. This move aligns with BHP's strategy, having previously sold the South Walker Creek and Poitrel coal mines. Both the mines in question are co-owned by BHP and Mitsubishi Development Corporation.

Whitehaven confirmed in an afternoon announcement it will pay $5 billion ($US3.2 billion) for the two mines over four instalments, including an upfront payment of $US2.1 billion.

While the prospective acquisition could be a significant strategic move for Whitehaven, the decision isn't devoid of contention. Whitehaven's London-based shareholder, Bell Rock, has been vociferously opposing the coal miner's decision to participate in the auction. Bell Rock's chief investment officer, Mike O’Mara, expressed concerns over the "transformative nature" of the proposed deal.

Bell Rock has also expressed discontent over Whitehaven's decision to suspend its share buyback program in August while bidding for the BHP mines.

Meanwhile, BHP's recent earnings have reflected a slow start in the iron ore and coking coal mines. BHP produced 69.4 million tonnes of iron ore in the last quarter, as it aims to reach between 282 million and 294 million tonnes by June 2024. However, despite the sluggish beginning, demand for iron ore from China has seen a surge, driven predominantly by the manufacturing and infrastructure sectors.

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Analyst Report

Jainson Education - Buy

Code: JAN | Market Cap: $98.6m | Current Price: $0.38 | Price Target: $0.70
Sector: Information Technology | Broker: Shaw & Partners

Janison Education Group provides online assessment software, assessment products, and assessment services in Australia and internationally. The company is split between its Solutions and Assessments business.

Janison announced a Q1 trading update on Monday, where the broker noted for key highlights:

1. Strong results from Solutions business offset by lower International Competition and Assessments for Schools (ICAS) growth

2. A strong pipeline of Solutions deals is expected to be announced in H2.

3. CEO succession plans were announced with a strong field of candidates identified and an appointment expected in the near term.

The broker acknowledges some of the risks from the report, including a softer Q1 performance, lack of clear FY24 guidance and uncertainty surrounding the CEO succession.

The broker maintains a Buy rating as it believes the potential over the medium term is under-appreciated by the market.

Based on the analyst’s forecasts, Janison is trading on an FY24 EV/Revenue multiple of 1.9x, while their price target implies 3.6x.
From an earnings standpoint, Janison trades on an FY26 EV/Cash EBITDA multiple of 10.6x, while the analyst’s price target implies 20.3x.

Daily Quiz

Test Your Knowledge

Yesterday’s Daily Quiz Question. Which of these healthcare giants has had the best 5-year share market returns?

Answer: ResMed. Despite the recent fall in price, ResMed is the best performer over a 5-year timeframe, rising by 51%. Cochlear (38%) was the next best, followed by CSL (26%)

That question was a tricky one, with only 13% of you getting that correct.

A Little Extra

📉 Going Down?

Top-10 shorted stocks on the ASX - as of October 12

📊 Broker Ratings

What do the brokers have to say?'

1. Bapcor (BAP) - Downgraded to Hold from Buy (Ord Minnett)

Read the full commentary here

👨‍💼 Director Transactions

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

💲Dividends

Companies trading ex-dividend today

1. Newcrest Mining (NCM) - $1.74, 100% franked

2. K & S Corporation (KSC) - $0.08, 100% franked

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.