Good Evening,

Welcome to Equity Espresso's Daily Recap. The week couldn’t end quickly enough as the ASX200 index fell for the fifth time in six weeks as commentary continues to dominate the airwaves on the RBA’s next move on rates. Something to worry about in two weeks time. In the meantime, we hope everybody enjoys their weekend.

The Recap

The ASX200 index went its own way on Friday, finishing a down week positively, gaining 14.6 points or 0.21% to close at 6,826.9. The rise came despite more carnage on Wall Street overnight, where the tech-heavy NASDAQ index lost 1.76%.

With only two trading days left in October, 2023 is on track to be the second-worst October in 15 years, trailing only 2018, when the index lost 6.0% after the Federal Reserve unexpectedly increased interest rates.

Consumer Staples (+1.33%) and Utilities (+0.91%) were the places to be today, leading the way of the six sectors that ended in the green. Coles (+2.3%) and Woolworths (+0.8%) both finished higher after providing quarterly trading updates this week. Tech (-0.8%) and Industrials (-0.6%) were the worst performers for the day.

ResMed (RMD) shares declined by more than 4% due to higher costs in Q1 which put pressure on its profit margins. The company's Gross Margins decreased by 250 basis points due to an increase in expenses associated with a field safety notification on Astral devices, as well as higher component and manufacturing costs. On today’s earnings call, CEO Mick Farrel said that GLP-1 drugs are seen as complementary, not substitutes and adherence rates are expected to remain steady.

Harvey Norman (HVN) shares rose despite a 49% plunge in Profit Before Tax but did reveal a $442 million share buyback.

The Gold price continues to show strength, holding above US$1,980/oz to trade at around US$1,988/oz, still unable to crack the psychological US$2,000/oz barrier. Iron Ore futures rose back above US$120.00 this afternoon.

Economic Data

• Australia’s producer prices (PPI) rose by 3.8% for the third quarter compared to the same quarter last year, slightly lower than the 3.9% rise in June.

• The European Central Bank kept interest rates on hold at 5.00% during its October meeting overnight.

• The U.S. economy expanded by 4.9% in the third quarter of 2023, the largest annual GDP rise since Q4 2021 and above market estimates of 4.3%. Q2 GDP expanded by 2.1%. Consumer spending was the most significant driver of the jump, growing by 4%, the most since Q4 2021.

• New orders for Manufactured Durable Goods in the U.S. rose by 4.7% month-over-month in September 2023, rebounding from a 0.1% contraction in August and surpassing market expectations of a 1.7% rise.

Wall Street

The U.S. market took a tumble on Thursday, with Tech stocks bearing the brunt of the damage after mixed reactions from quarterly earnings and a strong GDP report, putting more fear that interest rates could continue to rise. The NASDAQ (-1.76%) fell sharply while the S&P 500 (-1.18%) lost ground.

Of the 11 major sectors in the S&P 500, Communication Services (-2.6%) fell the most, while Real Estate (+2.2%) rose the most.

Outlook

Markets look set to rebound in the U.S. on Friday, with the S&P 500 (+0.62%) and NASDAQ (+0.91%) higher this afternoon.

The busy earnings week concludes tonight with Exxon Mobile, Chevron, Sanofi and Colgate, some of the companies reporting.

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Quick Singles

🪃 Local News

• The Australian Federal Police (AFP) discovered a large money laundering operation, with a Chinese currency exchange allegedly using dozens of retail premises as a front for illegal operations worth over $200 million. Seven individuals have been arrested, and properties and luxury items worth over $50 million have been seized.

🌏 Around The Globe

• China's former Premier Li Keqiang unexpectedly passed away from a heart attack at age 68, less than a year after he stepped down from overseeing the Chinese economy.

• The United Auto Workers union has announced that it has come to a tentative labour agreement with Ford. If approved, this would be the biggest gain for unionised auto workers in decades. The proposed deal includes a 25% increase in pay over the four years of the contract, reinstatement of cost-of-living adjustments that were previously suspended, and a faster timeline for new workers to reach the highest wage.

• Apple is hiking the price of AppleTV+ to $9.99 per month, up from $6.99/month.

• California has ordered General Motors' Cruise to remove their autonomous vehicles from state roads due to safety concerns and allegations of misrepresentation.

• In an effort to circumvent export restrictions imposed by the U.S., China is increasing its spending on domestic technology, as evidenced by government tenders and research documents.

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Markets

ASX200 Company Movers

Index & Commodity Prices

Sector

Bond Prices

ETF Watch

ASX News

🗞️ Company Announcements

• Core Lithium (CXO) produced 20,692t of spodumene concentrate during the September quarter, up from 14,685t in June. Cash receipts were $21.6m, with net operating outflows of $25.9m.

• Coronado Resources (COR) recorded revenue of $2.2 billion during the quarter, its second highest in company history. ROM Coal production was 19.3Mt - up 3.7% from the pcp.

• Harvey Norman (HVN) said aggregated sales revenue dropped by 9.1% during its first quarter, with the decline mainly coming from Australian stores, which saw a 13.6% slump in revenue. Profit Before Tax fell by 49.1% to $86.23 million. Despite the fall, the share price rose by over 5%.

• ResMed (RMD) reported a 16% growth in revenue for Q1, but margins compressed by 250 basis points to 54.4%, which slowed Net Income growth. ResMed declared a dvididned of US$48c per share.

• SiteMinder (SDR) reported a 30.8% YoY revenue increase to $46.8 million during Q1 as it continues to grow subscription revenue. Underlying FCF was ($5.5m) as the company said it aims to be underlying EBITDA profitable and underlying FCF positive by the second half of FY24.

• Weebit Nano (WBT) traded flat after it said it was still on track to achieve its first IP revenues in 2023. Weebit reported cash outflows for the quarter of $4.6 million, with $83.9 million cash on hand at the end of September.

 📱 Post of The Day

International News

📰 Global Earnings

Reported During Trading Hours

• Comcast (CMCSA) shares fell 8.4% after the telecom giant reported a loss in high-speed broadband subscribers, while advertising revenue from NBCUniversal was also weaker than expected.

• UPS (UPS) shares declined by 5.9% after releasing its Q3 earnings report, which showed disappointing revenue. Full-year revenue guidance was also slightly below expectations.

• Merck (MRK) rose by 2.8% after the pharmaceutical company reported Q3 revenue and adjusted earnings that beat expectations on strong sales of its cancer drug, HPV vaccine. Merck lifted its full-year sales forecast to $59.7 billion and $60.2 billion.

Reported After Hours

• Amazon (AMZN) shares rose in after-hours trade after it lifted its fourth-quarter sales guidance range to between $160 billion and $167 billion, while analysts’ estimates were around $166.6 billion. Amazon beat analysts’ forecasts on the top and bottom lines in the third quarter.

• Intel (INTC) stock traded more than 7% higher after-hours after the semiconductor chip manufacturer beat third-quarter earnings. Intel reported adjusted EPS of 41c per share, on $14.16 billion in revenue, which beat analysts’ estimates of 22c per share and revenue at $13.53 billion.

• Ford (F) missed consensus third-quarter earnings expectations, which sent its share price falling by over 3%. Ford reported adjusted earnings of 39c per share on $41.18 billion of revenue, lower than the 45c per share on $41.22 billion of revenue estimated by analysts.

• Chipotle Mexican Grill (CMG) rose more than 2% in after-hours trade, with adjusted earnings per share coming in at $11.36 versus estimates of $10.55.

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Analyst Report

Bowen Coking Coal

Code: BCB | Market Cap: $238m | Current Price: $0.11
Price Target: $0.27 | Sector: Materials | Broker: Shaw & Partners

Bowen Coking Coal focuses on exploring and developing metallurgical coal in Australia. The company holds 100% interest in the Isaac River Project, the Cooroorah Project, and the Comet Ridge Project. The company also has a 90% interest in the Hillalong Coking Coal Project, which covers 48 square kilometres in the northern Bowen Basin.

September Quarterly Highlights

• During the quarter, Bowen shipped 555,000 tonnes of coal, generating $120 million in revenue. The average achieved coal prices for thermal and metallurgical coal sales declined, with thermal prices down 21% to US$84/t and metallurgical prices down 28% to US$173/t. However, the shift in sales mix to metallurgical coal (54%) partially offset the weaker prices. The overall achieved coal price was down 15% to US$132/t.

• Overall cash costs were A$199/t per tonne of coal sold, with the Burton Complex operating at A$152/t and Bluff at A$372/t. The Bluff mine is not profitable at current coal prices and has been placed on care and maintenance.

• Bowen finished the quarter with $44million in cash

Recommendation 

Shaw & Partners retain a BUY recommendation, slightly dropping their price target to 27c (from 29c). They have a favourable view of coal markets and believe Bowen has a clear pathway to positive cash flow.

The broker forecasts that Bowens will finish the December quarter with $60 million operating cash flow, supporting funding for a $30 million development of capital at Ellensfield South.

Daily Quiz

❓️ Test Your Knowledge

Yesterday’s Daily Quiz Question. Only one sector is higher so far in October. Which is it?

Answer: As of yesterday’s close, the Utilities sector was the correct answer. However, Materials have also turned positive after today, so both are in the green with two trading days to go in the month. Tech (-8.6%) and Health Care (-7.8%) have been the worst performers in October.

A Little Extra

📉 Going Down?

Top-10 shorted stocks on the ASX - as of October 21

📊 Broker Ratings

What do the brokers have to say?

1. Argosy Minerals (AGY) - Downgrade to Neutral from Outperform (Macquarie)

2. Brambles (BXB) - Downgrade to Sell from Neutral (Citi)

3. Fortescue Metals (FMG) - Downgrade to Sell from Neutral (UBS)

4. Liontown Resources (LTR) - Upgrade to Buy from Hold (Bell Potter)

5. Sandfire Resources (SFR) - Upgrade to Buy from Accumulate (Ord Minnett)

👨‍💼 Director Transactions

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

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.