Global markets were higher overnight, with Wall Street’s main indexes rising as Apple and chipmakers boosted technology shares, while higher oil prices lifted energy companies.
In global stock news, Apple is attempting to reintroduce itself as an entertainment and financial services company that also makes iPhones as it launched a streaming television service, a credit card and an online gaming arcade. It will be interesting to see how dominant players such as Netflix respond, particularly given Apple has very deep pockets to fund expansion & develop/buy programming content. It also presents yet another potential headache for pay TV operators such as Sky TV.
Stock in Focus: Lynas (LYC:ASX)
The big gainer on the ASX yesterday was rare earth miner Lynas, which saw its shares jump +35% on the back of a takeover offer from conglomerate Wesfarmers (which saw its shares drop on the news, as Wesfamers is putting to work some of the cash it received from the demerger of Coles). Lynas have said they are assessing the proposal, which was unsolicited and highly conditional, and non-binding .
We are clearly pleased with the announcement as Lynas shares had taken a hit since we initiated research coverage, after the Malaysian government ordered it must remove the radioactive waste that it had accumulated due to its activities over the past six years if it wants to continue operating in this country and extend its license. Wesfarmers have clearly seen an opportunity.
In our view, Lynas provides an attractive investment for those wanting to gain indirect exposure to electric vehicle (EV) theme – which is a strong multi-year tailwind as the rare earth minerals it mines are a key component of EV’s. However, as a miner of a commodity it is exposed to pricing risk, and the hazardous nature of processing the rare earths means it is also prone to regulatory risk (which has been highlighted in recent times).
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