Global markets were higher overnight as the major US S&P 500 market index briefly crossed the 3,000-point mark for the first time after dovish remarks from Federal Reserve Chairman Jerome Powell boosted the case for an interest rate cut later this month.
Powell's testimony to Congress overnight was interpreted as hinting that an insurance interest rate cut is near, as he said the central bank stands ready to "act as appropriate" to support US economic growth.
Stock in Focus: Wellard (WLD:ASX)
WLD shareholders have experienced a turbulent month, after its already deflated share price sunk down to all-time lows after a default with their debt repayments triggered a significant hike in repayments to $1m per month with noteholders. Wellard entered into a trading halt as it continued to arrange options to restructure its balance sheet.
Fortunately, Wellard suspended its trading halt announcing it was able to organise the sale of one of its livestock ships for US$22m, to pay down debt and lower its repayment schedule significantly from the above noteholders. Wellard will leaseback the ship for about two years (with the option to extend for another four years) providing an attractive opportunity for Wellard to realise the equity value of its ship and consolidate its debt while retaining the use of the vessel for chartering or exporting opportunities.
We remain quietly optimistic given management were able to lower their debt and tangible assets per share ($0.183 at 31 December 2018) are still well above what Wellard shares are currently trading at. However, there is still a long road to recovery with further balance sheet improvements required, and operationally there are still significant risks weighing down on Wellard, given a major customer being Turkey has halted imports of live cattle, and there is large uncertainty around the impacts of recent floods in Queensland – in terms of supply levels, prices, and planned voyages. While Wellard are heading in the right direction, it is still far from smooth sailing ahead.
We currently have a HOLD recommendation on WLD.
Australia & New Zealand Market Movers
The Australian share market added to gains on Wednesday (ASX 200 index +0.36%) as the major banks had mixed reactions to APRA's new capital requirements. In stock news, Evolution Mining opened trade at a record high after reporting strong gold production of 753,000 ounces for 2018-19, above the midpoint of its guidance.
The New Zealand market rallied to fresh all-time highs yesterday (NZX 50 index +1.06%) as A2 Milk helped propel the index higher. Shares in A2 jumped +6% as a major broker updated their rating on the stock, investors will now be awaiting the company’s annual result in August. Outside the main index, New Zealand Oil and Gas jumped after OG Oil & Gas offered a 25 percent premium to buy out minority holders in the Wellington-based explorer. Singapore-based OGOG, the oil and gas arm of Ofer Global Group and 70 percent-owner of NZOG, is offering 62 cents for the shares it doesn't already own.
3 Things Markets Will be Watching this Week
- US Corporate earnings season kicks off this week.
- US Fed chairman Jerome Powell will testify before Congress on Wednesday and Thursday.
- In Australia, a business confidence survey on Tuesday will give its first report for a full month since the Coalition’s surprise Federal election victory.
Have a Great Day,