Afternoon Report / The hunter becomes the hunted! (CNI, PLG, RRL, Seasonality)

By Market Matters 10 October 17

The hunter becomes the hunted! (CNI, PLG, RRL, Seasonality)

Market Matters Afternoon Report 10th October 2017

Another session where we saw the best of it in the morning before some sellers came into play around midday pushing the index to a 3pm low – before a slight whimper into the close. An overall range of +/- 30 points, a high of 5750, a low of 5720 and a close of 5738,  off 1pt or -0.02%.

ASX 200 Intra-Day Chart

ASX 200 Daily Chart

More Corporate Activity…

Some more corporate activity at play today, this time in a stock we own in the MM Income Portfolio, with Centuria (CNI) finding itself the target of a share raid by Credit Suisse on behalf of  the Warburg Pincus entity, e-Shang Redwood Group. The private equity backed entity bought 14.9% of CNI overnight at $1.48 versus yesterdays close of $1.30 and this obviously had a very positive influence on the CNI share price today – with the stock closing up +7.69% at $1.40. The MM Income Portfolio has a 7% weighting to the stock from $1.20, however we continue to like the stock here. We’ll cover more of it tomorrow in the Income Report, however clearly this a strategic move with the same entity also acquiring 20% of Propertylink (PLG) – which CNI owns 17% of + CNI recently made a full takeover tilt for PLG which was rejected. To complicate matters further, CNI is also raising capital in a 1 for 4.9 entitlement offer to existing shareholders (after an institutional placement) with both being done at $1.28 per share – so we’ll increase our weighting further into CNI through this raise. Clearly a lot going on here which we’ll discuss tomorrow, however the stock is doing well for us.

Centuria (CNI) Daily Chart 

Good news also for the Gold miners today with the muted increase in  GOLD MINERS royalty blocked by the WA liberals Rewinding for a second, the WA government (Labor) recently announced plans to raise royalty rates on gold miners to 3.75% from 2.5% when the gold price stays above A$1200/oz. In addition, they were also aiming to remove the 2,500oz annual royalty-free threshold. In terms of stocks that would have been hit hardest, the pure play WA gold miners were clearly the ones, primarily  NST, SBM, SAR and RRL with the lower margin producers (SAR) the most impacted. Obviously the fact it is not going through is a positive for those names first and foremost with SAR seeing most relief buying today adding +3.73% while Regis Resources (RRL), which we bought recently for $3.66 in the Platinum Portfolio also did well adding 2.65% to $3.87. We’re targeting a move over $4 for this one

Regis Resources (RRL) Daily Chart

And to finish off, I was thinking about tomorrow’s MM Webinar at 1pm (reply to this email to reserve your spot) given the title of - Stocks to buy into the Christmas Rally. Firstly, is the actual Christmas rally legitimate? In short, yes. October through to April is typically a very good period for stocks and right now we’re cashed up, looking for opportunities ahead of this seasonally strong period. November sees some weakness however that’s all about the banks (3 or the big 4) going ex-dividend – so inclusive of the dividends it actually does OK.

ASX 200 Seasonality post GFC

We’ll cover more of this in tomorrow’s presentation, however drilling down into the banks we continue to see that being long banks here, with the view of collecting dividends and depending on the run they have, selling into December, or holding some for the first quarter of the calendar year makes sense.

Banking Sector Seasonality post GFC

Have a great night

The Market Matters Team

Disclosure

Market Matters may hold stocks mentioned in this report. Subscribers can view a full list of holdings on the website by clicking here. Positions are updated each Friday.

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