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11 December 2018 07:52 AM
Overseas Market ReportCurrent
Level
PreviousChangeDaily %
Change
Monthly %
Change
Dow Jones Industrial Average24,42324,38934.000.14-6.03
S&P 5002,6382,6335.000.18-5.15
NASDAQ7,0216,96951.000.74-5.22
FTSE 100 Index6,7226,778-57.00-0.83-5.40
DAX 3010,62210,788-166.00-1.54-7.87
CAC 40 Index4,7424,813-71.00-1.47-7.14
Nikkei 225 (Japan)21,22021,679-459.00-2.12-4.63
HKSE25,75226,064-311.00-1.190.59
SSE Composite Index2,5852,606-21.00-0.82-0.55
S&P/TSX Composite Index14,72814,795-67.00-0.45-3.58
NZ 508,6968,66036.000.41-2.64
US Volatility (Vix)23
Overseas Market Report

US sharemarkets were volatile on Monday, but eventually finished higher. Financials and energy stocks led the declines, while technology stocks were supported. Shares in Apple rose 0.7% despite Qualcomm saying it had won a preliminary order from a Chinese court banning the import and sale of several iPhone models in China due to patent violations. Concerns over the US China trade dispute continue to linger. At the close of trade, the Dow Jones was up by 34 points or 0.1% after being down 507 points at one stage. The S&P500 index finished up by 0.2%. The Nasdaq index was higher by 51 points or 0.7%.

Global oil prices fell on Monday. Investors re-assessed the decision by OPEC and its allies to cut oil output in 2019. There are renewed worries about global demand given the on-going US China trade tensions. And safe-haven assets like bonds were preferred to growth assets like commodities and equities. Brent crude fell by US$1.70 or 2.8% to US$59.97 a barrel and the US Nymex price fell by US$1.61 or 3.1% to US$51.00 a barrel. 

Base metal prices fell by between 0.2-2.3% on the London Metal Exchange on Monday with tin down the least and lead down the most.

The gold futures price fell by US$3.20 an ounce or 0.3% to $1,249.40 an ounce. The spot gold price was trading near US$1,244 an ounce in late US trade. Iron ore fell by US15 cents or 0.2% to US$66.80 a tonne.

CommoditiesCurrent
Level
PreviousChangeDaily %
Change
Monthly %
Change
Oil Brent59.9761.67-1.70-2.76-14.55
Oil - West Texas crude50.9851.00-0.02-0.04-15.30
Gold Spot $/OZ1,244.001,244.00-0.10-0.012.85
Silver Spot $/OZ14.5014.500.000.052.71
Iron Ore67.4066.600.801.20-8.20
Thermal Coal Newcastle102.70102.500.100.10-3.07
Coking Coal FOB ECP AUS0.000.000.000.000.00
Aluminium ($US/t)1,9291,951-22.00-1.13-0.89
Copper Mar-18 ($US/lb)2.722.72-3.90-1.411.27
Lead ($US/t)1,9381,983-45.00-2.26-0.95
Nickel ($US/t)10,73010,846-116.00-1.07-5.86
Zinc ($US/t)2,6462,681-36.00-1.322.30
Tin ($US/t)18,97319,016-43.00-0.23-1.13
Uranium ($US/lb)29.0029.000.00-0.35-0.86
Australian Market ReportCurrent
Level
PreviousChangeDaily %
Change
Monthly %
Change
ASX All Ords5,6575,62730.000.53-5.89
S&P/ASX 2005,5815,55229.000.52-5.75
ASX 24 Futures5,577
Australian Market Report

Monday 10 December - close. The Australian share market slumped to a two-year low, weighed down by the major banks as hopes for a trade resolution between the US and China continue to dissipate. The benchmark S&P/ASX200 index was down 129 points, or 2.27 per cent, at 5552.5 on Monday, while the broader All Ordinaries fell 2.26 per cent at 5627.50.

Ashanti Headlines

AuMake International Ltd (AU8.ASX, 29cps, m.cap A$78.7m with 271.5m SOI, Cash $10.7m, Consumer Discretionary)

This morning AuMake International (ASX.AU8) announced a strategic agreement with JD Worldwide (a division of e-commerce giant JD.com). The exclusive agreement will utilise the respective strengths of each company (AU8’s retail presence / brand building ability in Australia and JD.com’s online and logistics capabilities in China) to create a powerful channel for Australia and New Zealand products to reach Chinese consumers. Highlights of the agreement can be seen below;

  • JD Worldwide - is a division of JD.com, one of the world’s largest e-commerce platforms. In 2017, JD.com had revenue in excess of A$72.4b and has a current market cap of ~A$47b (JD:NASDAQ).
  • A competitive online presence - whilst AU8 already has an ‘shopfront’ on JD.com this exclusive relationship will direct request for Australian and New Zealand products to the AU8 store - providing preferential treatments to other stores on the platform. 
  • Collaboration on OEM Products - AU8 and JD.com will co-develop, incubate, promote and distribute Aus and NZ products to Chinese consumers. JD.com has selected AU8 for it’s ability to promote new, less popular products here in Australia which compliments     JD’s distribution in China (increased margins for both companies). 
  • Immediate Revenue Impact - JD.com have outlined an initial sales target of 10M RMB per month (~A$2M/month) - a significant boost to top line numbers. Once the implementation is complete, we expect AU8 to be approaching A$85M in annualised sales,    with an improved margin as a result of increased online sales. 
  • Powerful Channel - JD.com has 313.8 million users, distribution centres in 28 Chinese cities and more than 550 warehouses. We expect access to this logistics chain to improve AU8’s distribution into China and provide countless synergies as the agreement     matures. 
  • Outlook - Encouragingly AU8 provided a positive outlook for the business with the multi-channel approach providing a foundation for significant revenue growth and sustainable gross margins in the order of 25-30%. 

Our Take

We see this as one of the more significant developments in the short time since AU8 has been listed. This agreement is recognition and endorsement of AU8’s retail presence and brand promotion capability by a global e-commerce giant and we look forward to seeing how this relationship develops. We are particularly excited about the potential for AU8 and JD to co-develop and distribute own-branded products. AU8 & JD are looking to capitalise on the current opportunity that exists in identifying and promoting new Australian and New Zealand brands and products in China (i.e. - the potential impact of co-branding AU8’s first foray into milk products!).  In the short to medium-term, we expect this relationship to materially increase sales and margins (greater portion of online sales). 

A copy of the full announcement can be read here

Please contact the Ashanti Desk if you would like to discuss the AuMake story in more detail: Steve Martin+61 8 6243 1884 | Duncan Relf +61 8 61692669


Have a question? admin@ashanticapital.com.au

ERA Communications