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28 February 2019 08:18 AM
Overseas Market ReportCurrent
Level
PreviousChangeDaily %
Change
Monthly %
Change
Dow Jones Industrial Average25,98526,058-73.00-0.283.94
S&P 5002,7922,794-2.00-0.053.26
NASDAQ7,5557,5495.000.073.75
FTSE 100 Index7,1077,151-44.00-0.611.99
DAX 3011,48711,541-53.00-0.462.81
CAC 40 Index5,2255,239-13.00-0.264.66
Nikkei 225 (Japan)21,55721,449107.000.503.77
HKSE28,75728,772-15.00-0.052.92
SSE Composite Index2,9542,94212.000.4214.29
S&P/TSX Composite Index16,07416,0686.000.043.43
NZ 509,3079,28126.000.283.58
US Volatility (Vix)15
Overseas Market Report

US sharemarkets were mixed on Wednesday. Investors digested new comments from the Federal Reserve chief. Also US trade representative Robert Lighthizer said the US and China still had hard work ahead to reach a trade deal. At the close of trade the Dow Jones index was down by 73 points or 0.3%. The S&P500 index lost 0.1%. But the Nasdaq index was up by 5 points or 0.1%.

Global oil prices were firmer on Wednesday. US crude oil inventories fell by 8.6 million barrels last week. Analysts had actually been tipping an increase of 2.8 million barrels. Reuters reported Saudi Energy Minister Khalid al-Falih as saying that OPEC and its partners were already "taking it easy" in response to a tweet from Trump on Monday, who told the group to "relax" on production cuts. Brent crude rose by US$1.18 or 1.8% to US$66.39 a barrel and the US Nymex price rose by US$1.44 or 2.6% to US$56.94 a barrel.

Base metal prices rose by up to 2.4% on Wednesday with lead up the most. Tin was the exception, down 0.4%.

The gold futures price fell by US$7.30 an ounce or 0.5% to $1,321.20 an ounce. The spot gold price was near US$1,320 an ounce in late US trade. Iron ore fell by US25 cents or 0.3% to US$83.30 a tonne.

CommoditiesCurrent
Level
PreviousChangeDaily %
Change
Monthly %
Change
Oil Brent66.3965.211.181.817.71
Oil - West Texas crude56.9656.940.020.045.89
Gold Spot $/OZ1,321.001,320.000.700.05-0.05
Silver Spot $/OZ15.7015.700.00-0.01-2.03
Iron Ore82.6084.40-1.80-2.1814.30
Thermal Coal Newcastle94.9094.800.100.11-3.90
Coking Coal FOB ECP AUS0.000.000.000.000.00
Aluminium ($US/t)1,8961,88511.000.60-0.32
Copper Mar-18 ($US/lb)2.972.960.900.306.59
Lead ($US/t)2,1302,08051.002.431.16
Nickel ($US/t)12,97212,87795.000.738.94
Zinc ($US/t)2,7762,76511.000.383.47
Tin ($US/t)21,68021,770-90.00-0.414.16
Uranium ($US/lb)28.0028.000.000.54-3.97
Australian Market ReportCurrent
Level
PreviousChangeDaily %
Change
Monthly %
Change
ASX All Ords6,2286,234-5.00-0.084.90
S&P/ASX 2006,1446,150-7.00-0.114.76
ASX 24 Futures6,124
Australian Market Report

Wednesday 27 February - close. Australian shares have finished higher on gains by the big miners and banks while investors took stock of several new earnings reports. The benchmark S&P/ASX200 index finished up 21.9 points, or 0.36 per cent, at 6,150.3 points at 1615 AEDT on Wednesday, while the broader All Ordinaries was up 24.6 points, or 0.4 per cent, at 6,233.6.

Ashanti Headlines

AuMake International Ltd (AU8.ASX, 23cps, m.cap A$62.4m with 271.5m SOI, Cash $8.0m, Consumer Discretionary)

1HFY19 Highlights

This morning AuMake (AU8.ASX) released their numbers from the 1H FY19, highlights include;

  • 1H FY19 financial results compared to same period 1H FY18;
    • Total sales up 142% to $21.8m
    • Owned brand sales up 424% to $1.40m (compares favourably with peers in the space!)
    • Gross profit up 274% to $4.2m
    • Gross margin up 46% to 19.2%  (21.25% gross margin for Dec 18 quarter)
    • Same store growth up 30% in sales and 71% in gross profit
    • Stabilisation of fixed operating expenses
    • Online revenue continues to contribute 30% of total sales

An impressive set of numbers from AU8, especially when comparing the growth of the business on pcp. Of particular interest to us was the stabilisation of costs and the ability of the company to significantly increase margin (+46% HoH). The company is now confident in the business model and, with increased scale, can generate long term profitability for shareholders.  

HoH Highlights

Other Key Takeaways

Other points of interest from the release where;

  • AU8 averages a gross margin that is double that of industry peers (+20% v 10%). This is a result of AU8’s ability to sell OEM and lesser known brands.
  • AU8 estimate the size of the cross border retail market to be A$1.5- 2b per annum. 
  • The company is now focused on expanding market share and continues to assess opportunities in tourism, complimentary businesses and China
  • Trading conditions remain buoyant post Chinese New Year and implementation of new e-commerce legislation. 
  • Of note in the Blackmores 1H result- despite slower than expected China sales, the company noted continued buying from Chinese consumers in Australia and sending back to China. 
  • We will keep an eye on ongoing activity in China- relationship with JD.com is particularly interesting given references to Chemist Warehouse/T-Mall and Priceline/ Koala.com. Revenue is expected In 4Q of this FY.
  • Online activity continues to grow with +110,000 members and 30% of sales.  

Strategic Outlook

There was clear messaging in the 1H result that the Company is now looking to increase the scale of the business  and increase market share. This is a different rhetoric from the company, as for the last 6 months they have focussed on refining the business model and demonstrating the company’s ability to increase sales and margins. 

AU8 is a rapidly growing business in the China-Australia cross border retail sector and we look forward to seeing what the business looks like in another 6 months’ time. 

A copy of the announcement can be found 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