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23/02/18
       
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Australian equities ended slightly higher, with the ASX200 up 0.17% with big gains seen in Qantas, Crown Resorts and Nine Entertainment, which offset a retreat in AGL Energy and Woodside Petroleum.

Qantas (QAN) shares gained 5.9% to $5.58 after the airline announced a $378 million share buyback and 18% growth in half-year profit.

Crown Resorts (CWN) lifted 4.4% to $13.05 as its half-year normalised profit increased and its key international VIP gambling business recovered from the fallout from the detention of Crown staff in China.

Free-to-air broadcaster Nine Entertainment (NEC) soared 16.2% to a two-and-a-half year high of $1.97 as stronger ratings and a bigger slice of a larger free-to-air advertising pie contributed to half year profit growth.

Flight Centre (FLT) upgraded its full year profit guidance after its half-year profit improved by 23%, and its shares gained 10.4% to $55.26.

Shares in online retailer Kogan.com (KGN) jumped 19% to a record $8.60 as its growing customer numbers and expanding range of services delivered strong half year profit growth.

A2 Milk (A2M) hit fresh highs, rising another 7.1% as analysts upgraded their rating on the stock following Wednesday's announcement of its partnership with Fonterra.

Infant formula maker Bellamy's Australia (BAL) was one of the few stocks to fall after reporting, dropping 5.9% because of its warning of a softer second half of the year.

Blackmores (BKL) also lost ground, falling 14.7% to $136.00, after the vitamins producer's 20% half year profit growth came with warnings of a softer second half of the year.

Anchoring the market were Woodside Petroleum and AGL Energy, which both traded ex-dividend. Woodside shed 3.3% and AGL was 4.45% lower.

For more details on the recent company results, please click on the button to read the full report below.

International Markets

US stocks were mostly higher, with the S&P500 and Dow Jones closing up, buoyed by gains in industrial and energy shares as US Treasury yields eased, while the Nasdaq dipped slightly into the close.

On Wednesday, the Dow and S&P dropped for a second consecutive session and the Nasdaq fell for a third straight after minutes from the US Federal Reserve's January meeting showed the central bank's rate-setting committee grew more confident in the need to keep raising rates.

Concerns about a faster pace of rate hikes from the central bank were eased by comments on Thursday from St Louis Fed President James Bullard that expressed concerns a "bunch of hikes" could turn Fed policy restrictive, and benchmark 10-year US Treasury yields retreated from the more than four-year highs hit on Wednesday. Market participants are still largely expecting the Fed to raise rates three times this year.

Despite the recent climb in rates, many analysts expect the market to be able to absorb the rise as long as economic data remain supportive and the pace of the increase is modest.

To Read the Full Morning Report Please CLICK HERE
Reseach Report: Altech Chemicals Ltd. (ATC) 

US$190m project debt secured. Final funding due Q2


ATC has secured a US$190m debt funding package from KfW IPEX-Bank in Germany. It consists of US$170m via the German Export Credit Agency (ECA) scheme and US$20m through traditional debt on commercial terms. The successful conclusion of the debt financing for its high purity alumina plant is a major step for ATC, which now paves the way for final project funding to be secured. ATC aim to be the world’s largest independent supplier of HPA, which is an important constituent for the production of LED’s, Li-ion battery separators and mobile devices. We maintain our Speculative Buy recommendation on ATC and move our valuation up 15.6% to $0.37 per share.

 

Key Points

• ATC achieve execution of US$190m debt funding package: In December 2017, ATC announced a credit approval for their application for project debt financing from the Germanowned development bank, KfW IPEX-Bank. The US$190m debt package consists of a combination of Export Credit Agency cover (ECA) and traditional bank debt. The Final Investment Decision (FID) Study, completed in 2017, estimated a total pre-production capex spend of US$298m. The debt funding package therefore represents 64% of the total.

• Paves the way for equity raising: ATC has now commenced the project equity funding process. ATC has stated that the final funding mix may include subordinated mezzanine finance, straight equity and/or project level equity participation or project level joint ventures. ATC state the final mix will take into account funding costs and equity dilution to current shareholders. We note that the EPC contractor, SMS group, for the project build in Malaysia has committed to a total of US$15m in equity.

• Due diligence identifies twin product stream: ATC’s proposed processing plant in Johor, underwent an arduous (and expensive) near 18-month due diligence period by the Germanbased team. The DD identified an opportunity for the product finishing line to produce two HPA products – a beaded HPA product for use in the synthetic sapphire glass industry and a fine powder version of HPA for use by battery separator manufacturers. The production capacity was also adjusted upwards to 4,500tpa from the 4,000tpa envisaged in the BFS.

• Updated financial model: Now that the pre-production capex has been settled and execution of agreements completed, we have updated our financial model for the HPA project. We increase our output in-line with ATC’s twin production line, increased our capex estimates (in-line) and used updated price forecasts for HPA. We test two scenarios for additional funding requirements 1) a straight equity model and 2) a part sell-down of the project to a strategic investor. The partequity sell-down on our base case indicates a +14% valuation change over straight equity (assuming A$175m of additional capital required, raised at $0.20 per share).

• Recommendation and Valuation: We maintain our Speculative Buy recommendation noting that achieving the equity component of the project financing is the last major hurdle. We increase our valuation by 15.6% valuation to $0.37 from $0.32 per share. In our part equity sell-down scenario, our valuation moves to $0.42 per share.
 

To read the full report CLICK on the image below:

 

Head of Research

Paul Adams

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This report accurately expresses the personal view of the Authors.

DJ Carmichael Pty Ltd holds an immaterial holding in Altech Chemicals Ltd. DJ Carmichael Pty Ltd provides corporate advice to Altech Chemicals Ltd and has been paid a fee for these services. DJ Carmichael Pty Ltd acted as Lead Manager in two capital raisings for Altech Chemicals Ltd and was paid a fee for these services. 
 
The analyst dos not own shares in Altech Chemicals Limited.

The Author of this report made contact with Altech Chemicals Limited for assistance with verification of facts, admittance to business sites, access to industry/company information.  No inducements have been offered or accepted by the company.

The recommendation made in this report is valid for four weeks from the stated date of issue. If in the event another report has been constructed and released on the company which is the subject of this report, the new recommendation supersedes this and therefore the recommendation in this report will become null and void.
Recommendation Definitions

SPECULATIVE BUY – Potential 10% or more outperformance, high risk
BUY – Potential 10% or more outperformance
HOLD – Potential 10% underperformance to 10% over performance
SELL – Potential 10% or more underperformance
Period: During the forthcoming 12 months, at any time during that period and not necessarily just at the end of those 12 months.

Stocks included in this report have their expected performance measured relative to the ASX All Ordinaries index. DJ Carmichael Pty Limited’s recommendation is made on the basis of absolute performance. Recommendations are adjusted accordingly as and when the index changes.

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