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Comparing the Mid-tier Miners
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In general, barring NST, participants within the resources sector have experienced a substantial correction of at least 20% over the past month as a consequence of significant underlying commodity price falls relating to China – USA trade tariff tensions. Whilst the timing of possible end to this alliteration is not clear, we do feel that value has emerged in some of the established mid-tier mining names. More-so with a cautiously optimistic view of supply-demand fundamentals over the medium term for the likes of Ni-sulphides and Cu. Or similarly, taking a slightly pessimistic view that ongoing uncertainty should at least provide a floor (initially) and support (longer term) to gold prices.
We have undertaken simple comparative analysis of our established suite of mid-tier miners under coverage: EVN, IGO, NST, RRL, SAR, SFR and WSA. We are taking a view that established cash generative businesses will be preferentially coveted by the market for resource weightings ahead of potential commodity price stability and ultimately recovery. EV:Operating Cashflow, but more significantly EV:FCF, are the basis for comparing our resource producer coverage over the next three years. On these metrics, SFR and IGO are the clear stand-outs.
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Morningstar’s Australian Economic Update for September 2018
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The world economy is still growing, which is a generally positive background for risk assets, but investment outcomes have become over-dependent on ongoing gains from U.S. equities. The most likely outlook is ongoing global expansion, though trade wars, monetary policy mistakes, problems in some emerging markets, and geopolitical shocks are all real risks to monitor. Bond yields in the U.S. have headed higher and have contributed to weak performance by global fixed interest and by global income-oriented assets like property and infrastructure; Australasian property markets, however, have been performing better.
In the Australian economy, it looks as if the pace of business activity may be moving into a slightly higher gear, although the ongoing drag of the financials sector remains a concern for equity performance.
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AUSTRALIAN EQUITIES
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Aug-17
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Aug-18
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Change 1
Month
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Change 12
Months
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ASX200 Accum
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56,146.82
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64,795.65
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1.42%
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15.40%
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ASX200 Resources Accum
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21,671.91
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26,332.11
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-4.43%
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21.50%
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ASX200 Industrials Accum
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54,315.13
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61,280.92
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3.20%
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12.82%
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INTERNATIONAL EQUITIES
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MSCI World Index
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1,959.74
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2,175.50
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1.04%
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11.01%
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S&P500 (USA)
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2,471.65
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2,901.52
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3.03%
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17.39%
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FTSE 100 (UK)
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7,430.62
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7,432.42
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-4.08%
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0.02%
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Nikkei 225 (Japan)
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19,646.24
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22,865.15
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1.38%
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16.38%
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Shanghai Composite (China)
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3,360.81
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2,725.25
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-5.25%
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-18.91%
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CURRENCY
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A-Dollar / US-Dollar
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$0.79
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$0.72
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-3.19%
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-9.49%
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Trade Weighted Index
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66.3
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62.6
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-1.42%
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-5.58%
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FIXED INTEREST
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Aust 90 Day Bank Bills
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172.00%
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194.50%
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-195 bps
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2250 bps
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Aust 10 Year Govt Bonds
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271.34%
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252.02%
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-1282 bps
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-1932 bps
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US 10 Year Govt Bonds
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211.96%
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285.94%
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-1027 bps
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7398 bps
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SMSF Residency
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Strict residency rules apply to the commencement and operation of a self-managed superannuation fund (SMSF). As it is becoming more commonplace for trustees to spend extended periods of time overseas (for work or otherwise), it is important to be mindful of the steps required to ensure the fund continues to be complying.
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Frankly Speaking
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Consensus Earnings Forecasts and Inside Selling.
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