The local market ended the week 1% higher, on 7,348.10 points, with resources stocks doing the heavy lifting. M&A activity is still a dominant theme at the moment, particularly in the infrastructure space, while buy-now pay-later shares tumbled this week as competitors throw down the gauntlet.
Which shares excelled?
Novonix (ASX: NVX) and Vulcan Energy Resources (ASX: VUL) both had impressive weeks, with support for lithium and battery metals stocks lifting the segment.
The rally came on the back of the European Union’s highly-awaited decision around next-generation car developments. It has introduced legislation that will phase out new internal combustion cars by 2035, while also designating a 55% cut in overall CO2 emissions from new vehicles by 2030. Vulcan also fared well on the back of director buying, and their announcement regarding the grant of a new exploration license in the Upper Rhine Valley, which it says is prospective for geothermal and lithium brine.
On the back of plans to build a new data centre at the Macquarie Park Data Centre Campus, Macquarie Telecom (ASX: MAQ) had a bumper week, climbing well over 20%. The company’s plans will see it build the largest data centre on the site, while also boosting total campus IT load to 50MW. Phase one of construction activity is expected to be completed in the second half of 2023, although in the meantime, the boon in data usage bodes well for the company’s long-term outlook.
Shares in Spark Infrastructure (ASX: SKI) soared over 16% on news of a takeover bid, which it moved swiftly to knock back. The infrastructure player, which owns and manages a portfolio of electricity infrastructure assets, caught the attention of a conditional and non-binding indicative proposal from Ontario Teachers’ Pension Plan Board (OTPP) and Kohlberg Kravis Roberts & Co (KKR). The suitors offered $2.70 per share, before a subsequent bid of $2.80 per share, with the Board believing the bids undervalue the company.
The subsidiary of NRW Holdings (ASX: NWH), Golding Contractors, announced that it has sold most of its major mining equipment to Boggabri Coal Operations. In total, Golding plans to sell 38 mobile mining assets to Boggabri by the end of July, yet still continue to run maintenance on the assets. Shareholders were receptive to the news, with management pointing to reduced debt levels and an increased return on capital.
As iron ore prices continued their ascent, the nation’s major miners all delivered strong gains for the broader market. Leading the way was Fortescue Metals Group (ASX: FMG), up around 8% and closing in on an all-time high.
And rounding things out, the nation’s largest manufacturer and distributor of four-wheel drive accessories, ARB Corporation (ASX: ARB), delivered an upbeat outlook amid its trading update this week. ARB unveiled revenue grew 34% year-on-year to $623 million in FY21, while profit before tax is expected to come in around $145-150 million. Management cited the company’s strong order book as part of its outlook, although they held back on providing any formal guidance given broader uncertainty amid the pandemic. Shares surged more than 12% across the week.
Which shares dragged on the market?
It was a difficult week for the heavyweight names in the buy-now pay-later segment, with new competition raring to take up the fight with some of the local incumbents. As a result, Zip Co (ASX: Z1P) and Afterpay (ASX: APT) were both hit hard during the week.
The slump came amid news on two fronts. First, PayPal (NASDAQ: PYPL), in a widely telegraphed move, officially implemented its pay-in-four product across the Australian market to its user base that expands to more than 9 million people across the country. The company has also sought to differentiate itself from existing players by offering no late payment fees.
Things didn’t stop there, however, as tech giant Apple (NASDAQ: AAPL) also announced plans to enter the burgeoning segment in partnership with the lending support of banking giant Goldman Sachs (NYSE: GS). The company intends to roll-out an interest-free instalments-based payments program dubbed Apple Pay Later, leveraging its existing Apple Pay network.
Elsewhere, shares in luxury fashion retailer Cettire (ASX: CTT) pulled back from recent highs. An online retail business, the stock has fallen foul of shareholders despite no price-sensitive news to come out of the company over recent days. Possible explanations for the fall could include profit taking based on chart technicals, and concerns around consumer sentiment in the wake of more than half the country being in the midst of lockdowns.
It was a poor week for holders in some of the market’s most-popular medical and biotech names, including Polynovo (ASX: PNV), Telix Pharmaceuticals (ASX: TLX) and Mesoblast (ASX: MSB). These names fell in line with a risk-off appetite that swept over the market.
Polynovo reported product revenue of approximately $25.6 million in FY21, up 34%. The lack of formal guidance, as well as some uncertainty regarding US hospital engagement weighed on the minds of shareholders, including brokers Bell Potter and Ord Minnett, which both slashed their price targets for the stock. In the case of Mesoblast, its share slump was exacerbated this morning when it published some of the deeper findings associated with its remestemcel-L trial, which previously failed to meet its endpoint of 43% reduction in overall mortality.
Last but not least, Paladin Energy (ASX: PDN), Ooh!Media (ASX: OML) and Tyro Payments (ASX: TYR) make up some of this week’s worst-performing mid-to-large cap stocks, with lockdowns weighing on the two latter names.
We’ll be back next week with another Weekly ASX Trading Wrap Up – until then, have a great week!
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