Evening Wrap: ASX 200 down, Australia's CPI lifts to 5.2% + Stocks that refuse to fall

The Index falls for a second consecutive day but manages to recoup some of its early losses, Australia's inflation rises to 5.2% in August from 4.9% in July amid a rise in energy prices and rent, uranium stocks refuse to give back their gains and Citi's take on Pro Medicus and Mineral Resources.

Let's dive in.

ASX 200 Session Chart

ASX 200 lower but off worst levels (Source: Market Index)

Markets

The ASX 200 continued to fall on Wednesday but off session lows of -0.50%. The Index continues to display an odd amount of resilience as it bounces off session lows. But also continues to dwindle in no man's land. At least we've managed to hold the key 7,000 level (for now).

Technology stocks led to the downside, with notable fallers including Life360 (-1.7%) Wisetech (-1.6%) and Xero (-1.3%). The S&P/ASX 200 Info Tech Index marked its lowest close since 9 June.

Economy

Australia’s inflation lifts to 5.2% in August from 4.9% in July, in-line with consensus expectations. Here are the key takeaways from the CPI report (all figures below refer to year-on-year comparisons)

• Inflation contributors: “The most significant contributors to the August annual increase were Housing (+6.6%), Transport (+7.4%), Food and non-alcoholic beverages (+4.4%) and Insurance and financial services (+8.8%).” – ABS

• Energy prices: Electricity prices eased to a 12.7% rise in August from 15.7% in July. While automotive fuel prices spiked 13.9% in August from a 7.6% drop in July.

• Food inflation: “Continues to ease although differences remain across the food categories. Prices for Bread and cereal products and Dairy products have risen over 10% … while Fruit and vegetable prices are 8.3% lower … due to improved growing conditions.” – Michelle Marquardt, ABS Head of Price Statistics 

• Core inflation: Eased to 5.5% in August, down from 5.8% in July

Latest news

Uranium refuses to peak

Uranium stocks appeared rather heavy on Tuesday, with a leading name like Boss Energy (ASX: BOE) finishing 0.4% lower from a session high of 3.6%. After such a fade, I thought maybe we'll see some weakness for uranium stocks on Wednesday.

That was the case ... for about 30 minutes.

Shares in Boss Energy opened 2.95% lower on Wednesday, hit a session low of -4.2% shortly after but then proceeded to rally towards breakeven.

Boss Energy intraday chart (Source: TradingView)

Other names like Paladin Energy (ASX: PDN), Deep Yellow (ASX: DYL) and Bannerman (ASX: BMN) also bounced off session lows to close slightly higher.

So much for a pullback.

On the topic of resilient stocks ...

I'm fascinated by stocks that refuse to fall on days or periods where they should at least show some signs of weakness.

Is there something fundamentally strong or appealing about the company? Or does the stock have a tight-knit army of holders that refuse to sell? Or maybe there's a large buyer or institution that's buying into weakness? We'll look at some examples below.

Emerald Resources (ASX: EMR) is a mid cap gold miner operating the Okvau Mine in Cambodia. It produced 108,866 ounces of gold in FY23, up 8% year-on-year and a net profit of $70.9 million, up 13%. The stock is up 119.4% year-to-date.

Wednesday was a rough day for gold miners with names like Evolution Mining, Northern Star and Newcrest all down around 2-3%. But Emerald finished 1.2% higher.

Emerald Resources daily chart (Source: TradingView)

Shares in Seven Group (ASX: SVW) have rallied for 12 straight weeks. The diversified industrial company operates well-known brands such as WesTrac, Coates and Seven News as well as a stake in Beach Energy and Boral.

The stock has managed to climb even as Boral shares have pulled back almost 15% from recent highs.

Seven Group weekly chart (Source: TradingView)

Interesting news and movers

Trading higher

• +11.5% Tamboran Resources (TBN) – Reports Beetaloo resource upgrade

• +10.8% AMA Group (AMA) – Completes retail entitlement offer

• +2.5% Novonix (NVX) – R&D funding

• +1.4% Perenti (PRN) – Court approvals DDH1 takeover

• +1.3% Fortescue Metals (FMG) – Upgraded by Jefferies

Trading lower

• -16.0% Star Entertainment (SGR) – Completes placement

• -6.2% Genex Power (GNX) – Fire incident

• -3.1% Eroad (ERD) – Completes equity raise

Broker notes

Citi’s take on Pro Medicus

• Neutral with $72.00 target price ($71.19 at 25 Sep close)

• “PME announced that it won a 10-year, A$140m contract with Baylor Scott & White Health, the largest not-for-profit healthcare system in Texas.”

• “This is the largest and longest contract ever announced by PME – we view this as a strong endorsement of PME’s technology and ability to service customers.”

• “We forecast PME to win $25m/yr in the new contract in FY24, a significant uplift from the $13m/yr won in FY23.”

• “Maintain Neutral on valuation already reflecting significant revenue and EPS growth.”

Citi’s take on Mineral Resources

• Buy with $79.00 target price ($68.39 at 25 Sep close)

• “MIN has announced an offering for US$850m in unsecured notes due 2028; we have to wait for terms. The debt buys MIN time and provides optionality for the Yilgarn Craton lithium consolidation play.”

• “While NEV sales are up month-on-month and year-on-year the order books have disappointed given high expectations. A strong October EV sales print could trigger battery producer restocking ...or conversely a weaker set of metrics could see producers stick to buying lithium as-needed until Chinese New Year (weak season).”

Scans