ASX 200 expected to open lower after Wall Street climbs
Nasdaq rises with big tech stocks leading the rally; Apple at record high
Guzman y Gomez’s IPO generates anticipation despite concerns about high offer price
The ASX 200 is poised to extend this week’s losses when the market opens on Wednesday. At 8am AEST, the ASX200 futures contract was pointing down by -0.5%.
Overnight, Wall Street climbed after a successful US$39 billion Treasury sale, prompting speculation that tonight’s US inflation report could provide further impetus for the Fed Reserve to consider a rate cut in September.
“May’s CPI report looks to be encouraging, and will likely be followed by a string of similar reports this summer,” said Anna Wong at Bloomberg Economics.
“That should set the stage for the Fed to start cutting rates in September.”
The S&P 500 rose by +0.27% to an all-time high, the blue chips Dow Jones index was down by -0.31%, and the tech-heavy Nasdaq lifted by +0.88%.
Big tech stocks spearheaded the Nasdaq rally, with Apple gaining +7% and surging to a new all-time high.
Spotify rose slightly after unveiling a new premium subscription option tailored for its most dedicated users. This enhanced plan will come with a higher price point, offering better audio quality and innovative tools for playlist creation.
Eli Lilly rose slightly after its Alzheimer’s drug received favourable feedback from US drug regulatory advisers, who believe that its benefits outweigh the associated risks.
Boeing fell -2% despite reporting the delivery of 24 commercial jets, with 19 belonging to its 737 family aircraft, during the month of May.
Should I buy the Guzman y Gomez IPO?
Morningstar has just released a report on Guzman y Gomez (GYG), which is gearing up for its initial public offering (IPO) on June 20th.
The IPO is creating a lot of buzz as one of the most anticipated listings on the ASX in recent years.
GYG has been experiencing rapid growth, nearly quadrupling its number of stores in Australia in less than ten years, from 53 in 2014 to 183 by the end of 2023.
While most of its stores are in Australia, GYG is also expanding into international markets like Singapore and Japan through franchise agreements, and it operates a few corporate stores in the US.
But despite a strong brand presence in Australia, GYG is yet to carve out an economic moat (competitive advantage and barrier), says Morningstar.
“The restaurant space is highly competitive. Switching costs are nonexistent for patrons, and barriers to entry are relatively low,” said Morningstar’s research note.
.”Those restaurants which manage to carve out a durable competitive advantage typically do so by building intangible brand assets and cost advantages through scale.”
“Our fair value estimate for Guzman is $15 per share. Against this, the $22 IPO offer price is too high.
“Our fair value estimate implies an adjusted fiscal 2025 EV/EBITDA ratio of 26, and a P/E ratio of 250,” said Morningstar.
In other markets …
Gold price climbed by +0.3% to US$2,315.90 an ounce.
Oil prices lifted by +0.5%, with Brent crude now trading at US$82 a barrel.
Crude’s jump over the last few days has been fuelled by optimism surrounding a potential uptick in fuel demand during the northern hemisphere’s summer months.
The benchmark 10-year US Treasury yield fell by 6 basis point (bond prices higher) to 4.40%.
The Aussie dollar was flattish at 66.08 cents.
The iron ore price fell by almost -2% to US$104.20 a tonne.
Bitcoin meanwhile tumbled by -3% in the last 24 hours to US$67,468, while Ethereum was also down around -4.5% to US$3,502.
5 ASX small caps to watch today
Boom Logistics (ASX:BOL)
The total lifting solutions company announced the award of a contract with Squadron Energy for maintenance work on wind turbines within Squadron’s wind asset portfolio. The $12 million contract will see the company provide crane support for wind turbine maintenance tasks. The work is expected to commence in 1H FY25.
NICO Resources (ASX:NC1)
Nico announced that the Minister for Environment, Reece Whitby, has granted an extension to the previous EPA approval for the Wingellina Nickel-Cobalt Project. This project, located in Western Australia’s Musgrave Ranges, boasts significant reserves of nickel and cobalt and is positioned near BHP’s planned West Musgrave Nickel-Copper Project.
Singular Health (ASX:SHG)
Singular announced the launch of its new online DICOM viewer, along with an integration of ChatGPT 3.5 AI. This advancement aims to enhance patient education by providing prompts based on medical imaging records. With this new viewer, Singular’s customers can access their records without needing to download desktop applications, improving medical record management for all.
Tyranna Resources (ASX:TYX)
Tyranna reported results from its recently completed drilling in the Link Zone between Muvero and Muvero East. Highlights include a mineralised interval of 23 meters with a high lithium concentration of 2.42% Li2O, with even higher concentrations in some sections. Additionally, tantalum and tin were also found in significant amounts. Visual identification of spodumene, a key lithium mineral, was confirmed in one of the drill holes.
Great Boulder Resources (ASX:GBR)
Great Boulder has extended its high-grade gold deposits at its Saltbush prospect. Drilling revealed promising results, including the highest-grade intersection to date.Highlights include: 10m @ 6.47g/t Au from 117m, and 4m @ 4.40g/t Au from 65m. The company plans to explore further north and investigate a nearby geochemical anomaly. Additionally, drilling has commenced at the Polelle Project.
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