Source : THE AGE NEWS
The end of financial year has come and gone, capping off the best quarter on Wall Street since the Covid-19 recovery, finishing up nearly 15 per cent. The Nasdaq rose 21.4 per cent for the quarter and the Dow added 12.9 per cent despite a war in the Middle East and sky-high oil prices, which saw the ASX fall flat.
The broader semiconductor index finished the quarter up 88 per cent, clearly carrying the load on its shoulders, as signals begin to emerge that the market may not be as strong underneath.
Solidifying the concerns were US payroll figures, which came in at a concerning 57,000 new (non-farming) jobs for the month. Not quite the 115,000 forecast, suggesting that recent concerns over interest rate hikes to cool the economy may have been overstated.
With rates on potential hold and cash printing back on the menu, gold came roaring back this week, up nearly 5 per cent at one stage to US$4200 (A$6060) an ounce.
It’s a good thing gold is back, but it’s just in time for the death of small caps mining investment. The old 50 per cent capital gains discount rules are set to exit stage left, turning off the industry’s taps to risk capital and choking our junior explorers.
With mining and exploration companies making up almost 30 per cent of the ASX, you’d think kneecapping the industry’s grassroots might not be the brightest economic strategy. Meanwhile, the tech sector – barely three per cent of the market – looks set to enjoy startup exemptions. Go figure.
Punishing mining while potentially carving out tech startups for exemption is like adding a McDonald’s-only diet to my struggling waistline, though insisting everything will be fine because I’ll only order Diet Cokes.
I guess it’s a good thing the market wizards down at the Labour Party did their research before tacking this on to their terror budget. I’m sure they’re also aware that mining giants like BHP rarely bother finding the next big deposit themselves these days – they’re far too busy buying someone else’s shiny South American copper assets.
Exploration is mining’s heart and soul. Keep squeezing the flow of risk capital and the industry’s next diagnosis could be cardiac failure.
It was no surprise, then, that our Runners convoy was particularly sparse at the start of the new financial year. On a week low on risk capital and with exploration set to simmer, it was manufacturing companies that stole the show, with a modular housing provider taking out our top spot.
BAUMART HOLDINGS LTD (ASX: BMH)
Up 683% (0.6c – 4.7c)
This week’s Bulls N’ Bears Runner of the Week is modular housing specialist Baumart Holdings.
The company’s shares took off on Tuesday after it kicked off work on its inaugural BuildMart Modular housing project, with the first four completed units arriving at Fremantle Port in early June and subsequently delivered to the project site.
Baumart will lead the procurement and supply of modular homes, sourcing prefabricated units from established international manufacturers that meet Australian building standards, before supplying them to licensed builder CU Building Group for on-site assembly.
The pilot project is slated for commissioning in the first quarter of the 2027 financial year, pending the usual construction, regulatory and site approvals.
While relatively small, the development is intended to prove modular housing can be built faster and more cheaply than traditional homes, at a time when Australia’s housing shortage is becoming increasingly acute.
The company believes its extensive international supplier network and procurement expertise provide a natural advantage as modular construction gains momentum.
Long known for sourcing and distributing building materials for residential and commercial markets, Baumart is now leveraging those global relationships to expand into a sector many see as one of the country’s most promising long-term housing solutions.
If the pilot stacks up, modular housing could become much more than just another building product for Baumart.
NUENERGY GAS LTD (ASX: NGY)
Up 107% (2.8c – 5.8c)
NuEnergy Gas blasted into second place after locking in a fully funded US$88 million (A$127 million) field development contract for its flagship Tanjung Enim coal bed methane project in Indonesia, marking a major step towards commercial gas production. The company owns 45 per cent of the project in partnership with Indonesia’s state-owned conglomerates.
The deal, announced after Tuesday’s market close, appoints PT Beijing Energy Linking as lead engineering, procurement, construction and commissioning (EPCC) contractor.
The group will drill, test and complete the coal bed methane wells, undertake dewatering activities and, importantly, fund the upfront development costs itself before recovering its investment from future gas sales.
The financing structure dramatically reduces NuEnergy’s capital burden while paving the way for a targeted production plateau of 24 million standard cubic feet of gas per day.
PT Beijing is backed by heavyweight shareholders, including Beijing Energy International, which manages about US$15 billion (A$22.9 billion) in assets and operates almost 13.7 gigawatts of power generation capacity, alongside global renewable energy giant Envision Group.
The project still requires the usual regulatory approvals before construction begins, with a separate contract covering pipelines and infrastructure expected once front-end engineering (FEED) studies are complete.
Tanjung Enim is Indonesia’s first approved coal bed methane development and is expected to ramp up production from an initial one million standard cubic feet of gas per day in the early sales phase to a whopping 25 million standard cubic feet per day operation.
With someone else footing the development bill and first gas edging closer, NuEnergy has dramatically lowered the risk while turning up the pressure.
WIDE OPEN AGRICULTURE LTD (ASX: WOA)
Up 100% (0.6c – 1.2c)
Rounding out this week’s Runners podium is regenerative food play Wide Open Agriculture, which has wasted little time putting its new chief executive, Craig Swan, to work, unveiling a sweeping overhaul of its manufacturing strategy to accelerate the commercial rollout of its flagship lupin protein.
The company is sharpening its focus on its high-protein lupin isolate, having already secured regulatory approval to export into the vast Chinese market.
Under Swan’s new four-stage growth strategy, Wide Open says it is shifting towards a more capital-light business model designed to improve margins, strengthen cash flow and scale production without the burden of owning expensive manufacturing assets.
The centrepiece of the restructure is the immediate closure of its German production facility, acquired through its 2023 Prolupin takeover.
While the plant proved commercial-scale production of lupin protein was possible, management says expanding the operation would require significant capital and expose the business to persistently high European energy and operating costs.
Instead, the company will progressively wind down the site through mid-2027, trimming its fixed cost base while pivoting towards outsourced manufacturing to improve flexibility and capital efficiency.
The strategy comes as China’s plant-based protein market continues to gather pace. Valued at more than A$6.5 billion and forecast to grow at more than 12 per cent annually, the sector represents a sizeable opportunity for suppliers with differentiated products.
With lupin protein finding its way into everything from protein powders and dairy alternatives to yoghurts and ice cream, Wide Open is betting a leaner cost base and a sharper commercial focus will leave it well placed to feed one of the world’s fastest-growing food markets.
Is your ASX-listed company doing something interesting? Contact: mattbirney@bullsnbears.com.au
