In today’s daily we have covered stock research on PanAust Limited (Sell). To view 2 Dividend Stocks with 6%+ yield click here

S&P 500 was up 1.83 points or 0.09% on Monday and closed at 1951.27. The S&P 500 ended the session on Monday with its fourth straight record high and the Dow Industrials finished with their third consecutive record close as more deal news lifted enthusiasm for stocks. The CBOE Vix volatility index was up 5.5% from Friday’s seven year low. For now the equity bull market remains intact, underpinned by signs that the US labour market was continuing to recover and afterEuropean Central Bank’s moves last week to stimulate growth and ward off deflation.

Investor risk appetite was further helped by some positive signs on the growth from Japan and China. First quarter Japanese GDP growth was unexpectedly revised up from 1.5% to 1.6% - 6.7% on an annualized basis. Chinese trade data released over the weekend showed that the annual rate of export growth accelerated to 7% in May, suggesting that external demand conditions were becoming more supportive.


S&P 500 Daily Chart (Source – Thomson Reuters)
 
S&P ASX 200was up by 27.1 points or 0.50% on Friday and closed at 5464.0 points. Karoon Gas has negotiated key commercial terms for a US$100 million bridge facility with National Australia Bank. Vinva Investment Management has become a substantial shareholder in JB Hi-Fi with a voting power of 5.02%. Insurance Australia Group has received approval from Reserve Bank of New Zealand for the acquisition of Lumley General Insurance from Wesfarmers. Sundance resources is looking for offshore investors for its iron ore project in Central Africa. Spark Infrastructure has advised that both CitiPower and Powercor in which it holds 49% interest have executed new bank debt facilities.


 ASX All Ordinaries Daily Chart (Source – Thomson Reuters)

The top gainers on ASX 200 were:- 




Stock of the Day – PanAust (PNA)
 
PanAust is a copper and gold miner with operations in Southeast Asia and undeveloped deposits in South America and Papua New Guinea. It’s Phu Kham copper gold mine in Laos started in 2008 and produces more than 60,000 tonnes of copper and 55,000 ounces of gold a year. PanAust has received a non-binding, indicative proposal for an off market takeover from major shareholder Guangdong Rising Assets Management (GRAM). The proposal is for AUD 2.20 per share in cash and is subject to satisfactory due diligence, regulatory approvals and minimum 50.1% acceptance. GRAM has since revised the offer to $2.30 per share. PNA’s board has advised GRAM that the offer is materially below the level at which it would be prepared to recommend to shareholders.


Inca De Oro Copper Gold Project (Source – Company Reports)

GRAM is a Chinese provincial state owned enterprise. According to the company’s website, GRAM is the second largest shareholder of china Telecom and has various mining sector investments. GRAM assumed a 19.9% PNA shareholding and board position in September 2009 as part of PNA’s post GFC recapitalization and has since increased this position to 23%.


Phu Kam Copper Gold Project (Source – Company Reports)

PNA now looks fully valued on common valuation metrics. There are risks around a formal offer for PNA eventuating and GRAM’s 23% shareholding in PNA will likely deter competing bids. We believe the reported offer price adequately reflects PNA’s near term earnings and free cash flow profiles and medium term capital requirements. A counter bid for PNA will likely be impeded by GRAM’s 23% shareholding in PNA. 


PNA daily chart (Source – Thomson Reuters)

It is not clear as to how a change in control of PNA will impact the proposed Frieda River transaction with Glencore Xstrata. The remaining condition precedent for this transaction is indicative approval of the Investment Promotion Authority of Papua New guinea. The sunset date for satisfaction of conditions precedent is 30 September 2014 with the option to extend. Assuming that the Frieda River transaction completes, PNA’s capital requirements will increase. PNA’s purchase consideration is around US$75m and the company expects to spend a further $25m on feasibility studies over the next 18 months. We gave a BUY recommendation on the stock at the price of $1.55 on 12/03/2014. We recommend a SELL at the current price of $2.17

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