ASX Small Caps Lunch Wrap: Whose bark could be worse than their flight this week? - Stockhead (2024)

Local markets have fallen again on Friday morning, with pretty much every sector in the brace position (face down, arse up) as the ASX hurtles ponderously towards the lunch break.

There was a slight glimmer of hope from Energy stocks pre-lunch, but that looks almost entirely due to a sudden rush on Woodside stocks that’s enough of a needle mover to have that sector inching forward.

I’ll get to the details of the rest of the market shortly, but first there’s a news story out of the US that is a fair indicator that the Great Divide between the haves and the have nots might be getting a bit too wide.

I should preface this with the usual caveat– I’m not morally opposed to the idea of having a few luxuries in life, and if you’ve earned yourself a legitimate fortune through hard work or good luck or freakishly excellent genetics, then well done you.

How you spend that money is, of course, entirely your business… and more power to you if you have a vast fortune and decide to spend it on worthy causes, like building shelters for the homeless, or a new high-tech facility for grinding up endangered turtles to use in the wax that keeps Sunrise host David Koch’s head gleaming with its world-famous ‘showroom shine’.

And then there’s stuff like this –an airline services specifically for people who want to travel from one side of the United States to the other with their beloved pet dog, but couldn’t bear having to put them in a cage to travel in the cargo hold while the owners get packed like sardines into the laughably-named “premium economy” seating and grumbling all the way to LA.

A US company called BARK (of course) is behind the service, which it’s calling BARK Air, presumably because “Why is there a dog on this plane Air” was already taken. And the service is not cheap, with a ticket for owner and pooch running to about US$5,000 per flight.

But for that price, Rover gets a seat in the cabin, some dog treats, and a place to go potty while the plane is still en route to your destination.

If you’ve ever had the misfortune to get stuck next to the dunnies on a long-haul halfway round the planet, you’ll know what a horror show that’s going to be once the Pitbull from Seat 2B decides it’s time to shed a few kilos of poorly-digested child halfway through the flight.

The dogs would also be allowed to roam around the cabin, neet their fellow canine passengers and sniff each other’s butts to their little doggy heart’s content, which poses a couple of evident risks.

I imagine the safety briefing from the flight attendant will also include information about how it’s important, “in the event of an emergency, that humans put their oxygen masks on first before attending to your hound”.

And, “in the event of a dogfight breaking out on board the plane, the safety information pamphlet can be rolled up like a newspaper, allowing the passenger to strike their animal thusly”, complete with the accompanying, robotic miming of slowly beating your dog into submission.

The flight attendant fake-smiling while mouthing the words “git out of it, ya mongrel!” at that point is going to be a highlight of the journey.

I do have concerns, though–if the recent horror story of Singapore Airlines Flight SQ321 taught us anything, it’s that unexpected clear air turbulence is a very real and very dangerous thing.

And I strongly doubt that you’re going to be likely to find a surgeon – or a vet – with the necessary skills to treat any passengers that turn up in hospital with a Beagle wedged in their skull.

TO MARKETS

Local markets have tracked Wall Street lower on Friday morning, after wonky data spooked the horses on Wall Street, leading to a cancellation of Race 8 and the unfortunate trampling of CNBC’s resident ratchet-jaw, Jim Cramer.

That weak lead-in, and hangover concerns that the rate relief we’re all pining for is still tantalisingly out of reach made local investors glum, and so our local market sectors looked like this:

And the ASX indices looked like this:

And none of it, with the exception of the Energy sector, is looking even remotely happy for a Friday.

As far as I can tell, the boost for the Energy sector is coming via the powerful haunches of Woodside Energy Group (ASX:WDS) , with the nation’s massive petrol pumper up +1.44% for reasons I haven’t had time to figure out.

That’s because there’s a Small Caps winner on the charts this morning that deserves a bit more of a deep dive than a sparse paragraph further down the page.

Keypath Education (ASX:KED) hit the market with a 1-2 combo on Friday morning, announcing significant Q3 FY24 results with highlights that include a 14% revenue boost to $102.6 million, leading the company to an improved EBITDA of $2.7 million, with $41.2 million in the bank.

While that looks good on paper, it seems that all’s not entirely well from the Keypath board’s perspective, which has led to it signing a definitive merger agreement with a newly-formed subsidiary of Sterling Capital, under which the new company will buy up all the Keypath shares it can, and then delist.

A Special Committee convened by Keypath to look into the deal drew the conclusion that it “does not have confidence that liquidity in Keypath CDIs will improve, which also raises associated challenges in incentivising and retaining employees, which is typically a key benefit of being a listed company”.

The $0.87 cash per share on offer was also a fairly juicy incentive for the board to agree to the deal, as it’s an 88.3% premium to the 6-month volume weighted average price (‘VWAP’) of Keypath CDIs prior to the announcement being made.

NOT THE ASX

Overnight, the S&P 500 fell by -0.74%, the blue chips Dow Jones index tumbled by -1.53%, and the tech-heavy Nasdaq slipped by -0.39% – which helps explain why local shares were off on Friday morning.

Earlybird Eddy Sunarto reported that US stocks and bonds took a hit after data showed US business activity picking up alongside rising inflation, suggesting the Fed Reserve might remain on hold for now.

The main trigger was the unexpectedly strong PMI (Purchasing Managers’ Index) data, which came in much higher than anticipated.

“The data put the US economy back on course for another solid GDP gain in the second quarter,” said Chris Williamson at S&P Global Market Intelligence.

In US stock news, Nvidia, now the third biggest company by market cap, added over 9% to a record high after reporting seven-fold increase in profit yesterday.

However, the gains didn’t extend to the rest of the market.

Boeing’s woes continue, down by -7.5% as the company predicts negative cash flow this year, and that new aircraft deliveries won’t likely improve in Q2.

Live Nation Entertainment fell almost -8% after the Justice Department filed an antitrust lawsuit, saying the company, which owns Ticketmaster, should be split up, which is great news for consumers, but terrible news for music lovers, as rumours abound that Taylor Swift is eyeing off the breakup as source material for a new album about how intolerably hard it is to be pretty, wealthy and white in America.

Over the Atlantic, the FTSE 100 was only down -0.37% in London after UK PM Rishi Sunak called for a general election on July 4, about six months earlier than he legally had to. Sunak’s Conservatives are lagging behind the Labour Party by quite a bit in the polls.

Meanwhile, the gold price dropped -2% overnight to US$2,330.47/oz.

In Asia, Japan’s Nikkei is down -1.28%, Hong Kong’s Hang Seng is off -0.75% and Shanghai markets are once again marching to the beat of a drum that no one else can hear, up +0.05%.

Markets in Bulgaria, Bermuda and Ecuador are closed for holidays today, the lucky sods.

ASX SMALL CAP WINNERS

Here are the best performing ASX small cap stocks for 24 May [intraday]:

Swipe or scroll to reveal full table. Click headings to sort:

Strategic Energy Resources (ASX:SER) was once again at the top of the small caps heap on Friday morning, building on the previous day’s news that the company has raised a cool $2 million to explore the Achilles 1 polymetallic prospect in the South Cobar Basin. The placement, done at a small 8.3% discount to the last traded price, is cornerstoned by Datt Capital and Lowell Resources Fund (ASX:LRT).

Keypath Education (ASX:KED) was up thanks to a merger and delisting deal signed with Sterling Partners, with an offer of $0.87 cash per share on the table that the Keypath board has grabbed firmly with both hands – it’s an 88.3% premium to the 6-month volume weighted average price (‘VWAP’) of Keypath CDIs prior to the announcement being made.

Adherium (ASX:ADR) jumped on Friday morning, on news that drug behemoth AstraZeneca has selected the company’s Hailie Smartinhaler platform for a clinical trial, with the contract valued at $1.1 million over the course of three years.

Lending platform Propell Holdings (ASX:PHL) was up in early trade, clearly enjoying significantly increased deal volumes in April and May that has seen average loan size continue to grow, reaching $82k quarter-to-date – a 20% uplift on Q3.

Greenhy2 (ASX:H2G) moved sharply on Friday in the wake of an investor presentation from the Chairman and Managing Director in Sydney.

And Paterson Resources (ASX:PSL) got a shot in the arm on Friday after announcing the strategic sale of 100% of the issued capital of its wholly owned subsidiaries Burraga Copper, BC Exploration and Old Lloyds Mine – which bolt together like Voltron to form the basis of the Burraga Project in NSW.

ASX SMALL CAP LOSERS

Here are the most-worst performing ASX small cap stocks for 24 May [intraday]:

Swipe or scroll to reveal full table. Click headings to sort:

ICYMI – AM EDITION

They’re on the way, because I missed them this morning as well.

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