ASX News Live | ASX Jumps; EML, Lake Resources, Bubs, Sezzle All Feature

Infant formula manufacturer Bubs Australia (ASX:BUB) was down over 10% on Monday following the release of its 1Q23.

Bubs reported cash outflows from operating activities of $8 million as receipts from customers were not enough to offset operating and corporate costs.

Bubs also saw China channel gross sales fall 21% on prior corresponding quarter, with adult goat milk powder sales shrinking a whole 94%.

China was BUB’s worst performing segment. Bubs said the Chinese market is suffering from oversupply and competitive overcrowding:

“Across the infant formula category, a significant number of brands have oversupplied the market, including local Chinese brands. This has created a significant decline in margin across all distribution partners. In addition, the cost of doing business has also increased on cross-border e-commerce, particularly as it relates to advertising spend. The category issue was exacerbated through a subdued result during the 6.18 shopping festival, and the oversupply by other brands is expected to continue through to the upcoming Double 11 festival, which is likely to cause distributors and participants to look for alternative, quality infant formula brands that can provide stability of margin, and supply with international and established reputation.”

BUB cash position rescued by equity raise

Bubs burned $27.9 million on manufacturing and operating costs, $4.8 million on admin and corporate, $2.5 million on staffing, and $4.0 million on marketing.

BUB ended the quarter with operating cash burn of $8 million.

Having started the quarter with $16.3 million in cash and cash equivalents, Bubs would have ended the quarter with around $4 million remaining in the bank if not for the $60 million raised from issuing shares.

$BUB: "In the short term, we expect China sell-in revenue to be constrained throughout the second quarter due to the phasing of the recruitment channel transitioning to the new M2C model but remain optimistic on positive momentum returning post Chinese New Year." #ausbiz #ASX

— Fat Tail Daily (@FatTailDaily) October 31, 2022

Two questions have hovered unanswered over Lake Resources (ASX:LKE) in recent months:

1. Has LKE resolved its dispute with key technology partner Lilac Solutions?
2. What happened to LKE’s indicative agreements with Ford and Hanwa?

Late last week, the lithium developer released its FY22 report and today its 1Q23 quarterly. Neither contained definitive answers, although investors did receive a clue about LKE’s potential offtakes with Ford and Hanwa.

In April 2022, Lake announced a non-binding memorandum of understanding with Ford to negotiate for an offtake worth 25,000 tonnes per annum of Kachi lithium.

And in March 2022, LKE entered a similar MoU with trading house Hanwa for a 25,000tpa offtake.

On the day of the announced MoU with Ford, LKE chairman Stu Crow said:

“This MoU with Ford follows the Hanwa MoU. Together with the UK and Canada Export Credit Agencies’ indicative provision of debt finance for around 70 percent of the Kachi project’s capital requirements, this provides a framework of support for Lake’s TARGET 100 Program, which has the goal of producing annually 100,000 tonnes of high purity lithium chemical to market by 2030.”

Since then, news flow about turning the MoUs into binding offtakes has faded.

In its June quarterly, LKE mentioned Hanwa and Ford once, stating:

“Discussions continue with Ford Motor Co., Hanwa Corporation under non-binding MOU’s and others for offtake of lithium carbonate from Kachi Project.”

In its September quarterly released today, Ford and Hanwa were not mentioned.

Instead, LKE turned its attention to the recent conditional framework agreements signed with SK On and WMC Energy.

The two CFAs cover 50,000tpa of Kachi’s lithium carbonate and both provide for SK On and WMC Energy to make ‘strategic equity investments’ in Lake for up to 10% of LKE’s issued capital.

Lake estimates this will add around $358 million before it makes a final investment decision.

LKE did offer a clue in today’s release.

The lithium developer said its agreements with SK On and WMC Energy “bring to an end discussion regarding offtake with a number of interested parties that had expressed interest in securing Kachi product.”

$LKE said its conditional agreements with SK On and WMC Energy "bring to an end discussion regarding offtake with a number of interested parties that had expressed interest in securing Kachi product."

Does this mean discussions with $F and #Hanwa have ended? #ausbiz #lithuim

— Fat Tail Daily (@FatTailDaily) October 31, 2022

 

 

There’s one time-honoured way to make money.

Buy something that’s in limited supply that a lot of other people will want or need in the future.

Then simply wait…

If you get it right, the price increases as demand overwhelms available supply.

If you don’t…well…you might be left with a garage full of toilet rolls, as some pandemic hoarders found out!

That’s the trick, isn’t it?

Anticipating what people will want or need in the future before the scarcity value is priced in.

A Picasso painting, a rare baseball card, a stock, or a commodity…it’s just the laws of basic economics at work.

In a weird way, this current market downturn is being driven by the scarcity of one unique thing.

Namely, a shortage of US dollars.

And that, in turn, has distorted the market for real goods.

Certain commodities are likely going to be in short supply for a lot longer than they would under ‘normal’ market conditions.

That’s because markets are reacting to changes in money supply, not signals from the market.

To me, this spells opportunity.

Let me explain…

https://www.moneymorning.com.au/20221031/buy-scarce-assetswaitthen-profit.html

Carbon Revolution (ASX:CBR) is up 80% right now following a positive 1Q23.

CBR manufactures carbon fibre wheels for the automotive industry.

Carbon Revolution’s 1Q23 details:

• Revenue up 66.2% on pcp to $10.4 million
• Revenue down 29.7% QoQ from 4Q22’s $14.8 million
• Wheel sales volume up 78% on pcp to 3,739 wheels at a “relatively high average selling price per wheel” of $2,778
• Cash position of $10.7 million after net cash outflows of $12 million

CBR noted that it secured a deal with Ford to supply carbon fibre wheels to Ford’s “next generation 2024 Mustang Dark Horse” model.

Carbon Revolution said this marks the first time that CBR willl supply a “core vehicle program at Ford”.

The manufacturer did flag “near-term liquidity and balance sheet pressures” as previously banked-on sources of working capital did not materialise.

CBR further elaborated:

“As indicated in the above table, the Company expects to have total near term liquidity of $15.9m as at 31 October 2022. The main driver to the change in expected liquidity since July 2022 is that the Company expects that it is unlikely to be able to expand its working capital and asset backed financing to the expected level, due primarily to the temporary suspension of production and sales of the Corvette Z06 program. The Company notes that it is yet to receive final offers and is continuing to engage with financiers on these facilities.”

Carbon Revolution signs non-binding letter of intent with US SPAC

The small cap stock also announced that is has signed a non-binding letter of intent with US special purpose acquisition company (SPAC) regarding a potential merger.

Explaining today’s big share price jump, the proposed merger would value CBR at a pre-money enterprise value of US$200 million, or $313 million.

That implies a notional CBR share price of $1.49. CBR shares last traded at 22 cents a share.

If a binding deal gets signed, Carbon Revolution will become a US-listed stock and de-list from the ASX.

CBR cautioned:

“There is currently a non-binding LOI in place and there is a risk that a binding merger agreement will not eventuate or a transaction will not be completed. However, both parties intend to work exclusively to bring this to binding agreements stage in the near term.

“In addition, given the Company’s current cash and liquidity position and given the transaction is not expected to complete until Q2 CY23 at the earliest, the Company will require short term bridge funding to meet cash flow requirements until the Proposed Transaction closes. The amount of funding is currently being assessed and will be a function of expected near-term transaction costs, ongoing business requirements and the success of ongoing discussions (as noted previously) with key Government and customer stakeholders to improve the Company’s near-term cashflow.”

The Reserve Bank of Australia will announce its cash rate decision on Tuesday. A hike is guaranteed. The question is how big — 0.25% or 0.50%?

A recent Reuters poll showed nearly 90% of respondents had the RBA hiking by 25 bps to 2.85%.

The remaining 10% anticipate a 50 bp rise. Markets will monitor if the RBA revises its inflation estimate.

Among major ASX banks, ANZ, CommBank and NAB expect a 0.25% cash rate hike on Tuesday. Westpac, taking the road less traveled, predicts a 0.50% hike.

Will the #RBA hike the cash rate by 25 or 50 basis points on Tuesday?

Among major #ASX banks, $ANZ, $CBA and $NAB expect a 0.25% cash rate hike on Tuesday. $WBC, taking the road less traveled, predicts a 0.50% hike.#RBA #ausbiz #auspol #economy

— Fat Tail Daily (@FatTailDaily) October 31, 2022