ASX Weekly Small Caps and IPO Wrap: Better stick this one in next door’s bin, it stinks

• ASX set to end the week down by around 4.5%. ‘Nuff said, really.
• Best sector was gold stocks (+4.95%). Next best was Utilities (-0.8%). Yikes.
• Vita Group (ASX:VTG) topped the ladder with a 79% gain for the week.

It’s safe to say that just about everyone will be happy to draw a line under this week, and try their best to walk away while whistling a jaunty tune and pretending like it never happened.

It won’t work, of course – because virtually any way you slice this week, it is abundantly clear that it was not the market’s finest effort.

Overall, the benchmark ASX 200 is going to be around 4.5% down from this time last week – and the fact that we all saw it coming when the wheels started coming off the US banking machine, it doesn’t make it any easier to swallow.

US bank drama is (I’m sorry) going to dominate things here for a few moments – so let’s get it out of the way.

WHAT MADE THE WEEK

When the first rumblings that Silicon Valley Bank was in trouble started to emanate from the US, the warnings started flying thick and fast.

SVB put out some urgent feelers for US$2.25bn to keep the wolves from the door, which prompted a whole lot of VC firms attached to the bank to start emailing their start-up clients, urging them to get their money out.

“We’re concerned there’s going to be a bank run, so you should all get all of your money out right now” is – quite literally – how bank runs get started.

Well done, eggheads. You played yourself.

The rest of the rout then unfolded with a tedious inevitability. Tens of billions of dollars were withdrawn, SVB lost control of the situation, and then control of itself when regulators stepped in to try to stop the fight.

But the damage was done. New York’s Sovereign Bank ended up with a nasty case of cold sores as the chilling contagion spread, and before too long every manic prepper in the US had their family loaded into the truck, not-at-all excited at the prospect of eating tinned food and shooting at their neighbours for the next 10 years.

Just when it began to look like things were (again) under control, Euro bank Credit Suisse put in a very roundabout application to be rebranded as Debit Suisse, all but forcing the Swiss National Bank at gunpoint to fork over AUD$87.38 billion to keep the lights on and doors open there, and the lunatics were now quite openly running the asylum.

The ASX took a beating – as Christian Baylis, Investment Manager at Blossom, puts it: “The US sneezes and we catch a cold” – first because the local banks were panic-sold. Then, thanks to bond yields going bananas (and an unexpected glut and falling demand for crude in the US), the arse dropped out of the local Energy sector, as well.

The only saving grace through the entire debacle was the ever-predictable nature of fleeing investors – with nowhere to put their money with any sort of certainty, the gold rush started.

Once that kicked off, the less risk-averse among us started snapping up gold-related stocks – which in turn saw a number of otherwise quiet goldies piping up about fresh new finds.

Which brings us to the incredibly telling numbers of the week – the XGD ASX All Ordinaries Gold index was by far the best performer, stacking on a remarkable 5.0% since Monday morning. The next best was the XTX ASX All Technology index, fully 9.0% lower on -4.0%.

Bottom of the barrel with a wooden spoon lodged in its arse was XEJ ASX Energy sector index, down 8.5% for the week.

If only there was some kind of deep, dark hole for it to climb into so it could hide for a few days while this whole mess cools off.

But it wasn’t all terrible bank news – indeed, the slump at the start of the week kicked off ruminations that it might spell the end of rate hikes from the RBA for a while.

That little ray of hope was quickly snuffed out when the February job figures were released by the ABS, coming in even better than expected at 3.5% unemployment and 65,000 new gigs on the books.

And that’s precisely the sort of data the RBA loves to point out while it turns the interest rate screws up higher and tighter, which puts us on about an even money bet on a rise or a pause than the board next meets for a lunch and a cheeky vino or two.

ASX SMALL CAP LEADERS

Here are the best performing ASX small cap stocks from 13 – 17 Mar:

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

As crap as the broader market was this week, there have been some stellar results from a handful of Small Caps, and leading the way with a 79% rocket ride was Vita Group (ASX:VTG).

That came after the company revealed that it has entered into a scheme implementation agreement with Practice Management, which would see the latter acquire 100% of VTG for a cash consideration of $0.06255 per share.

Under the terms of the deal, VTG will be permitted to pay a fully franked special dividend of up to $0.06425 per VTG share on or before the scheme implementation date, subject to the scheme being approved by shareholders and the Court.

If the dividend goes ahead, it would have up to approximately $0.02754 per VTG share in franking credits attached.

It’s a big win for VTG shareholders, who would be in line for a total value of up to $0.12680 per VTG share, before the benefit of any franking credits. A nice little earn if you were on it before it kicked off.

Royalty cheques started rolling in for GWR Group (ASX:GWR) last week, and the momentum stayed on the company this week as well, with news that things at its C3 iron were progressing nicely as well.

GWR collected $3 million of the roughly ~$52 million (minimum) royalties expected Gold Valley Iron Ore over the next 10 years, in monthly instalments of around $750,000 that are set to continue until everyone gets bored. It set GWR up for a very solid +73% rise for the week.

Meanwhile, intelliHR (ASX:IHR) added 43% this week as prolonged discussions over who’s going to buy it and for how much continued.

And a late entrant for the week, but still making the leader board on the strength of today’s big news, is Kingsgate Consolidated (ASX:KCN), which is up 19% on news that the Thailand’s Department of Primary Industries and Mines has officially greenlit the reopening of the Chatree gold mine.

Chatree had been placed on Care and Maintenance on 1 January 2017, after the Thai government decreed that all gold mining activity would cease by 31 December 2016 for some stupid reason.

But, common sense has prevailed, key inspections were finalised and Chatree – which produced more than 1.8 million ounces of gold and more than 10 million ounces of silver before it was closed – is open for business once more, to the obvious delight and relief of KCN supremo Ross Smyth-Kirk.

“It’s a truly remarkable moment to see Chatree open again,” Smyth-Kirk says. “We have always believed that having the mine operate again is the best possible outcome, and I would like to personally thank all our loyal staff who have worked so hard to make this happen and all our loyal shareholders who have stuck with us through thick and thin over the past 6 years.”

ASX SMALL CAP LAGGARDS

Here are the least-best performing ASX small cap stocks from 13 – 17 Mar:

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

ASX IPOs this week:

An IPO? In this sort of weather? You’d have to be mad…