*Galaxy Resources (GXY.AX) still facing oversupply issues
*Inghams Group (ING.AX) to struggle in FY2020
*Bellamy Organic bid faces regulatory hurdles
Galaxy Resources (GXY.AX)
A strong ASX performer once-upon-a-time when it took two years for the stock to go from A$0.40 to a high of A$4.40, Galaxy Resources - a Lithium exploration and processing company - has since seen its share price tumble more than 70% from the start of 2018.
Galaxy Resources, alongside other Lithium producers, have been faced with an oversupplied spodumene (what Galaxy produce) market, which naturally, has led to lower pricing for its main product. Such wider market issues have cut into revenues and profits, and have led to the impairment of Galaxy's main Australian operations, Mt Cattlin spodumene mine, to the value of US$123.5mn.
Looking at Galaxy price action, there's not a lot of support under Galaxy's current price of 1.16 having been in a downward trending channel for 21 months. If the fundamental story remains subdued, it's likely GXY.AX will continue going lower to test the next support level seen around ~A$1.00 (Jan 2015 highs).
Inghams Group Ltd (ING.AX)
An Australian-based integrated poultry producer, Inghams is currently the second most shorted stock on the ASX as gauged by the short sell ratio. Since Q1 2019, considerable pressure has been put on the poultry giant with sentiment having turned extremely negative following a string of poor results.
On February 28th, Ingham's shares dropped -11.2% after half-year net profits came out -5.3% lower. While, in April, their shares were smacked down again after news broke that a major shareholder, private equity firm TPG Capital, was seeking to offload a sizable stake. Ingham's latest financials which gave a bleak FY2020 outlook for profit margins saw shares also drop as low as A$3.21, -17%.
Subdued sentiment appears to be sticking around with ING.AX for the time being with the average recommendation on the street, neutral. Look for support at Jan 2017 lows (3.02).
Bellamys Organic (BAL.AX)
Bellamy's Organic, an Australian darling in 2017 and major baby formula exporter to Asia, recently doubled its share price, +52%, after Chinese company China Mengniu announced a $983mn takeover bid for the company. This action has since seen short covering across the board as speculators mull the likelihood that the bid will overcome regulatory foreign investment hurdles.
Bellamy Organic's Board of Directors have unanimously recommended the deal to the company's shareholders and will subsequently put it forward to a vote. Should the deal clear all obstacles, shareholders are set to receive ~A$13.25 cash per share held from the scheme. If it fails to pass FIRB's (Foreign Investment Review Board) sniff test, who have rejected major deals in the past - Huawei, CKI - BAL.AX will certainly fall back to pre-bid levels around A$8.40.
Short sell ratio = short sell volume/issued capital. Data as of Sep 13. Source: Eikon