Vulcan attracts a Rinehart, Roblox DPO delayed and the Aussie stocks to watch

By Jonathan Jackson. Published at Feb 5, 2021, in Features

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My nine-year-old daughter is a Roblox player. She knows nothing about the markets, but she does play a game that could have a massive impact this year.

For those of you who have never heard of Roblox, it is an online game platform and game creation system that allows users to program games and play games created by other users.

If that is confusing, don’t worry, I’m still confused and I watched her play it all through Melbourne’s nine-month lockdown.

In the company’s words, “Roblox is powered by a global community of over two million developers who produce their own immersive multiplayer experiences each month using Roblox Studio, our intuitive desktop design tool. Any experience imaginable can be created on Roblox.”

Sounds pretty cool ... if you’re under 18 and into that sort of stuff.

For those of us more in the middle age bracket and with an interest in markets, it is the company’s pending DPO (Direct Public Offering) that is of more significance.

The company is planning a US listing, which was slated for this month after being pushed back from December as the company weighed up whether to IPO or DPO.

The DPO has been pushed back again after the Securities and Exchange Commission raised concerns about how Roblox recognises its revenue from Robux.

Robux is the platform's virtual currency. Robux are purchased for real world currency and are only sold by the Roblox company.

Here are a few different ways Robux can be earned or purchased:

  • You can purchase Robux in our mobile, browser, and Xbox One apps
  • Accounts with a membership receive a Robux stipend
  • Accounts with a membership can sell shirts and pants and get a percentage of the profit
  • Any user can build a game and earn Robux in a variety of ways.

Roblox was valued at $29.5 billion after its latest funding round raised $520 million.

Its numbers overall are impressive. Measurement firm Sensor Tower reported that Roblox saw 159.6 million installs globally from across the App Store and Google Play in 2020, up 43% from a year ago. Furthermore, Sensor Tower reports “consumer spending in the mobile version of the game more than doubled from the previous year, reaching over $1 billion in revenue globally. Roblox was, in fact, the highest-earning mobile game in the US during the Christmas period, reaching $6.6 million in gross revenue, up 40.4% from a year ago.

I may not be impressed with the game itself (it isn’t Tekken or Medal of Honour, or Resident Evil), but I am looking forward to seeing what Roblox does when it hits the markets, so long as it is not an overheated valuation.

Gaming the market

Hopefully, Roblox goes about its business in a non-GameStop kind of way.

GameStop was the focus of US Treasury Secretary Janet Yellen this week, as she discussed Reddit-focused trades with Securities and Exchange Commission, the Federal Reserve, the New York Fed, and the Commodity Futures Trading Commission.

"We really need to make sure that our financial markets are functioning properly ... and that investors are protected," Yellen told Good Morning America Thursday ahead of the meetings.

The discussion focused on market volatility stemming from short squeezes on GameStock stock and other Reddit-focused trades.

GameStock rose eightfold last week. The shares were trading at $US43 before the Reddit short squeeze started, it soared to $US483 and on Thursday closed at $53.50.

Now, not only is Yellen asking what happened, but so is the Organisation for Economic Cooperation and Development (OECD), which is examining policies to curb risky trading behaviour.

Is this the right move in a free market? Not according to Sen. Pat Toomey, the top Republican on the Banking Committee, who told CNBC’s ‘Squawk Box’, “What bothers me the most is my colleagues who think we have to run out and pass a new law and have more regulation and somehow limit the freedom of people to participate in the stock market.”

4 ASX stocks to watch

While most of the international discussion has been around GameStop this week, there have been some outstanding performers on the ASX and in the small cap market in particular.

Most notably ...

Vulcan Energy (ASX:VUL)

This week Vulcan raised $120 million, with Australia’s richest person and famous mining magnate Gina Rinehart corner-stoning the raise.

Rinehart’s son, John Hancock had already taken a substantial position (over 5%) in VUL a couple of weeks ago.

VUL aims to produce Zero Carbon Lithium in Europe, and supply to EU electric vehicle battery makers.

Its ESG credentials saw, local and International ESG funds feature heavily in VUL’s cap raise, including BNP Paribas’ BNP Energy Transition Fund. BNP Paribas is the 8th largest bank in the world by total assets.

VUL now has MORE than enough cash to take it past its definitive feasibility study and support it right into a ‘Final Investment Decision’ - meaning it is highly unlikely there will any capital raise over the next couple of years at least.

The company finished the week at $9.12.

Vonex Limited (ASX:VN8)

Vonex finished the week in a trading halt, with the AS requiring more information about its multi-year agreement with Orange Business Services, the global enterprise division of the $26.2BN capped Orange Group (EPA: ORA).

You would have received an email from us with regards to that agreement yesterday, but just in case you missed it, Vonex will supply Orange with business-grade Mobile Broadband services throughout Australia.

The announcement was the second major milestone for the company this week, following the completion of the Nextel acquisition. Nextel generated EBITDA of approximately $450,000 on revenue of approximately $2 million, with infrastructure and specialised projects being a key driver.

Suffice to say, it has been a big week for the Aussie telco. You can click on the link below to read more.

Vonex was up 25% on Friday, following the Orange announcement and will come back on the boards at 32 cents. It started the week at 23 cents.

Frugl Group Ltd (ASX:FGL)

FGL is definitely one to put on your watch list. It started the week at 5.6 cents, flew as high as 7.2 cents, before resting at 6.2 cents.

There was no news this week, however it seems people caught wind of their latest presentation which shows commercialisation agreements are imminent.

The company expects that commercial contracts for ongoing data services will begin in the first half of 2021, with the second half expected to see the expansion of commercial data and intelligence services that will include shopper behavioural data.

Commercial contracts are exactly what FGL needs, now that it looks like the product is ready and in use.

FGL is valued at just $9M and may be overlooked by the market.

Nelson Resources (ASX:NES)

$11M capped WA gold explorer Nelson Resources (ASX: NES) is primed for a major drilling event.

Drilling will occur imminently and in the coming weeks and the associated results have the potential to re-rate this tightly held stock, especially given the current strong gold price hovering around $1,900/oz.

The company recently raised $2M and is funding for imminent drilling on a 100% owned project, which has genuine potential to host a Tropicana style gold deposit.

Tropicana is a monster 7.7 million ounce gold deposit in WA.

NES’s Woodline Project covers 828 km2, and sits in the highly prolific Tropicana gold belt.

Nelson started the week at 7.9 cents and finished at 10 cents.

The best and worst performing sectors this week

The Financial Services sector rose over 3 per cent, as did Information Technology while Communication Services was not far behind. The worst performing sectors include Utilities down around 1 per cent followed by Consumer Staples, which is just in the Green and Industrials up over 1 per cent so far this week.

The best performers in the ASX/S&P top 100 stocks include Tabcorp Holdings up over 12 per cent, Boral up over 11 per cent followed by, The Star Entertainment Group and Afterpay, which are all up over 8 per cent. The worst performers include Worley down over 10 per cent followed by Northern Star Resources down over 5 per cent and Saracen Minerals down over 3 per cent.

What's next for the Australian share market?

Wealth Within’s Dale Gillham says, “What an interesting week it’s been for the Australian stock market. After falling away on Monday, as I expected, it rose strongly over the next two days before showing weakness again on Thursday. Previously, I indicated that the market would peak and start to fall away for a short period, which is what occurred. While this week would technically be considered a down week on our market, the move down really occurred over four trading days in the last two weeks.

“So can we expect further falls or is the down move over? It is possible we will see more downside but this cannot be confirmed just yet and I expect one of two possibilities to unfold. The first is that the market will rise next week and continue up for the next couple of months, making a new all-time high before moving into the next yearly low.

“The other possibility is that it will continue to fall for one or two more weeks with the market travelling down to between 6,500 points and 6,100 points before it rises again. Either way, I expect our market to trade higher over the next couple of months. For now, I encourage everyone to be patient while we wait for the market to confirm a direction.”

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