The Nuix Limited (ASX: NXL) share price has continued its remarkable post-IPO rise and zoomed higher again on Monday.

In fact, at one stage today the analytics software provider’s shares jumped a massive 37% to a record high of $10.95.

When its shares hit that level, it meant they were up over 105% from their IPO listing price of $5.31.

The Nuix share price has since given back the majority of those gains but is still up a sizeable 14% to $9.15 at the time of writing.

What is Nuix?

Nuix is a leading investigative analytics and intelligence software provider. This software has been used by customers around the world to process, normalise, index, enrich, and analyse data from a multitude of different sources.

This includes for a number of important investigations such as the Panama Papers, the Banking Royal Commission, organised crime rings, corporate scandals, and terrorist activities.

The company’s customer base includes government agencies, regulators, corporations and professional services firms.

Why has it undertaken an IPO?

Nuix launched its IPO this year in order to raise funds to fuel its growth plans and to allow shareholders to realise a portion of their investment.

Nuix Chairman, Jeff Bleich, explained: “The purpose of the offer is to broaden Nuix’s shareholder base and provide a liquid market for its shares; repay existing indebtedness and provide funding and financial flexibility to support Nuix’s growth strategy and future growth opportunities; provide Nuix with the benefits of an increased brand profile that may arise from being a publicly listed entity; and provide existing securityholders with an opportunity to realise a portion of their investment in Nuix and fund the cancellation of options exercisable before completion of the offer.”

In respect to its growth strategy, the company is seeking to expand its presence across geographies and in targeted industry verticals. It aims to do this by winning new customers, employing an industry‑centric “land and expand” strategy across industry verticals, continued investment in functionality of the Nuix platform, and improvements in overall operating efficiency and extracting potential benefits of increased scale.

Management also believes that growth can be accelerated by focusing on building a network of strategic partners to provide complementary delivery and market expansion capabilities, as well as through a considered approach to value accretive mergers and acquisitions.

In FY 2021, the company is forecasting total revenue of $193.5 million, gross profit of $166.7 million, and EBITDA of $63.6 million. This represents year on year growth of 10%, 7.4%, and 14.6%, respectively.

More reading

• Why Fortescue, Metcash, Nuix, & Xero shares are storming higher
• ASX 200 goes up on Friday
• The Nuix (ASX:NXL) share price zoomed 69% higher following its IPO
• $1.7 billion Aussie tech company finally lists on ASX

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Sky Network Television Limited (ASX: SKT) share price is lifting today after the company announced a renewed multi-year deal with Discovery. At the time of writing, the Sky share price is up 3.2% at 16 cents. In comparison, the All Ordinaries Index (ASX: XAO) is up 0.7% to 6,915 points.

Discovery is a popular American multinational television network that provides viewers with real-life entertainment, including factual and lifestyle shows.

Renewed partnership

According to the announcement, Sky has extended its partnership with Discovery under a multi-year agreement.

Although no exact terms have been released, Sky said customers would be offered a raft of well-known programs. These include Discovery Channel, TLC, Discovery Turbo, Living, Food Network, Animal Planet, and the newly launched channel, Investigation Discovery.

In addition, Video on Demand (VOD) rights will be expanded for Sky Go, Sky On Demand, and Neon. And the Discovery Channel will be included in its starter package to attract new customers.

Furthermore, Sky said Investigation Discovery would debut in New Zealand under the entertainment package in early 2021.

What did management say?

Commenting on the partnership extension, Sky chief executive Sophie Moloney said:

We know our customers love Discovery’s premium programming, and we are delighted to continue our 26-year partnership through a renewed deal that responds to our customers’ needs and the content landscape in New Zealand.

New Zealanders are spoiled for choice when it comes to content. Our partnerships with the world’s leading content creators makes it easy for Sky customers to enjoy the best and broadest range of storytelling; all in one place. We are excited to deepen our offering of Discovery’s premium content by welcoming Investigation Discovery to New Zealand in 2021.

About the Sky share price

The Sky share price has fallen dramatically in the past 5 years. After reaching the $6 mark in 2015, the Sky share price is now swapping hands for 16 cents, a 98% wipe out of its prior value. 

More reading

• Sky Network (ASX:SKT) share price falls following significant board change
• Sky Network (ASX:SKT) share price shoots 6% higher on upgraded guidance

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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From the moment the buy now, pay later (BNPL) concept was born, it has faced criticism and the threat of possible regulation. The sector that BNPL aims to supplement (or perhaps replace), credit provision, is one of the most regulated industries in the country.

Under current laws, not every Tom, Jane or Harry is allowed to offer credit cards or personal loans to anyone they please. You need a credit license, regulatory approval and the ability to satisfy a raft of other compliance measures.

But the same cannot be said of BNPL products. The companies that offer BNPL services, such as Afterpay Ltd (ASX: APT), have long argued they shouldn’t be subject to the same laws and regulations as traditional credit providers. That’s namely because BNPL products usually don’t charge interest. And it is interest (which has a nasty habit of compounding over time) that normally gets debtors into strife. Or so the argument goes.

Until now, BNPL providers have managed to keep this status quo going, despite those such as Commonwealth Bank of Australia (ASX: CBA) CEO Matt Comyn telling investors last month he believes BNPL regulation to be ‘inevitable’.

However, reporting from the Australian Financial Review (AFR) this morning has put another feather in the caps of Afterpay and the wider BNPL sector.

RBA gives BNPL another green light

The AFR reports that Reserve Bank of Australia (RBA) governor Dr. Philip Lowe “has given the strongest indication yet” that buy now, pay later providers will be able to continue insisting stores and merchants do not pass their costs on to customers. For now, at least.

According to the report, Dr Lowe gave a speech at an AusPayNet event. He laid out the RBA’s position on the “no surcharge” restrictions: “The board’s preliminary view is that the BNPL operators in Australia have not yet reached the point where it is clear that the costs arising from the no-surcharge rule outweigh the potential benefits in terms of innovation”.

Dr. Lowe went on to state that, “even the largest BNPL providers still account for a small proportion of total consumer payments in Australia, notwithstanding their rapid growth”. He noted only around 1% of the total payments volume in the country go through BNPL channels.

Lowe also points out that “the increasing array of BNPL providers is resulting in competitive pressure that could put downward pressure on merchant costs”.

As such, Dr. Lowe says the RBA will only step-up regulation in the buy now, pay later sector when “it is clear that doing so is in the public interest”. And right now, “the board is unlikely to conclude that the BNPL operators should be required to remove their no-surcharge rules”.

More reading

• How to get a passive income of $50,000 per year from ASX dividend shares
• Top brokers name 3 ASX shares to sell next week
• Is the Afterpay (ASX:APT) share price in the buy zone after its update?
• 5 things to watch on the ASX 200 on Friday
• ASX 200 rises on Thursday

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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We kick off the first Monday of the last month of 2020 with a spot of good news.

Today, at time of writing, the S&P/ASX 200 Index (ASX: XJO) is up 1.1%.

Yes, that’s nice. But that’s not the good news.

The good news is that this morning’s strong start puts the ASX 200 in the green for 2020. It’s currently up 0.3% since the opening bell rang on 2 January.

Now that may not last the day. The last time the average share price of Australia’s top 200 listed companies closed up for the year was on 26 February.

That was just 3 trading days into the horror selloff that saw the ASX 200 crash 36.5% from its 20 February all-time high to its 23 March 2020 low.

It’s now up more than 47% from that low. And less than 7% off the all-time 20 February highs.

Both the size and the speed of the market’s fall and rebound smashed any previous records.

And it’s not just the ASX. Most global share markets have experienced similar record-breaking moves. And some, like US share markets, are trading back at record levels.

On Friday, the Dow Jones Industrial Average (INDEXDJX: .DJI), the S&P 500 Index (INDEXSP: .INX), and the Nasdaq Composite (INDEXNASDAQ: .IXIC) all closed at new all-time highs. The gains came with hopes the long-awaited, near trillion dollar US stimulus package will soon get the green light.

The Nasdaq has posted a truly stellar year. The tech-heavy index is up 37% since 2 January and up 82% from its 23 March low.

That’s been 2020 for you.

But with the clock ticking on the old year, what can investors expect from share markets in 2021?

Proceed with caution

The forecasts among leading analysts and fund managers ranges from cautious to cautiously optimistic.

Bank of America Corp (NYSE: BAC) falls on the cautious side of that equation. The Bank of America’s Bull & Bear Indicator has leapt from 4.7 to 5.8, on a scale of 0–10.

As the Australian Financial Review (AFR) reports, the bank is concerned about investors’ acceleration “toward extreme bullishness” giving it a “code red” designation.

According to Bank of America, the US$115 billion (A$155 billion) invested into stocks over the past 4 weeks set a new record. Meanwhile, the US$9 billion outflow from gold, a classic haven asset, over the past 3 weeks sets another new record.

Adding to the bank’s cautious outlook, it stated fund managers’ cash holdings had dropped to 4.1%, approaching what it views as a “sell signal”.

So what should investors do in the months ahead? According to Bank of America (quoted by AFR):

If risk asset correction occurs [in the] next 3-6 weeks, investors should buy the dip in cyclical value; if [a] correction [takes place] in 3-6 months, investors should buy defensive growth.

Buying opportunities ahead

US and Australian share markets have rallied strongly following the pandemic-led selloff despite a wave of share offerings to raise capital.

As Bloomberg reports, data compiled by Informa Financial Intelligence’s EPFR unit show companies announced plans to raise some US$510 billion via initial and secondary share offerings in 2020.

That’s up 50% from 2019 and it’s equal to the amount companies plan to remove with share buybacks and takeovers this year. By comparison, over the past 10 years companies have bought back an average 3 times more than they’ve issued.

Buybacks, as you’re likely aware, tend to drive up share prices while share offerings tend to be dilutive.

Winston Chua, an analyst with EPFR, explains the rationale behind the surge in share offerings (quoted by Bloomberg):

Obviously when the market is at an all-time high, you want to issue shares now, because the shares are worth a lot more than they would be if the market was tanking. Looking at the market broadly, companies are not being supportive of share prices.

While all the share offerings may not be supportive of share prices today, Mike Bailey, director of research at FBB Capital Partners, points out this looks likely to change in 2021 (quoted by Bloomberg):

There’s a lack of an incremental buyer out there, so that’s a negative, and it still signals some caution as companies let the cash accumulate. The flip side is, you are building more pressure for companies to really drop the hammer and start to buy back stock next year and into 2022.

Brian Rauscher, Fundstrat Global’s head of global portfolio strategy, also sees buying opportunities ahead, recommending a move from value shares over growth (quoted by the AFR):

Any dips in the broad equity market that may occur in the coming weeks based on worsening COVID cases and short-term weak economic data should be viewed as buying opportunities.

2021 is just a few weeks away. And while there will be plenty of risks in the share markets in the year ahead, there will also be plenty of opportunities to make money.

More reading

• ASX 200 up 0.7%: Metcash impresses, BHP & Fortescue storm higher, Xero given buy rating
• Why ASX iron ore stocks are set to rally today
• 5 things to watch on the ASX 200 on Monday
• 5 things to watch on the ASX 200 next week
• These were the worst performing ASX 200 shares last week

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Control Bionics Limited (ASX: CBL) share price landed on the ASX boards this morning following the successful completion of its initial public offering (IPO). And what a start it has had!

At the time of writing, the medical technology company’s shares are fetching $1.21.

This is more than double the Control Bionics listing price of 60 cents.

What is Control Bionics?

Control Bionics is a medical technology company founded by former CNN anchor, Peter Ford.

Whilst working at CNN, Mr Ford taught himself to code and, inspired by Stephen Hawking, began developing software that would allow severely disabled people to operate and communicate using only their thoughts and neural signals.

The company notes that this technology is making a huge difference to the lives of those using it.

Furthermore, it has now gone well beyond basic communication and can allow those with diseases such as motor neurone disease (MND) to do things that haven’t been possible for a long time. This includes gaming, controlling a television, and continuing with careers.

An example of the latter is Professor Justin Yerbury, who was recognised in this year’s Australia Day honours list for his outstanding contribution to research regarding MND.

Using Control Bionic’s NeuroNode system, Mr Yerbury has been able to continue teaching and researching in his field of Neurodegenerative Diseases at Wollongong University.

In FY 2020, the company generated $3.1 million in product revenue, which represented growth of 297% on FY 2019. And despite challenges presented by COVID-19, it has achieved unaudited revenue growth of approximately 41% in the first quarter compared to the prior corresponding period.

The Control Bionics IPO.

Control Bionics’ IPO raised a total of $15 million at $0.60 per new share. This gave the company a $50 million market cap.

Management revealed that demand was so strong for its IPO that it was restricted to priority offer applications only after just a week.

Speaking about the offering, Chairman Roger Hawke commented: “The funds raised by this Offer will provide Control Bionics with working capital to execute our growth strategy in North America, increase our presence in Australia and prepare for entry to other priority markets including Japan. Additionally, funds will be used to support the marketing for existing products and to fund continued development of the hardware and software for a range of new, advanced applications.”

More reading

• Why the Keytone Dairy (ASX:KTD) share price is up 8% today
• Why the Cresco (ASX:CPH) share price is rocketing up 30% today
• Are ASX lithium shares a hot commodity right now?
• ASX 200 up 0.7%: Metcash impresses, BHP & Fortescue storm higher, Xero given buy rating
• The Santos (ASX:STO) share price is trading higher today. Here’s why.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of CBL Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Keytone Dairy Corporation Ltd (ASX: KTD) share price is on fire today, up 8.12% to 26 cents at the time of writing. Keytone shares closed at 24 cents on Friday afternoon, but opened at 26 cents this morning and were up to 28 cents at one point, a rise of more than 16% at the time.

Despite this strong showing today, Keytone isn’t having a great year in terms of share price performance. Keytone shares remain down 33% year to date on this pricing, and down more than 40% from the highs of 46 cents we saw back in mid-April.

So why is this dairy company seemingly in investors’ good books today?

Why the Keytone share price is surging today

Today’s Keytone share price performance is most likely due to an ASX release the company provided just before market open this morning. In this announcement, Keytone revealed it has inked a significant deal with major supermarket operator Coles Group Ltd (ASX: COL).

Keytone will provide private-label goods to Coles that will be sold under Coles’ ‘in-house’ white-label brands under the agreement. The products to be provided under this arrangement are “multiple powdered SKUs [stock keeping units] in various pack formats, flavours and sizes”. Keytone told the markets the deal is a result of the company’s “first-class manufacturing facilities and rigorous health and safety standards, highly responsive and innovative new product development team and the growing strategic relationship between Keytone and Coles”.

Production of goods under the deal is expected to commence “late in the first quarter of 2021”, with the products set to appear in Coles’ stores “from the second quarter of 2021”. The company tells investors the “term of the arrangement has not been specified”. However, Keytone “anticipates the term will be longer than an initial 12 month period, implying a gross sales value multiples higher than the annual value”.

The company forecasts the deal will result in $5.2 million worth of sales per year.

Keytone CEO, Danny Rotman, had this to say on the announcement:

This is a fantastic and significant win for the business. It highlights the growing awareness of the Keytone brand of quality and our credentials across the broader health and wellness sector… The calibre of the client base is becoming increasingly robust and we look forward to supporting the growth of our diversified customer base through our state of the art facilities and first-class product development and operations teams.

More reading

• Keytone Dairy (ASX:KTD) share price higher on record half-year results

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The emerging cannabis industry has received another vote of confidence, after the United States House of Representatives passed a historic bill to end a federal ban on marijuana last Friday.

The proposal has yet to be signed into law. However it’s given a boost to Australia’s cannabis industry, including ASX-listed Creso Pharma Ltd (ASX: CPH). The Cresco share price is surging 30% higher to 13 cents at the time of writing.

US Senate to vote on the new bill

The US House of Representatives on Friday voted on the Marijuana Opportunity Reinvestment and Expungement Act, popularly known as the MORE Act. The Act decriminalises cannabis and clears the way to erase non-violent federal marijuana convictions. 

In the vote count, 228 voted in favour of passing it while 164 were against.

However, the bill will have to pass Senate approval before it’s enacted into law. Analysts have said the Senate is unlikely to approve the bill due to bipartisan disagreements on the issue.

If approved, the MORE Act will open a pathway for ownership opportunities in the emerging industry. Projections from a cannabis industry market research firm, Brightfields Group, estimate it to be worth around $19 billion in sales this year – in the US alone.

Recent United Nations (UN) landmark announcement

The trend toward normalising cannabis has been gaining ground globally.  Last week, the UN announced a landmark decision to reclassify cannabis as a less dangerous drug.

That decision will see the UN Commission on Narcotic Drugs withdraw cannabis from Schedule IV classification. Schedule IV substances are considered the most dangerous and addictive drugs.

The UN said that cannabis would be reclassified as a Schedule I substance, which is the least restrictive drug classification.

Cresco share price to benefit 

In the wake of the UN ruling, Creso said it was extremely well-positioned to benefit, and that it would unlock multiple near-term opportunities. The Cresco share price rose by 8% after that announcement.

Cresco announced today the new development in the US also placed the company in a good position to capitalise on opportunities in the US market.

The company has an established global distribution network in the US that will benefit from the legislation. In addition, its Canadian subsidiary, Mernova, can scale up operations to meet potential demand from the US market.

The company says Mernova is a fully licenced 24,000 square-foot cultivation growing facility, and is ideally located to cater to both Canadian and US markets. 

Cresco co-founder and director Boaz Wachtel is optimistic about Cresco’s future, saying:

This is a historic ruling that has the ability to create significant growth opportunities in our burgeoning industry.

It follows similar regulatory shifts in the European Union and from the United Nations that highlight public acceptance for cannabis and cannabidiol-derived products, is at an all time high.

The Creso share price has risen by more than 250% since 27 November, including the 30% price rise today. The company currently commands a market capitalisation of around $69 million.

More reading

• Creso Pharma (ASX:CPH) share price up 8% today, 200% in a week
• Elixinol (ASX:EXL) share price tumbles on capital raising update

Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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ASX lithium shares, Orocobre Limited (ASX: ORE), Galaxy Resources Limited (ASX: GXY) and Pilbara Minerals Ltd (ASX: PLS) all soared more than 50% in November. Could this be the beginning of a new lithium run? 

A long road ahead for lithium prices 

While ASX lithium shares were running hot in November, the lithium spot price continued to sit near multi-year lows. Fastmarkets highlights a potential bottom for lithium prices with a recent small recovery. China’s battery-grade lithium carbonate prices started to uptrend on tight supply and bullish market sentiment. Overseas, lithium hydroxide prices moved up in both European and United States markets. 

To add some perspective, Orocobre was selling its lithium at an average price received of US$3,102 per tonne while its cost of sales was US$3,974 per tonne for the quarter ending 30 September 2020. Its gross cash margins for the quarter were negative at US$872 per tonne, but the company expects these to improve with better pricing in the second quarter of FY21.

Global EV adoption to drive lithium demand surge 

Galaxy Resources raised $161 million last week to enable the company to accelerate its developments to take advantage of the emerging European and North American electric vehicle (EV) growth surge. 

In the company’s capital raising presentation, it pointed to COVID-19 supply-side interruptions and strong recovery in EV sales as drivers of lithium prices. 

Iron ore markets faced similar supply-side disruptions causing spot prices to push higher. In the case of lithium producers, not only have they faced supply-side interruptions and challenging spot prices, but also financial-related challenges that have pushed producers to the brink of collapse. Pilbara Minerals, for example, has entered into an agreement to acquire the shares in Altura Lithium Operations Pty Ltd.

According to Galaxy, global EV sales are forecast to grow as high as 30% compounded annual growth rate in the next decade. This plays into the narrative of a phased reduction in CO₂ emissions mandated in China and much of Europe. Government stimulus and country-level subsidies are also expected to support EV and renewables adoption. 

Ready to pounce at higher prices 

ASX lithium companies have largely curbed production due to poor market conditions. However, they remain ready to pounce at the prospect of improved prices. Pilbara has opted to moderate its production over the last 15-18 months, aligning production to sales and inventory, and preserving working capital. Similarly, Galaxy’s flagship mine, Mt Cattlin, has been producing at 50% to 55% of its nameplate capacity and examining the potential ramp up to full capacity, subject to market conditions and inventory.

More reading

• These are the 10 most shorted shares on the ASX
• Why the PIlbara Minerals (ASX:PLS) share price is charging higher
• Fund managers have been buying Galaxy Resources (ASX:GXY) and this ASX share
• Why Air NZ, Bega Cheese, Fisher & Paykel Healthcare, & Galaxy are pushing higher
• Why the Galaxy Resources (ASX:GXY) share price is tumbling lower today

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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At lunch on Monday the S&P/ASX 200 Index (ASX: XJO) is on course to start the week on a positive note. The benchmark index is currently up 0.7% to 6,679 points.

Here’s what has been happening on the market today:

Metcash jumps on half year results release.

The Metcash Limited (ASX: MTS) share price is jumping higher following the release of a strong half year result. For the six months ended 31 October, Metcash reported a 12.2% increase in group revenue to $7.1 billion and a 43% lift in underlying profit after tax to $129.6 million. Food sales were up 9.5%, Liquor sales rose 14.3%, and Hardware sales jumped 20.6%. Pleasingly, this positive momentum has carried over into the second half.

Iron ore producers storm higher.

Iron ore producers including BHP Group Ltd (ASX: BHP) and Fortescue Metals Group Limited (ASX: FMG) are charging higher on Monday after the price of the steel making ingredient surged higher again. According to CommSec, on Friday the spot iron ore price jumped a further 5.4% to US$145.30 a tonne. News that Vale has downgraded its production guidance and robust demand have given prices a boost.

Xero shares given buy rating.

The Xero Limited (ASX: XRO) share price is charging higher today after analysts at Goldman Sachs slapped a buy rating and $157.00 price target on its shares. Goldman believes the cloud-based business and accounting software provider’s total addressable market will increase significantly in the future. Combined with attractive unit economics, the broker believes the long-term earnings opportunity for Xero is material.

Best and worst ASX 200 performers.

The best performer on the ASX 200 on Monday has been the Metcash share price with a 9.5% gain following its half year results release. The worst performer has been the IDP Education Ltd (ASX: IEL) share price with a 3.5% decline. This appears to be down to profit taking after strong gains over the last couple of months.

More reading

• Why Fortescue, Metcash, Nuix, & Xero shares are storming higher
• Metcash (ASX:MTS) share price jumps 8% after strong first half growth
• Why ASX iron ore stocks are set to rally today
• Leading broker puts buy rating on Xero (ASX:XRO) share price
• 5 things to watch on the ASX 200 on Monday

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Idp Education Pty Ltd and Xero. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Santos Ltd (ASX: STO) shares are lifting today on news the company has signed a 10-year agreement to sell liquefied natural gas (LNG) to Japan’s Mitsubishi Corp.

The Santos share price is currently trading up 2.52% at $6.52 after reaching a morning high of $6.58.

What’s in the deal

Santos says the deal represents the first long-term sale from one of its major LNG projects. It will supply 1.5 million tonnes per annum of LNG to Mitsubishi  from its Barossa project for 10 years, with extension options.

The price will be based on the Platts Japan Korea Marker (JKM), a benchmark price for spot physical cargoes of LNG. The JKM Index is often referenced in spot deals, tenders and contracts both in Northeast Asia and globally. 

Santos said Barossa was a globally-competitive, low-cost brownfield LNG project providing new supply into a tightening LNG market, where JKM-based pricing is an increasingly deep and liquid price marker for both sellers and buyers. 

In the deal, Santos also has options to pursue further LNG transactions through commercial flexibilities negotiated with Mitsubishi. These include collaborating on opportunities relating to Santos’ Moomba carbon capture and storage (CCS) project. In addition, the pursuit of carbon neutral LNG, bilateral agreements for carbon credits, and potential future development of zero emissions hydrogen.

Santos’ investment in the Barossa project

The company currently holds a 62.5% operated interest in the Barossa joint venture, along with South Korean energy company SK E&S which owns 37.5%. Santos is also a joint venture partner and operator in Darwin LNG with a 68.4% interest.

Completion of the planned sell-downs to SK E&S and Japanese power company JERA, announced in early 2020, will see Santos’ interests in Darwin LNG and the Barossa project change to 43.4% and 50%, respectively. The sell-downs are subject to customary consents, regulatory approvals, and final investment decisions.

About the Santos share price

The Santos share price has lost around 20% in 2020. Although the share price has rebounded by 140% from its lows in March, it’s still a long way off from its 52-week high of $9.07.  Santos currently commands a market value of $13.2 billion.

More reading

• 5 things to watch on the ASX 200 on Monday
• Can OPEC deliver more share price gains for Santos (ASX:STO) and Woodside (ASX:WPL)?
• 5 things to watch on the ASX 200 on Thursday
• Santos (ASX:STO) share price rated top buy in sector by Citigroup
• Which ASX 200 sectors performed the best in November? 

Motley Fool contributor Eddy Sunarto owns shares of Santos Limited. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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