THE YOVICH REPORT 
FEBRUARY 2012

 

NZX 50  3326

ALL ORDS  4357

NZDAUD 77.34

NZDUSD  83.44

The NZSX50 is up 1.62%, Dow up 5.48%, ASX All Ordinaries up 5.83%. Footsie up 5.43% since the start of the year notwithstanding Europe problems and in particular Greece

Unemployment rate for December quarter fell to 6.3% compared with forecast 6.5%.  The flat employment rate highlights that the increase in employment is just keeping pace with the increasing size of the country's increasing size of the working age population.

The Reserve Bank is not expected to increase interest rates until at least the fourth quarter.  The NZ dollar is continuing to strengthen and this impacts on our exporters. 

Recent Announcements:

• Steel & Tube profit for December half year down 24% at $6.4m.
• NZ Refining tax paid profit guidance for 2011 year is in the range of $32m to $36m some $11m to $12m lower than previous guidance.
• Pumpkin Patch is placing its 36 store UK subsidiary in Administration.  Cash cost will be $3m to $5m and expected write-downs are in the range of $25m to $27m.
• Michael Hill same store NZ sales for December half year were up 9.9% and in Australia were down .5%.  There has been pressure on margins.
• Energy mad EBITDA forecast has been cut from $3.5m to $1.1m.
• Warehouse has downgraded its 2012 profit guidance by up to 18% to between $62m and $60m.
• Briscoes is expected a 25% increase in 2012 profit.
• Hallenstein Glassons sales for 1 February half year were up 7.9% and profit for period expected to be up 25%.
• NZ Experience profit for December half year expected to be $750,000 compared with previous guidance of between $1.4m and $1.6m.

Internal News
Jarrod Goodall has joined Yovich & Co.  He is a young Whangarei man who was Chairman of Whangarei Boys High School Student Council and representative on the Board of Trustees and WBHS most valuable rugby player.
He has worked the last 9 years in investments with Macquarie Securities Limited in Sydney and Hong Kong.  Call in and meet Jarrod when you are in Whangarei.

Financial Advisor:  Wally Yovich


Short Term Rates

Call - UDC over $5,000 3% over $100,000 3.25%
  3 Months - Heartland 4.5% 
  9 Months - Heartland 4.90%
12 Months - Heartland 5.25%

Fixed Interest – Capital Notes

The following is an indication of current yields

Company	Coupon Rate	Maturity Rate	Current Yield	Payable
ANZ National	9.66%	Perpetual	9.66%	April, October
BNZ Income	9.89%	Perpetual	10%	March, June, Sept, Dec
Fletcher Building	8.9%	15/03/2013	6.95%	February, August
GPG Finance	8.3%	15/11/2012	7.6%	Jan, May, July, Oct
Infratil	7.75%	15/11/2012	7.8%	Feb, May, Aug, Nov
Marac Finance	10.5%	15/07/2013	7.7%	Jan, April, July, October
Nuplex	9.3%	15/09/2012	8.27%	Feb, May, Aug, Nov
Prime Infrastructure	9%	30/11/2012	15.2%	May, November

Listed Property Investments

Company New Zealand	Price	2012 PIE Cash Yield	Distribution
AMP NZ Office Ltd	0.87	5.08%	February, May, September, November
Argosy Property Trust	83.5	7.16%	March, June, October, December
Goodman Property Trust	1.02	6.02%	March, June, September, December
Kiwi Income Property	1.05	6.66%	July, December
NPT Limited	0.54	5.8%	January, April, July, October
Property for Industry	1.18	5.85%	February, May, August, November
Vital Health Property Trust	1.16	6.64%	March, June, September, December

High Yielding Stocks – New Zealand

Company	Price	Yield	Distribution
Barramundi	0.64	11.31%	March, June, September, December
Briscoes	1.45	9.36%	March, October
Hallensteins	3.70	11.97%	April, December
Kingfish	0.93	10.91%	April, October
Restaurant Brands	1.97	11.97%	June, November
Team Talk	2.30	12.42%	April, September
Turners Auction	1.48	16.4%	April, September
Warehouse	2.76	11.38%	April, September

 

Ryman Healthcare - Listed in 1999 and has been the top performer on the NZ market.  Its increase in value since it listed has been 1037% and the dividend has increased every year with its dividend for its first year 1.04 cents and for the last year 7.2 cents.

Its profit for the September half year was $41.4m up 14.69% on same period last year and the dividend for the half year is 3.9 cents compared with 3.4 cents last year.  The Company has indicated that it expected its profit for the March 2012 to be up 15% at $83m.  The dividends for the year are forecast to be 8.3 cents compared with 7.2 cents last year.  Its growth has been funded from cash flow.  The total debt level is $170m.  Since listing 12 years ago, they have built 3850 units and beds investing over $845m, all of which has been funded out of operating cash flows while profits and dividends have grown 12 fold.

There are two new villages under construction in Tauranga and Christchurch.  The first sales will come into next year's results but pre-sales are running at a high level.

Current price is $2.80 and gross dividend yield is 2.75%.  The 12 month target price is $3.20.

Sheffield Resources is a small cap mineral exploration company with over 6,000km² of tenure in West Australia.

The focus is on regions with infrastructure advantages.  Its interest is mainly in mineral sands and talc.  There are two product streams in mineral sands - Zircon ($2400 - $2600 tonne) main use in the manufacture of ceramics and refractory linings.  Global market is 1.4 Mt per annum and there is an acute shortage of supply - Titanium which is use mainly in pigment production for paint coatings, plastics and Titanium metal.  Global market 6 Mt pa and there is a shortage of supply.  Talc is used in paint, ceramics, plastics and paints.  There has been strong demand from the auto sector.  China's output of high quality talc powder is considered insufficient to meet the needs of either Chinese domestic market or export.  Sheffield listed in December 2010.  Current price is 34C.  The low  has been 23c and high 37c.

Gold and Silver
Some investors have an interest in investing in gold and silver.

An effective and secure means of investment is to invest in listed securities, ETFS Physical Gold is a Company that has been created for the purpose of issuing of Gold Bullion Securities allowing investors to own and trade physical gold bullion through a listed security trader on the ASX.  The metal is held in the name of the Trustee, Gold Bullion Nominees Limited and is held by the custodian bank - HSBC Bank USA in vaults in London.

The code is GOLD.A and closing price 9 February 15571.

ETFS Physical Silver is designed to offer a simple cost efficient way to access the precious metals market.  It is intended to provide investors with a return equivalent to movements in the silver spot price less fees.

The code is ETPMAG. ASX and closing price 9 February 3100.

Fortescue Metals has surged to a five monthly high of A$5.44 amid speculation that a planned merger between Glencoe and Xstrata could generate takeover interest in Australia's third largest iron ore miner Fortescue.

Fortescue is to explore for new commodities in an area of the country not known for iron ore and is laying foundations for a possible diversification away from steel making and is signalling its intent to compete for new markets in Asia.  It has applied for tenements in South Australia an area more associated with copper, uranium and gold mines.  Its interest is in 10 exploration licenses covering 4654 sq kilometres.
 
Fortescue iron ore expansion in West Australia remains on schedule and within budget as it targets continued strong demand from major consumer China.  It shipped a record 14.8m tonnes in the December quarter, up 19% on previous quarter and 39% on the year.  Demand for iron ore remains strong despite volatility in the spot market price late last year.  They are continuing to sign contracts for the additional iron ore Fortescue anticipates producing in the coming year.  All iron ore shipped to China continues to be placed with customers and the company has not had to alter the terms of its contracts with existing buyers.

The expansion work to reach 155 million tonne target in 2014 is on track.  There is plenty of capacity in the market to absorb the additional ore that mining companies plan to produce as India's exports to China contract over the coming years and higher cost producers are forced to cut output.

The tax paid profit for 2011 was $1634m and the forecast for 2014 $4701m.  The earnings per share then would be $1.61 - an increase of 303% and the dividend is expected to increase to 40 cents.

Fortescue target price is A$7.80.



Briscoes sales for January quarter were up 4.7%.  Homeware same store sales were up 10.7% in last quarter compared with 8.2% in previous quarter.  Store closures reduced overall.  Homeware sales growth to 4.8%.  Seven Living & Giving stores have been closed.  Rebel same store sales were up 5.7% after 24.6% growth in previous quarter.  The tax paid profit for January 2012 year is expected to be $27.2m compared with $21.6m last year - an increase of 26%. 

The current price is $1.50 and the gross dividend yield is 8.93.  Fair value is $1.65.

A Disclosure Statement is available on request