THE YOVICH REPORT 
OCTOBER 2011

 

NZX 50  3290

ALL ORDS  4274

NZDAUD 77.46

NZDUSD  79.19

World markets were strong last week but the New Zealand market fell 81 points driven down by announcements from Fletcher Building, Cavalier and Methven.  Offshore markets have fallen further early this week driven by lack of progress in Europe debt negotiations.  The prolonged uncertainty over Europe’s debt problems is hurting the Euro zone’s long term growth prospects.
 
Recent Announcements:

• Fletcher Building has announced that trading conditions are difficult and first half earnings are expected to be 10% lower than expected.
• Cavalier sales for September quarter were down 20% due to Europe crisis and high cost of wool.  There has been deferral of large number of major commercial projects particularly in Australia.
• Michael Hill same store sales up 1.4% and all stores up 6.5% for September quarter.
• Methven expects profit for September half year to be down 25% at $3.2m.
• Cerebos has made a takeover bid for Comvita at $2.50 per share.  Comvita's Directors recommend that shareholders do not accept as it is an opportunist offer.
• Trade Me to float, likely by Christmas.
• NZ Refining processing fees for July and August were $30m compared with $43.3m for May and June.
• Postie Plus profit for July year was up 56% at $656,000.
• Pumpkin Patch tax paid profit for July year is $12.6m compared with $25,5m last year.
• Hallenstein Glasson 2011 profit was down 10.5% at $18.3m.
• GPG has sold its 19.4% stake in Turners Auction.
• Diligent sales revenue for September quarter at US$4.8m was more than double last year.
• Sommerset share price was set at $1.40 per share.
• Turners Auction's profit guidance for full year is between $3.4m and $3.6m.  Last year profit was $3m.
• Vital Healthcare is not proceeding with internalisation of management.
• Restaurant Brands' sales for 2nd quarter were down 6.5% and the profit for the September half year down 44% at $7.5m.  Interim dividend is 6.5c compared with 7c last year.

Disclosure Statements available by clicking on the links below.

FINANCIAL ADVISER LET V11.pdf
Walter Yovich Primary Disclosure v1.pdf
Walter Yovich Secondary Disclosure v1 (2).doc

Please contact us if you have any queries.  We will want to meet with you to update account records.

Financial Advisor:  Wally Yovich


Short Term Rates

Call - UDC over $5,000 3% over $100,000 3.25%
3 Months - Marac 5%
9 Months - Marac 6%

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	7.7%	April, October
BNZ Income	9.89%	Perpetual	8.4%	March, June, Sept, Dec
Fletcher Building	8.9%	15/03/2013	6.35%	February, August
GPG Finance	8.3%	15/11/2012	7.9%	Jan, May, July, Oct
Infratil	7.75%	15/11/2012	7.45%	Feb, May, Aug, Nov
Marac Finance	10.5%	15/07/2013	7.9%	Jan, April, July, October
Nuplex	9.3%	15/09/2012	7.65%	Feb, May, Aug, Nov
Prime Infrastructure	9%	30/11/2012	13%	May, November

Listed Property Investments

Company New Zealand	Price	PIE Cash Yield	Distribution
AMP NZ Office Ltd	0.84	6.5%	February, May, September, November
Argosy Property Trust	0.79	8.81%	March, June, October, December
Goodman Property Trust	1.00	7.77%	March, June, September, December
Kiwi Income Property	1.05	6.62%	July, December
NPT Limited	0.49	9.12%	January, April, July, October
Property for Industry	1.16	6.20%	February, May, August, November
Vital Health Property Trust	1.15	6.70%	March, June, September, December

High Yielding Stocks – New Zealand

Company	Price	Yield	Distribution
Barramundi	0.62	12.20%	March, June, September, December
Briscoes	1.37	9.91%	March, October
Hallensteins	3.65	11.97%	April, December
Kingfish	0.91	11.42%	April, October
Team Talk	2.05	13.94%	April, September
Tower	1.40	10.20%	January, July
Turners Auction	1.40	17.34%	April, September
Warehouse	3.22	12.86%	April, November

 

IIuka Resources is the world's largest producer of zircon and the high grade feedstocks rutile and synthetic rutile.  Prices for all products have increased considerably as strong demand outpaces supply.  Shortages of supply have become chronic with new supply not available due to lack of past investment in the industry.

Financial Results: 

	2010	2011 Est	2012 Est	2013 Est
Revenue	A874.4m	A1546.6m	A3053.1m	A3181.8m
Net Income	36.1m	494.3m	1511.4m	1612.2m
Dividend cps	8c	69c	$2.20	$2.30
Net Debt to Equity	27.8%	Net Cash	Net Cash	Net Cash

Current price is A$15.69.  Target price is A$21.00.

Fortescue Metals Group.  Has released a resource upgrade from its Nyidinghu iron ore deposit bringing its total resources to 11.4 billion tonnes.  Its reserves in March 2011 were 10.4 billion tonnes and this increase is not reflected in its current price.  Nyidinghu is 35km from its Cloudbreak Mine in the Chichester Hub and has the potential to offer synergy benefits for Fortescue moving forward.

The September quarter production and costs have been released.  Shipments were 12.2 million tonnes which is in line with 55 mtpa target.  Costs were US$49.78 per tonne down from US$53.23 previous quarter.  Price was US$160 tonne in line with expectations.  The goal is to achieve 155 mtpa within 3 years.  Current price is A$4.64 and target price is A$9.10.

Atlas Iron is completing its takeover of Ferraus and its target is to be a 42 mtpa producer within 5 years.  It is a low capex iron ore model with projects within trucking distance of Port Hedland and shipping through a multi user port.  Atlas has $366m cash, no debt and port access.  It has just paid its first dividend of 3c.  Current price is A$3.10 and target price is A$4.80.  It is a future takeover target.

Kathmandu Holdings reported an excellent result in what has been a difficult period for the retailing sector.  Revenue was up 24.5% at $306.1m.  Australia was up 32.2% at $187.6m.  NZ was up 17% at $110.3m and UK revenue was disappointing at $8.2m.  The tax paid profit was $39m compared with 2010 $25.2m an increase of 54.9%.  Sales growth resulted from upsized product offering new store rollouts and continuing store refurbishment programme.  The Company is planning for continued growth and remains positive about 2012.  Current price is $2.25.  The gross dividend yield is 6.49%.

Ecoya.  The fragrances and skincare group listed in March 2010 with shares being issued at $1.  It acquired Trilogy Natural Products in September 2010.

The Company has reached breakeven point for the September half year with earnings before interest expected to be $240,000 compared with $2.6m loss last year.  Australia is Ecoya's largest market and it is also exporting to UK, Ireland, Japan, Korea and Malaysia.  The Company sells a broad range of body, bath and home fragrance products.  It uses natural ingredients to create environmental friendly products that perform for the consumer (eg soaps, hand and body lotions and hand wash) and their home (eg scented candles and diffusers).

Geoff Ross, the Chairman was founder of "42 Below".  The current price is 93c.

Australian Bank Investments

Bank Interest rates are low.  The best alternative is to invest in bank shares.  This will generate higher income together with the potential for capital gains.

 

National Australia Bank
Current Price $A24.47                                                                           Fair value $A30.80
Dividend yield: 2010 6.21%  2011 7.11%  2012 7.89%       Payable July & December
One Year High  $A28.18   Low  $A19.65

Trading Results

                                               2008               2009          2010          2011 Est       2012 Est

Tax Paid Profit                A4224m      A2568m      A4581m         A5362m         A6157m

Dividend                            $A1.94         $A1.46         $A1.52           $A1.74           $A1.93
Owns Bank of New Zealand

 

Westpac
Current Price $A21.79                                                                          Fair value $A28.91
Dividend yield: 2010 6.37%  2011 6.74%  2012 7.15%       Payable July & December
One Year High  $A25.60   Low  $A17.84

Trading Results

                                               2008               2009          2010            2011 Est     2012 Est

Tax Paid Profit                     A3794m         A3446m    A5879m      A6350m      A6866m

Dividend                                 $A1.42           $A1.16      $A1.39         $A1.47          $A1.56
Westpac are also listed in NZ and the current price is NZ$24.70

 

Commonwealth Bank
Current Price $A48.11                                                                           Fair value $A61.15
Dividend yield: 2010 6.28%  2011 6.65%  2012 7.07%          Payable October & April
One Year High  $A55.77   Low  $A42.30

Trading Results

                                               2008               2009          2010            2011            2012 Est

Tax Paid Profit                     A4791m         A4611m    A5923m      A6835m      A7380m

Dividend                                 $A2.66           $A2.35      $A3.02         $A3.20         $A3.40

ANZ
Current Price $A21.33                                                                           Fair value $A29.70
Dividend yield: 2010 5.91%  2011 6.56%  2012 6.84%       Payable July & December
One Year High  $A25.96   Low  $A17.63

Trading Results

                                               2008               2009          2010            2011 Est     2012 Est

Tax Paid Profit                     A3319m         A2943m    A5025m      A5629m      A5997m

Dividend                                 $A1.36           $A1.02      $A1.26         $A1.40         $A1.46
Owns National Bank
ANZ are also listed in NZ and the current price is NZ$27.05.