Yovich & Co. Market Update - 12 March 2020

Mar 12, 2020 | Commentary

Market update 2020-03-1312 March 2020

New Zealand Equities

Biggest movers 2020-03-12


In summary, the NZX50G had 22 companies on the downside, 2 remained unchanged and 26  companies were on the upside.  Last week the market closed down lower 2 of the 5 trading days, so far this week 3 days have closed down lower and the feeling on the street is that it will be 5 by the end of the week. Currently, the NZX50G is back to the levels of November 2019. The Bank of England has lowered the OCR from 0.75% to a record low of 0.25% in an attempt to stimulate the economy, this was an emergency rate cut. Economists are pencilling in a 0.25pb drop in the OCR by the RBNZ this month. The Government is to release a new economic stimulus “Business Support Package” next week. KiwiSaver members’ balances are also experiencing the negativity from the COVID-19 effects, especially the members in Growth funds, as these funds are weighted to the share market. Yovich & Co are advising that if clients’ goals and time frame have not changed then to stay the course. If at all concerned please contact your adviser. The short video in this link https://www.morningstar.com.au/Video/coronavirus-and-the-market-our-take/200330, provides investors with a graphical view of the benefits of staying invested. It supports and reinforces what Yovich & Co advisers are telling their clients.


Investment News

Heartland Bank

Launches a digital home loan service with a low 1 and 2 year fixed rate of 2.89% p.a. and 2.97% respectively. To be eligible for Heartland Home Loans, customers must be refinancing or purchasing a standalone house on a single section, have a deposit or equity of at least 20% and intend to live in the home. Share price rallied 3.09% on the back of this announcement. Current Share Price: $1.48, Gross dividend yield: 13.61%, PE Ratio: 10.51, Target Price: $1.84.


Is pleased to announce that it has entered into an exclusive licensing agreement with Agrifoods Cooperative for the production, distribution, sale and marketing of a2 Milk™ branded liquid milk for the Canadian market. The a2 Milk Company will provide Agrifoods with access to its IP and marketing assets as well as its proprietary systems and know-how relating to the sourcing and processing of a2 Milk™ and will work with Agrifoods and local Canadian dairy farmers to source milk locally. It is expected that a range of liquid milk products will be launched later this calendar year. Current Share Price: $15.77, PE Ratio: 36.20, Target Price: $16.38.

NZK Salmon

Announced that they have started to export to China again. Their focus is to export to the supermarket sector, and away from restaurants and fast food outlets. NZK Salmon’s theory is that while people are not out spending money in the fast food and restaurant sectors people still need to eat and get their food from supermarkets. The issue facing exports is obtaining decontaminated refrigerated containers. Current Share Price: $1.80, Gross dividend yield: 5.40%, PE Ratio: 14.65, Target Price: $2.25. 

AFT Pharmaceuticals

Reports it is seeing strong current demand for its cold and influenza related medicines as customers build stocks following the Covid-19 outbreak. Managing Director Dr Hartley Atkinson said: “As news of the Covid-19 outbreak emerged at the start of this year, we moved quickly to significantly build stocks of our key medicines in Australasia and we have been rewarded for this foresight.” The company has sold $1.2m of Vitamin C Lipo sachets in New Zealand over 3 days alone which represented the total previous 12 months sales. AFT supplies to hospitals across Australasia the injectable antibiotic Piptaz, which is used to treat pneumonia, a potential complication of the Covid-19 virus. There is a strong demand for this product and other injectable antibiotics as Australian based customers have increased stocks in preparation for the possibility of a more serious outbreak. AFT is expecting operating profit to be in the mid to upper end range of $18.8m to $21.8m for the FY2020. Current Share Price: $3.75, PE Ratio: 31.28.


Has seen China’s online sales growth in excess of 70% in the first 10 days of March; this has materially offset the impact of fewer shoppers in traditional brick and mortar retail sales. At the same time sales from large retail partners in North America are up 50%. The uplift in sales is due to a high demand for natural health products, such as Comvita’s Manuka honey. The NZ and Australia markets have been negatively affected as less foot traffic goes through airports (duty free stores). Current Share Price: $3.75.

Disclaimer: This publication has been prepared for your general information. While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken for any errors or omissions. This publication does not constitute financial or insurance product advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication. No part of this publication may be reproduced without prior written permission from our company. Disclosure statements relating to the financial advisers associated with this newsletter are available on request and free of charge.

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Nathanael McDonald

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