Yovich & Co. Market Update - 6 July 2020
Jul 6, 2020 | Commentary
6 July 2020
New Zealand Equities
In summary, last week the NZ50G saw 9 companies on the downside, 5 remained unchanged and 36 on the upside. The NZ50G had a positive run last week with four of the five trading days seeing green. The NASDAQ was up 4.62% for the week, this is the fourth consecutive week of gains. Data out of USA showed that June nonfarm payroll jobs rose by 4.8m and unemployment dropped 2.2% to 11.1%, bucking forecasted expectation that another 500,000 jobs would be lost and the unemployment rate would rise to 15% (Bureau of Labour Statistics). NZ business confidence stabilised over June to -34% from -41.8% in May. Own activity outlook increased from -38.7% to -29.1%. This is approaching levels typically seen in a recession. The preliminary Business Outlook to July will be out mid week. The ANZ consumer Confidence survey bounced up 8 points to 104.5, which is positive but still below historical average. As investors try to navigate the post COVID-19 world, Yovich & Co are advising clients that if their goals and time frames have not changed, to then stay the investment course. If at all concerned please contact your adviser.
Announced a transformational reimbursement milestone. Novitas (Medicare Administrative Contractor for Pacific Edge’s USA) has notified Pacific Edge that tests performed on or after July 1, 2020 that are medically necessary will be reimbursed. Centres for Medicare and Medicaid Services (CMS) had already agreed on a US$750 price tag per test. CMS tests currently make up approximately 40% of Pacific Edge’s commercial tests in USA. This comes after the signing of a commercial agreement with Kaiser Permanente, one of the largest non-profit healthcare providers in the USA. Kaiser has over 12m members and annual operating revenue of $84.5b. It operates 39 hospitals, 714 medical offices and employs approximately 23,000 physicians. Shares jumped 10.37% to 55 cents from 27 cents on 3 July. Current Share Price: $0.55, Price/NTA: 28.10.
The market update on 2 July mentioned strong sales recovery but uncertainty remains over economic outlook. Total Group sales for the 10 months ended 31 May 2020 were 15.1% below the comparable period last financial year. However, since stores began reopening, retail store and online sales have generally exceeded management expectations, further strengthening Group liquidity. Each segment experienced over 20% of sales via the online platform. Rip Curl and Kathmandu same store sales were up 21% and 12.5% respectively. Based on current COVID-19 conditions globally, FY20 adjusted EBITDA is expected to be above $70 million with gross margin expected to be at the lower end of the 61% to 63% target range. Current Share Price: $1.25, EPS: $0.16, PE ratio: 7.79, Target Price: $1.55, Rating: Outperform.
Following on from earlier communications, Centuria has now made an official takeover offer. Centuria is willing to purchase the remaining Augusta shares to take holding to 100%. The consideration is for every one Augusta share the investor will receive NZ$0.22 and 0.392 Centuria Stapled Securities (CNI.asx). The Centuria shares will be allotted to investors and registered on the ASX. As at 6 July 2020 the takeover offer values Augusta’s shares at NZ$0.96 cents, based on the Centuria’s current share price being AU$1.76, and AUD/NZD at 0.9404. Current Share Price: $0.925.
Has received a non-binding indicative offer from Asia Pacific Village Group Limited (APVG) to purchase all Metlifecare shares at NZ$6 per share (down for $7 in the last agreement) under a Scheme of Arrangement (NBIO). APVG would require Metlifecare to fully settle the litigation in respect of the Scheme Implementation Agreement (SIA) dated 29 December 2019, upon entry into a new SIA. Metlifecare emphasises the NBIO is non-binding and there can be no assurance that a binding new SIA will be agreed. At time of writing the share price has moved 9.39% to $5.71 on the back of this news. Current Share Price: $5.76, Price/NTA: 0.82, EPS: $0.18, PE ratio: 31.20. Non-Binding Indicative price: $6.00
June metrics show that total market capitalisation has increased 7.7% to $200,191m this is 64.4% of GDP. Total equity transactions were up 230% year on year (YoY) to $1.3b. The average on market trade size reduced by 41.1% (YoY) to $2,483. This supports the theory that smaller retail investors are now in the market. Secondary capital market raises increased by 94.2% (YoY), 284 in June, this equated to $1,441m raised. Current Share Price: $1.41, EPS: $0.05, PE ratio: 26.40, Gross dividend yield: 6.01%.
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