Yovich & Co. Market Update - 25 August 2020

Aug 25, 2020 | Commentary

25 August 2020

New Zealand Equities

COVID-19 Message Yovich & Co provide an essential service so are able to provide ongoing advice regardless of the Alert Level and place trades on market as usual.

 Market update 2020-08-25

In summary, last week the NZ50G saw 6 companies on the downside, 1 remained unchanged and 44 on the upside. The NZX50G had a positive last week surpassing the losses from the initial investor response, from Auckland going into Alert Level 3. At time of writing the NZX50G is 153 points (1.26%) off its record highs reached 21 February 2020. The S&P500 and Nasdaq closed at record highs in the US on Friday at 3399.96 and 11326.21, respectively, after positive data in the U.S economy. Rising higher again Monday after news that the Trump administration may fast track vaccines and treatments of coronavirus.  A report by the Commission for Financial Capability (a NZ government agency) highlighted that “two-thirds of the 15,000 respondents did not think much or at all about how much money they would need in retirement. Even in the 51 to 60 years age group half thought “hardly at all” or just “a little” about how much money they would need”. This report shows that there is a great need for financial advice regarding retirement planning, Yovich & Co advisers are experts in providing retirement planning advice, so if you have any concerns please see your adviser. Auckland is to remain in Lockdown Alert Level 3 until 11:59pm this Sunday, a four-day extension. Auckland will then join the rest of NZ at Alert Level 2 until Sept 6 albeit at a much stricter Level 2 than before.


Biggest movers 2020-08-25

Investment News


Has caught the attention of, the NZX regulator on  Wednesday last week as share price increased from $0.56, (market opening price on 17 August 2020), to $0.74, being the market price at 10:31am on 19 August 2020. This represents an increase of 32.1%. This happens when no material information has been released to the market. The Directors responded with a comment that they were unaware of material information that should be released to the market. The Share price closed the week 42.32% up at 84 cents, the rally has continued this week. Current Share Price: $0.97.


Has applied to be listed on the Australian Stock Exchange (ASX) as a Foreign Exempt Listing and all being well Eroad intends to list in September 2020. “While it is EROAD’s intention to remain a New Zealand domiciled-business, committed to our New Zealand investor base, the Board believes that listing on the ASX is a natural progression for the company and a way of accessing a broader pool of institutional and retail investors who wish to share in EROAD’s success.” EROAD Chairman Graham Stuart said. Current Share Price: $4.14, NTA: $0.13, Target price: $4.39, Rating: Outperform.


Is the second-largest manufacturer of dairy rubberwear in the world. While the biggest growth opportunities come from international markets, New Zealand remains a key market. Tax paid profit for the FY20 ending 30 June 2020, was in line with previous corresponding period (pcp) at $29.1m, revenue was up 2% at $251m, earnings per share down 1% at 14.9c. The Agri division achieved record results, revenue up 5% at $93.6m and EBIT up 11% at $25.4m. The Industrial division had flat revenue on pcp and EBIT down 9% at $20.9m. The final gross dividend of 8.95 cents per share, with an ex-dividend date of 1 October and payable 16 October 2020. Current Share Price: $2.75, NTA: $0.65, Gross dividend yield: 5.65%, Target price: $2.80, Rating: Outperform.


Tax paid profit for the FY20 ending 30 June 2020 was down 25% at $47.3m, revenue up 3% at $630.9m. The completed acquisition of Big Chill Distribution Limited (Big Chill) was approved days into Alert Level 4. Due to a dramatic drop in Big Chill volume (-22%) the transaction was renegotiated to partly settle the transaction in shares, thus preserving cash.  Big Chill’s June revenue has delivered growth of 15% on FY19. The Express Package business was increasing revenue and margins through organic growth up to March 25. Full FY20 operating revenue was up 4.7% at $474m. During Alert Levels 4 to 2 Business to Customer (B2C) freight increased to 50% of volume, now reducing to 24% which is a 4% increase on FY19. COVID-19 has accelerated a trend that was already expected before the epidemic, and for which Freightways had been preparing for through the Pricing For Effort (PFE) programme. The Business Mail business had a reduction of 30% in mail volumes during April and May albeit the full year volume grew by 4%, due to gained market share and more frequent mail delivery service. The Information Management business storage revenue was solid through COVID-19 but the collection and retrieval of archives and media tapes reduced by 90%. Resulting in operating revenue falling 3.5% to NZ$158.7 million and EBITDA down 16% on a year ago at NZ$29.6 million.  Gearing as of 30 June 2020 is 38%. Due to macro-economic uncertainty the Board has decided that a final 2020 dividend will not be paid. Current Share Price: $7.30, EPS: $,0.30 PE ratio: 24.33. Target price: $7.60 Rating: Neutral.

Seeka Limited

Tax paid profit for the 6 months ending 30 June 2020 was up 54.9% at $18.3m, revenue up 5.2% at $178.6m and net tangible assets up at $5.13 from $4.50 in FY19. Net debt reduced by $18.8m to $129m. Late September 2020 should conclude the decision from the Foreign Investment Review Board in Australia regarding the sale and lease back of the three Australian kiwifruit orchards for AU$26.5m. These sales are expected to reduce debt and realise a gain on sale. Upper range forecasted net profit before tax for FY20 is expected to be $12m, an increase of 22% on FY19-while lower range forecast is $9m, down 9% on FY19.  A gross interim dividend of 13.89 cents has an ex-dividend date of 3 September and is payable 30 September 2020.   Current Share Price: $4.05, EPS: $,0.41, PE ratio: 9.77, Gross dividend yield: 4.08%. Target price: $4.15, Rating: Outperform.

EBOS Group

Is the largest and most diversified Australasian marketer, wholesaler and distributor of healthcare, medical and pharmaceutical products. It is also a leading marketer and distributor of recognised consumer products and animal care brands. Underlying net profit for the FY20 year ending 30 June 2020, was up 16.5% at AU$168m, record revenue up 26.5% at AU$8.8b, underlying earns per share up 10.6% at 104.2 cents. Net debt lowered by AU$38.6m to AU$327.2, giving a Net Debt:EBITDA ratio of 1.11x. The two main businesses of Ebos Group, Healthcare and Animal Care, had revenue growth of 27.4% and 11.3% respectively.  A final gross dividend of 43.89 cents per share with an ex-dividend date of 24 September is payable 9 October 2020.  The final dividend brings yearly gross dividend to 85.03 cents up 8.4% on FY19.  Current Share Price: $22.38, EPS: $,1.07, PE ratio: 20.89, Gross dividend yield: 3.80%. Target price: $22.50, Rating: Neutral.

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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