Yovich & Co. Market Update - 4 August 2020

Aug 3, 2020 | Commentary

4 August 2020

New Zealand Equities

 

Market update 2020-08-04

 

In summary, last week the NZ50G saw 24 companies on the downside, 5 remained unchanged and 21 on the upside.  The NZX50G finished the month up 2.42% on last month and 8% on July 2019. July was the lowest of the four consecutive monthly increases since March, April the greatest at 7.51%. The end of June closed the Q2 with an increase of 18.89% on Q1 end. The markets are still very volatile, reacting negatively to daily new COVID-19 cases and positively to government news around stimulus packages. Reporting season has started, August will see the bulk of listed companies’ earnings released. Focus is on whether companies will meet their projected net profit after tax targets, balance sheet details and outlook. Current sectors that Yovich & Co believe will help investors achieve their long-term goals in the current economic climate are: Agriculture, Transport, Financial, Gentailers and Communication. Melbourne and Victoria are seeing new COVID-19 cases increase, this causing state governments to order new lock down restrictions. Melbourne entered stage four restrictions from 6pm on Sunday 2 August, a state-wide mandatory mask policy is in effect from midnight Sunday 2 August, and regional Victoria will enter stage three restrictions from Thursday 6 August.

 

Biggest movers 2020-08-04

Investment News

AFT Pharmaceuticals

Has signed an exclusive Maxigesic IV® licensing and supply agreement for Bulgaria, Cyprus, the Czech Republic, Hungary, Romania and Slovakia, countries with a combined population of more than 53 million. Following on from the registration of Maxigesic IV® in Australia and New Zealand in mid-2019, AFT has now licensed the medication in more than 90 countries. Meanwhile, the tablet form of Maxigesic has been licensed in more than 125 countries. Current Share Price: $,4.57, EPS: $,0.13 PE ratio: 35.05.

Kiwi Property

Released its sales data for June, the first full month of trading since New Zealand exited lockdown. Adjusted sales at the Company’s shopping centre portfolio were up 7.5% on the same period last year, while total June sales increased 0.5%. Sylvia Park in Auckland, The Base in Hamilton and The Plaza in Palmerston performed particularly well, recording strong sales during the month. Current Share Price: $1.06, Price/NTA: 0.84.

Briscoe Group

Has released its half year ending 26 July 2020 financial results. Total group sales down 3.49% at $292.4m while online group sales grew 22% (due to COVID-19). Second quarter results ending 26 July 2020 were pleasing with group sales up 28.24% at $195.4m (compared to $152.3m in Q2 2019), all sectors showed positive results. Current Share Price: $3.50, Price/NTA: 2.52, EPS: $0.28, PE ratio: 12.42, Gross dividend yield: 3.37%.

Scales

Is a diversified agribusiness group. It comprises three operating divisions Horticulture (the major apple producer in NZ), Food Ingredients and Logistics. The company’s diverse spread of activities gives Scales broad exposure to New Zealand’s agribusiness sector. Underlying Net Profit for the twelve months to 31 December 2020 is now expected to be at the bottom end of the guidance range, of between $30m and $36m. This weaker result comes from the Horticulture division partly offset by some strength in the Food Ingredients. Scales matched 2018 recorded harvest levels of 5.1m TCEs equivalent. The Asian markets have suffered from domestic supply issues created by COVID-19. This has been the result of the timing and impact of COVID-19 creating a phasing issue whereby the domestic supply of apples was pushed further into the New Zealand selling window, resulting in non-normal surplus supply (compounded by a strong China crop).  Assuming no further downturn in global market conditions, we understand the disruption caused by COVID-19 in key Asian markets is likely to be transitory in nature, with sales rates in future years expected to revert to historical levels as the China domestic crop reverts to more normal flows.  Current Share Price: $5.00, Price/NTA: 2.28, EPS: $0.83, PE ratio: 5.99, Gross dividend yield: 5.29%, Target price: $4.90

Mainfreight

Share price increased 7.57% on the back of the Shareholders meeting on 30 July 2020. For the first 17 weeks of FY21 Mainfreight has reported revenue growth of 5% (ex-FX) and profit before tax (PBT) growth of 18% (ex-FX). Importantly, this trading period includes almost all the impact of lockdown in the core New Zealand market. Two of the three divisions increased revenue: transport, warehousing, 8.6% and 10.1% respectively and air & ocean down 1.8%. Geographically the Americas had lower revenue down 3% while all other regions had positive growth. Capital expenditure in FY2020 was $155m with $112m spent on land and buildings. Expected capital spend for FY21 is $80m with $120m deferred. With current net debt of $120m and a gearing ratio at 11.1% Mainfreight has a very strong balance sheet. Jarden’s research forecasts NPBT to increase by 25% (FY21) ,14% (FY22), 12% (FY23), and have increased their target price to $45.00. Current Share Price: $46.85, Price/NTA: 6.42, EPS: $1.58, PE ratio: 29.63, Gross dividend yield: 1.75%, Target price: $45.

Eroad

Has released its first quarter update ending 30 June 2020. EROAD’s New Zealand sales have returned to near normal growth levels across both the Small and Medium (SMB) and Enterprise growth segments. In NZ during May and June EROAD experienced near normal growth levels across both the SMB and Enterprise growth segments. In July EROAD launched its new EROAD Day Logbook which supports drivers to keep on top of their work or rest hours, through either Android or iOS devices. Eroad has added 2,326 units in Q1, bringing total contracted units to 118,814. Current Share Price: $3.55.

Aroa Biosurgery

In a recent newsletter Yovich & Co mentioned the IPO of Aroa Biosurgery. Since listing on 23 July, the share price has responded positively. Investors who want exposure to a NZ biosurgery company can now purchase shares in ARX.asx. As of 30 July Aroa secured FDA clearance for Symphony. Symphony is designed to reduce the time to wound closure, particularly where patients have severely impaired healing or are compromised by other diseases. The FDA clearance increases Aroa’s total addressable market from $1.5b to 2.5b in the US. Current Share Price: $1.41.

About Aroa Biosurgery: Aroa Biosurgery is a soft-tissue regeneration company that develops, manufactures, sells and distributes medical and surgical products to improve healing in complex wounds and soft tissue reconstruction. Committed to ‘unlocking regenerative healing for everybody’, its products are developed from the Company’s proprietary Endoform® technology platform, a novel extracellular matrix biomaterial derived from ovine (sheep) forestomach. Clinically proven with peer reviewed publications, Aroa’s products have been used in more than four million procedures to date, with distribution into its key market of the United States by Appulse and Tela Bio. Founded in 2008, Aroa is headquartered in Auckland, New Zealand and is listed on the Australian Securities Exchange (ASX:ARX).  

 

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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