Yovich & Co. Market Update - 17 September 2020
Sep 17, 2020 | Commentary
17 September 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.
In summary, last week the NZ50G saw 29 companies on the downside, 5 remained unchanged and 16 on the upside. The continued sell off of tech stocks last week saw the S&P 500 and NASDAQ close the week down 2.51% and 4.06% respectively. The start of this week has seen slight rebound in the tech stocks. The markets are still reacting to news regarding the pandemic, positively on good news and negatively on bad news. NZ Alert levels are to remain at status quo for another week. The country is technically in a recession with two consecutive quarters of negative GDP growth. March quarter was a 1.6% drop and June’s quarter a 12.2% decline, the largest on record. On an annual basis GDP declined 2.0 percent over the year ended June 2020. All eyes are now on the September quarter results with economists and the RBNZ expecting at least a vigorous 12.2% rise from the June quarter. An unexpectedly strong GDT auction overnight with the auction recording a 3.6% gain. Again, both SEA and North Asia accounted for a majority of the purchases with this auction falling in the midst of the tariff free window for powders bound for China. WMP +3.2%, SMP +8.4%, AMF +2.0%, Butter -1.4% and Cheese +7.2%.
Advises that it expects its underlying net profit after tax for the financial year ending 30 June 2020 (FY20) will be approximately $20 million. This compares to Tourism Holdings’ previous guidance range of $17.5 - $19.5 million, as released on 25 June 2020. This underlying result excludes the impact from a number of one-off items, including the partial Togo exit undertaken in March 2020 which resulted in a one-off gain of $9.3M. Net debt as at 30 June was approximately $128m, compared to earlier expectation of net debt of approximately $133m. The FY20 financial results will be released 18 September 2020. Current Share Price: $2.15.
Has released a three-year strategy. The new strategy is focussed on Spark’s established markets of wireless, broadband and cloud, as well as three future growth markets – Internet of Things (IoT), digital health and sport. Spark is aiming for revenue increase of $140m to $150m from established markets and $80m to $90m from future markets over the next three years. A target of NZ$500m free cashflow by FY23 will provide dividend growth in FY24, until then, current dividends are forecasted at 25 cents per share any; increases to be funded from free cashflow.
Current Share Price: $4.68, EPS: $0.23, PE ratio: 20.15, Target price: $4.38, Rating: Neutral.
Air New Zealand
As physical distancing is no longer required on the flights, domestic operations are currently operating at 70 to 75% of (200,000 seats per week) pre-pandemic capacity. Directly after restrictions were lifted, Air NZ sold a record 110,000 seats in a day. This shows that New Zealanders are wanting to explore the great NZ.
Current Share Price: $1.36, Target price: $1.17.
Halted trading on Tuesday and will resume trading September 18, 2020. The halt is in preparation for a NZ$50m capital raise and its listing on the Australian Exchange as of September 16, 2020. The capital raise comprises a NZ$42m fully underwritten Placement and a NZ$8m Share Purchase Plan (SPP). This equates to NZ$50,000 per shareholder, EROAD can at its discretion accept oversubscriptions. The placement is being conducted at an offer price of NZ$3.90 per share (AU$3.59 per share), representing a 10.3% discount to the last close price on the NZX on 14 September 2020 of NZ$4.35, and 9.0% discount to the ten-day volume weighted average price on the NZX of NZ$4.29. The proceeds from the capital raise will be used to accelerate execution of EROAD’s growth strategies by investing in EROAD’s platform via product development and sales and marketing. The proceeds will also be used to improve balance sheet flexibility and support future growth initiatives, notwithstanding any impacts and general uncertainty of COVID-19. It is intended that the SPP will open on 23 September 2020 and close on 2 October 2020 at 5pm NZDT. The price for the SPP will be the lower of the price paid by investors in the placement or a 2.5% discount to the five day volume weighted average price of EROAD shares traded on the NZX during the five trading days up to, and including, the SPP’s closing date. Current Share Price: $4.35, Target price: $4.30, Rating: Neutral.
Tax paid profit for the FY20 ending 30 June was down 2.2% at $71.9m and total revenue was up 13.2% at $235.3m. Return on equity up 31 basis points to 11.4%, net operating income up 13.2% at $235m, earnings per share up 5.2% at 13.7 cents per share. A gross final dividend of 3.47 cents per share has an ex-dividend date of September 24 and is payable October 10, 2020. The final dividend brings total dividends for the FY20 to 9.72 cents per share, this is lower than last FY due to the restrictions imposed by the Reserve Bank of New Zealand. Future investment in digital technology will contribute to the banks goal of a digitally led financial services group “a fintech with a bank licence”. Heartland currently expects its NPAT for the year ending 30 June 2021 to be in the range of $83m to $85m.
Current Share Price: $1.26, EPS: $0.12, PE ratio: 10.10, Gross dividend yield: 7.66%, Target price: $1.33, Rating: Neutral.
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