Yovich & Co. Market Update - 23 September 2020
Sep 23, 2020 | Commentary
23 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 24 companies on the downside, 3 remained unchanged and 23 on the upside. Last week was another week of red. The well-known blue chip companies also drove the market lower. Bucking the trend was Serko as it enters the NZX50G this week. The Government announced that Auckland is to move to Alert Level 2 on Wednesday at 11.59pm, while the rest of NZ moves to Alert Level 1, reviews will take place 1 October 2020. The New Zealand dollar continues to appreciate against our major trading partners. News is still to be announced around the US economic stimulus, this along with the upcoming Presidential Election creates uncertainty and investors/markets do not like uncertainty. The Reserve Bank left the ORC unchanged at 0.25%, as expected by most economists and investors. Focus is now on the “Funding For Lending Programme” (FLP). This programme is designed to boost the economy and make it cheaper for the banks to borrow, in turn pushing down interest rates for retail borrowers.
Tax paid profit for the FY20 ending 30 June 2020 was $659m (up $1.3b) revenue up 5% at $20.9b. Net tangible assets per share increased from $2.01 to $2.77. Debt was reduced $1.1b to $4.7b, with a further $400-$500m to come off debt, from the Brazil and China Farms still to be sold. Earnings per share (EPS) achieved NZ24 cents per share (cps), near its upper end guidance of NZ15-25 cps. Forecasting EPS as follows FY21 NZ20-35, FY22 NZ40 and FY24 50 cps. Fonterra was not without COVID-19 challenges as its Food service businesses reported a loss in the second half. Despite this normalised EBIT for the Foodservice overall was up 14% on last year to $209m, which is a result of the strong performance by the Greater China business in the first half. A gross final dividend of 5 cents per share has an ex-dividend date of 24 September and is payable 15 October 2020. Current Share Price: $3.97, PE ratio: 9.35, Target price: $4.20, Rating: Neutral.
Announced on the 17 September, that its wholly owned subsidiary Cannasouth Plant Research New Zealand (CSPRL) has been granted the first of its required licence to cover the commercial activities of the group under the NZ Medicinal Cannabis scheme. The licence allows both medicinal cannabis cultivation and possession for manufacture with certain authorised activities. This allows Cannasouth to transition from a research and development company to a commercial medicinal cannabis company. Current Share Price: $1.07.
Tax paid profit for the FY20 ending 31 July 2020 was down at $8.1m, this included an $18m one-off transaction cost and $4.6m of restructuring costs. Underlying NPAT was down 44.5% at $31.5m. Revenue was up 48.7% at $802m, this included 9 months of Rip Curl sales. A $207m capital raise provided balance sheet strength and optionality for future growth, with closing net debt of $9.4 million. Total FY20 global sales were down 17.1% vs PCP (equivalent nine months of FY19). There has been an acceleration in online sales. Group online sales up 63% to $106.4m now comprising 15.7% of direct consumer sales, this is an increasing trend seen in the retail sector. No dividend for the FY20. Current Share Price: $1.19, Target price: $1.70, Rating: Outperform.
No surprise with the FY20 result with tax paid profit down 8% at $27.4m, EBIT down 22% at $48.6m. What was surprising was the USA vehicle sales business achieved 68% revenue growth in the last four months of FY20 compared to previous corresponding period (pcp). Tourism Holdings has strengthened its digital business with the acquisition of “ShareaCamper” in NZ and Australia and increasing its holding in Triptech to approximately 60%. Looking forward, the NZ business is focused on driving vehicle sale, servicing, and retail to target break even cash flow. Australia business will look at new vehicle purchases given better than planned vehicle sales in recent months, with expected vehicle sales demand to continue in 2021. Tourism Holdings is confident in the sales and rental markets for FY21 in the domestic USA market. Current Share Price: $2.22, EPS: $0.18, PE ratio: 11.90, Target price: $2.80, Rating: Neutral.
Turners Automotive Group
Have had their annual meeting, reporting a strong business rebound since lockdown and promising signs for the second half. Turners are targeting a FY21 NPBT to be in the range of $28m to $31m, if NPBT is achieved then an indicative full year gross dividend of 23.61 cps will be paid, spread over four payments. First quarter gross dividend of 5.55 cps has an ex-dividend date October 9 and is payable October 22, 2020. Current Share Price: $2.50, EPS: $0.24, PE ratio: 10.27, Gross dividend yield: 9.44%.
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