Yovich & Co. Market Update - 4 February 2021

Feb 4, 2021 | Commentary

4 February 2021

Market update 2021-02-04

 

In summary, the NZX50G had 28 companies on the downside, 2 remain unchanged and 20 companies were on the upside. Another positive GDT result on 2 February 2021 saw prices increase 1.8%, the sixth consecutive positive result. Average price per tonne was US$3,614 and 28,707 metric tonnes (MT) sold, butter milk powder price increased the greatest up 10.70%.  On the back of the GDT result, Fonterra has increased the farm gate milk price range to $6.90 - $7.50 per milk solid for the 20/21 season. The Reserve Bank of Australia kept its cash rate on hold at 0.1 percent until 2024, meeting market expectations. It also decided to purchase an additional A$100 billion of bonds.  New Zealand’s central bank, meanwhile, tapered its bond-buying programme, opting to buy $570 million of government bonds this week, nearly $100 million less than last. Data from Stats NZ showed that the NZ’s unemployment rate for quarter ending December 2020 fell to 4.9%, from 5.3% in the quarter ending September. With lower unemployment than forecasted, the BNZ is now predicting interest rates to increase from May 2022 and ANZ chief economist Sharon Zollner to abandon her prediction of another OCR cut. Zollner said: "We no longer expect the RBNZ to cut the OCR again this cycle." She added: "We are inclined to take this at face value and conclude that conditions are unambiguously better than previously feared."

 

Biggest movers 2021-02-04

 

Investment News

 

The Colonial Motor Company

Owns and operates twelve Ford Dealerships with each holding a franchise in its own right from the Ford Motor Company of New Zealand Ltd. Seven of these Dealerships also have Mazda franchises. All Dealerships sell new and used vehicles as well as providing parts and service. Recent diversification has introduced other brands and motorcycles to the mix of products. The Company is involved in the distribution and retailing of Kenworth and DAF heavy duty trucks, and in the retailing of New Holland, Kubota and Case IH tractors and equipment in Southland.  Colonial Motor’s philosophy is to own the properties from which its subsidiaries operate. Land and buildings continue to make up a significant proportion of CMO's assets. The company updated its guidance with early results for the six months to 31 December indicating a revenue increase of over 4% almost all of which is attributable to a much stronger December than the previous year. Trading Profit after tax for the six months is expected to be materially ahead of the same period in 2019 and 2018. The Half Year Report is expected to be released by the 18th of February. Share price has responded positively to this news, up 3.27%.

Current Share Price: $8.88, Gross Yield: 4.97%.

Carbon Fund

Is a managed investment scheme with the aim to provide investors with a total return exposure to the price of carbon credits. The Fund has the ability to buy carbon credits in emissions trading schemes in New Zealand and offshore. As a result, the Fund may also provide exposure to the price of carbon offshore. Carbon Fund’s share price has been increasing as more investors look for Environmental, Social and Governance (ESG) investments. A result from The Climate Change Commission Report released on Sunday saw the fund’s share price increase 3.6%.

Current Share Price: $1.53.

Restaurant Brands

Total sales for the year to December 2020 were $892.4 million, an increase of 2.1% across the businesses it operated for the full year and up 8.4% when including four months trading from its recent California acquisition. For the fourth quarter of the financial year (three months to 31 December 2020) total sales were $269.1 million, an increase of $54.5 million driven primarily by the inclusion of trading for the California acquisition. Total sales for the fourth quarter after excluding the California acquisition were up 7.4% on the equivalent period last year due to strong same store sales growth, particularly in Hawaii and New Zealand. Trading results for the year ending 31 December 2020 will be released on 25 February 2021. Current Share Price: $11.75, Target Price: $12.75.

Sky Network Television

Announces a further increase in its earnings guidance for the 2021 financial year (FY21), building on the positive momentum outlined in its November guidance update. The increased revenue and profit expectations for FY21 are due to further one-off cost savings, a second half management reforecast, ongoing cost control and continued improvement in satellite and streaming revenues.

 SKT.nz guidance 2021-02-04

Sky’s revised guidance includes the impact of the proposed sale of OSB assets to NEP New Zealand Limited, announced on 12 August 2020 and currently awaiting Commerce Commission approval. While timing remains uncertain, Sky is confident it will complete the sale process. Share price increased 6.25% on the back of this announcement.

Current Share Price: $0.18, Target Price: $0.18.

Tilt Renewables

Advises that it has received a number of nonā€binding indicative proposals to acquire the company, following the strategic review process being conducted by Tilt Renewables major shareholder, Infratil Limited (Infratil). The Board of Tilt Renewables has reviewed the proposals and decided to grant a number of parties access to due diligence material to enable these parties to prepare binding proposals. There is no certainty that Tilt Renewables will receive binding proposals or that any proposals received will be recommended to shareholders by the Board.

Current Share Price: $6.41.

The Warehouse Group

Announced its intention to pay a fully imputed special dividend of 5 cents per share. In recent trading updates the Group has highlighted stronger than expected trading performance, in particular over the Christmas trading period. A decision on an interim dividend has yet to be made and will be announced with the H1 result on 25 March. The Warehouse Group reaffirms guidance for the half year result of Adjusted Net Profit After Tax (NPAT) exceeding $90m, before accounting for the impact of repaying the wage subsidy. Share price has responded positively to this announcement, up 4.5%.

Current Share Price: $3.16, Target Price: $3.00.

 

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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