Yovich & Co. Market Update - 22 March 2021
Mar 22, 2021 | Commentary
22 March 2021
In summary, the NZX50G had 19 companies on the downside, 4 remained unchanged and 27 companies were on the upside. The Global Dairy Auction on 16 March was 3.8% lower at US$4,089 per MT, with 26,872 MT sold. This is the first decrease in price since 3 November 2020. Whole Milk Powder (the product most related to NZ dairy farmer’s pay-out) reduced by 6.2% to $4,083. NZ’s Gross domestic product (GDP) for the quarter ending 31 December was 1% lower (September quarter was up 13.9%) ending the 2020-year 2.9% lower. From the 7 contracting industries; construction, retail trade and accommodation industries were the greatest contributors to the decrease. While transport (postal and warehousing), business services and the arts were the positive contributors. The Westpac Consumer Confidence survey for March shows a slight softening and remains below average levels at 105.2 (vs 109.9 avg). Concerns around the outlook for the economy are starting to eat into confidence, while younger New Zealanders are increasingly worried about their financial situation. Federal Reserve of America left the OCR unchanged between 0.0% to 0.25%.
Tax paid profit for the FY21 ending January 2021 was up 17% at $73.2m, total sales up 7.47% at $701.8m, online sales show growth of 79.65%, which now make up 18.82% of total group sales. The massive disruption to trading from Covid-19
accelerated their strategic plans to optimise margins from 39.43% to 43.76%. These improvements range from; optimising pre-season planning and buying processes, use of enhanced data analytics to maximise their seasonal trading events, improving inventory flow to shelf for new and replenishment product, and reducing our level of clearance product.
A final gross dividend of 18.75 cents has an ex-dividend date 18 March and is payable 31 March 2021. Total gross dividend paid FY21 is 51.39 cents
Current Share Price: $5.80, Gross Dividend Yield: 3.59%, Target Price: $5.67.
NZ Rural Land
Is a newly incorporated company that has been formed for the purpose of acquiring rural land across the New Zealand agricultural sector. NZ Rural Land Company (NZRLC) intends to be a landlord only and will lease the rural land that it acquires to experienced tenants under long term leases. Tenants will undertake the on-land agricultural operations and pay rental to NZRLC. On 15 March NZRLC has a conditional agreement to acquire a 456 Ha dairy farm in Mokoreta, Southland for a price of $10.3m. The farm contains a 64 Bail Rotary Dairy Shed, a 13 Bay Purpose Built Calf Shed, 4 houses, and other ancillary buildings. Fortuna Group will lease the property once acquisition is settled (1 June 2021) for $515,667 p.a. implying a lease rate of 4.97%. The sole outstanding condition for the acquisition is the completion of a successful ‘Drop Test’ to ensure the integrity of the effluent pond on the property. This condition is to be confirmed on or before 26 March 2021.
Current Share Price: $1.19.
Tax paid profit for the 1HFY21 was up 44% at $418m (normalised profit), revenue up 5% at $9,915m, net debt down 3% at $5.6b. As part of Fonterra’s continuous review of its asset portfolio, Fonterra can advise farmers and unit holders that, along with the joint venture partner, it has decided to undertake a sales process for the JV farms in China. Sales of the farms to be completed this financial year and the JV farms to be completed this calendar year. Hurrell reaffirms the forecast Farmgate Milk Price range of $7.30 - $7.90 per kgMS and forecast normalised earnings guidance of 25-35 cents per share. The strong milk price is great for farmers. It’s good for New Zealand too – with a mid-point of $7.60 per kgMS, it would see us contribute more than $11.5 billion to the New Zealand economy. However, the increasing raw milk prices through the first half and now into the second half puts a lot of pressure on our sales margins and this will be seen through the second half of the year. A 5-cent dividend with an ex-dividend date 23 March is payable 15 April 2021.
Current Share Price: $5.07, Gross Dividend Yield: 2.90%, Target Price: $3.97.
New Zealand Refining
Released its operating details for January and February 2021, the simplified refinery operations processed 4.4m barrels before the refinery shutdown for the planned maintenance turnaround in the second half of February. Refinery to Auckland pipeline petrol and diesel volumes were similar to the same periods in 2019 and 2020, despite Auckland’s recent Alert Level 3 lockdown. Jet fuel demand remains impacted by COVID- 19 travel restrictions. Net debt at the end of February was $231.5 million, reflecting cash neutral operations after Strategic Review and restructuring costs paid of circa $5 million. In principle agreement has been reached with BP Oil New Zealand Limited on key commercial terms (non-binding and subject to conditions). Import terminal negotiations continue with Z Energy and Mobil.
Current Share Price: $0.47, Target Price: $0.90.
Is pleased to announce that it has successfully renegotiated the covenant waivers with its banking syndicate, allowing Z to recommence distributions to shareholders, starting with an expected full year dividend for FY21. The stronger than originally expected performance of the business, along with the reduction in debt from the proceeds of a successful equity raise, means that Z is in a much better financial position than was expected when the dividend waiver was announced. The final dividend for the FY21 year is expected to be in the range of 12 to 14 cents per share, in line with Z’s recently updated FY21 guidance and Z’s current distribution policy to pay ordinary dividends of 70-85% Operating Cashflow less Integrity Capex. It is expected the dividend will be declared and paid in May 2021, following the announcement of Z’s annual results for FY21.
Current Share Price: $2.91, Expected Gross Dividend Yield: 4.1%, Target Price: $4.20.
Is Australasia's leading online travel booking and expense management company for businesses. With its HQ in Auckland New Zealand, and with offices in Sydney Australia, Xi'an City China and Gurgaon India. Serko Online is an integrated Online Booking Tool used by administrators and travellers to book flights, accommodation and car hire from the broadest possible set of travel providers. The Online Booking Tool ensures that travel bookings comply with corporate travel management policy without limiting the users choice of travel provider. Mr Grafton, Serko’s CEO, said: “During March we have seen transaction volumes increase, with transactions month-to-date averaging 68% of the transaction volumes recorded for the same period in March 2019, which were unaffected by Covid-19. As previously announced, Serko has assumed in its forecasts that travel volumes will be transacting in the range of 40-70% of pre-Covid levels by March 2021, so we are pleased to see transactions currently tracking to the higher end of this range. Some of this uplift is reflective of continued onboarding of new customers in Australasia despite the effects of Covid.”
Current Share Price: $6.36.
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