Yovich & Co. Market Update - 3 March 2021
Mar 3, 2021 | Commentary
3 March 2021
In summary, the NZX50G had 32 companies on the downside, 2 remain unchanged and 16 companies were on the upside.
The NZ50G closed the week down 2.56%. Reserve Bank of NZ left the OCR unchanged last week at 0.25%, this is a positive sign that the NZ economy is preforming better than first expected. The market is pricing in higher interest rates (due to expected inflation). As interest rates rise, fixed interest bonds become less attractive. As an example, the 10-year government bond yield has climbed to above 2% last week, as bond yields increase their prices are reduced. The ASB Bank have increased the five-year term deposit rate by 75 basis points to 1.75 per cent. While other main banks remain at 0.9 per cent. If you require defensive assets with a resetting interest rate, please call your adviser. Over night the Global Dairy Trade increased 15% to an average price of US$4,231 per MT (a 17-year high), with 25,554 MT sold. Whole Milk Powder was the main driver up 21% to $4,364.
Tax paid profit for the 1HFY21 ending 31 December 2020 was down 35.1% at $120m, revenue was down 16% at $677m. The daigou/reseller channel have and are experiencing challenges from COVID-19 with a flow on impact to the cross-border e-commerce (CBEC) channel. The Board have taken steps taken to re-activate these channels. The China label infant nutrition performance has been strong with revenue growth of 45.2% an increase in market value share to 2.4%. During the transitional period of the Mataura Valley Milk (MVM), MVM will operate as a manufacturer of commodity powders and some base powders for nutritional products, prior to manufacturing predominantly consumer packaged nutritional products for a2Milk. The proposed transaction is subject to approval of the New Zealand Overseas Investment Office, with completion expected around the end of May 2021. The a2Milk’s share price reduced 16.08% to $9.69 on 25th February, providing a buying opportunity for brave investors.
Current Share Price: $10.02, Target Price: $10.66.
New Zealand King Salmon
A Statutory loss for the 1HFY21 ending 31 December 2020 was -$4.3m from $20.8m in 1HFY20, revenue of $82.4m was down from $84.2m due to lower average pricing of $23.90 per kg compared to $24.46 per kg. Sales volumes of 3,441 tonnes was equal to corresponding previous period. COVID-19 has meant re-establishing global sales while incurring higher costs with expensive air freight. Ora King salmon is now being sold via new channels including speciality seafood online, and an increased retail presence for our Regal smoked salmon. In addition to premium branded sales recovering, sufficient indications of positive demand will ensure clearance of all surplus fish by around mid-calendar Y21. The Blue Endeavour both volume and unit value drive is expecting the RMA hearings are expected for June 2021. If given the go ahead the earliest possible harvest would be mid-2024. Blue Endeavour is expected to generate an eventual production volume of 4,000 MT per site per 18-month cycle. No interim dividend is declared.
Current Share Price: $1.45, Target Price: $1.88.
Tax paid profit for the 1HFY21 ending 31 December 2020 was up 19% at $227m, customer growth continued up 13% in Australia and 6% in New Zealand. Customer numbers across New Zealand and Australia now exceed half a million and have grown 3% since June 2020. Lower NZ hydro generation and lower market prices in Australia negatively impacted EBITDAF from last year’s record level. Overall, generation volumes were down 7% on the prior period due to lower starting storage and lower inflows into catchments since October 2020. Net debt to EBITBAF is at 2.0x, total borrowings as at December 2020 was $1.679m. Meridian has undrawn bank facilities of $525m. The approval of Meridian’s Harapaki wind farm will be the second largest wind farm with a total of 41 turbines generating 176 megawatts. The build cost is expected to be $395m. A gross interim dividend of 7.61 cents has an ex-dividend date 30 March and is payable 16 April 2021.
Current Share Price: $5.73, Gross Dividend Yield: 4.36%, Target Price: $5.32
The Warehouse Group
The forecasted tax paid profit for the 1HFY21 ending 31 January 2021 was to exceed $90m before accounting for the impact of repaying the wage subsidy. A revised guidance is that the 1HFY21 will exceed $110m ($46.2m 1HFY20). Group CEO, Nick Grayston says, “Strong trading over the January period, combined with excellent operational performance and cost management, has delivered an improved result.”
Current Share Price: $3.30, Gross Dividend Yield: 2.10%, Target Price: $3.38.
Upcoming Dividend payments for NZ stocks
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