Yovich & Co. Market Update - 30 March 2021

Mar 30, 2021 | Commentary

30 March 2021

Market Update 20210330

In summary, the NZX50G had 26 companies on the downside, 2 remained unchanged and 22 companies were on the upside. The index closed the week 1.33% lower. On the back of the Government’s new housing policies the NZ dollar fell against the USD and AUD. A year on from New Zealand’s country wide lockdown, the share market, housing and the economy has surprised all economists (most likely everyone else as well). The NZX50 increased 54% from 23 March 2020 to 8 January 2021 and currently up 42% as at 26 March 2021, and an increase of 25.97%-year rolling. House price inflation up 22% year on year (ASB Economic Weekly).    

Biggest Movers 20210330

Investment News

Seeka

Advised that it has entered into an amalgamation agreement which offers the shareholders of the leading regional integrated kiwifruit business Opotiki Packing and Cool Storage Limited (“OPAC”) new shares in Seeka Limited. The OPAC shareholders will receive new shares in Seeka at the ratio of 1.4833 Seeka shares for every 1 OPAC share held, valuing the net assets of OPAC at $33.94m assuming all OPAC shareholders accept the offer. Seeka will assume approximately $25.06m of debt as part of the acquisition, bringing the total transaction value to $59.00m. The combined Company will have the capability to grow and handle fruit in all of New Zealand’s major kiwifruit growing regions. The offer is subject to a number of conditions, including shareholder approval.

Current Share Price: $5.05, Forecasted Gross Dividend Yield: 7.19%, Target Price: $4.65.

Telstra Corporation

Board has resolved to delist from the Main Board of NZX Limited (“NZX”) and move to a sole listing on the Australian Securities Exchange (“ASX”). NZ RegCo has approved the delisting, subject to Telstra meeting certain conditions. The trading of Telstra shares on NZX will cease at the close of business on Wednesday 16 June 2021. NZX shares will be transferred to the ASX, and there will be no NZX trading, on Thursday 17 June and Friday 18 June 2021. Telstra will be delisted from NZX from the close of business on Friday 18 June 2021. The sole listing on the ASX will commence at the opening of the next trading day on Monday 21 June 2021. Shareholders who hold Telstra shares on NZX will automatically be transferred to the ASX and no action is required from shareholders to facilitate this process. New Zealand shareholders will still be able to trade Telstra shares through Yovich & Co.

Current Share Price: AU$3.73, Forecasted Gross Dividend Yield: 4.75%, Target Price: AU$3.62.

Oceania Healthcare

Retail offer opened 25 March (closing 5pm 12 April 2021) for $20m with the ability to accept oversubscriptions, the retail offer is part of Oceania’s $100m equity raising. Under the retail offer each shareholder recorded in Oceania’s share register as at 7pm on the record date of 22 March 2021 can subscribe up to NZ$50,000 shares at a price of $1.30 per share, or at a 2.5% discount in the five-day volume weighted average price (VWAP). The equity raise (assuming $100m is raised) represents approximately 11.5% of Oceania’s market capitalisation.

Current Share Price: $1.33, Forecasted Gross Dividend Yield: 2.86%, Target Price: $1.60, Rating: Outperform.

Synlait Milk

Tax paid profit for the 1H FY21 ending 31 January was down 76% at $6.4m, revenue up 19% at $664.2m. Synlait is continuing to experience significant uncertainty and volatility within its business. This is due to ongoing uncertainty in The a2 Milk Company’s expected demand for the remainder of FY21 and FY22. Synlait does not currently have sufficient confidence to forecast when this recovery will occur. The resulting impact of this on Synlait’s business is two-fold; demand for consumer-packaged infant formula remains uncertain, which in turn impacts  infant based powder production and asset use. Board and management have considered the above factors and how they will impact Synlait’s FY21 profitability. There is still a range of scenarios contributing to the company’s profitability, and our current outlook suggests a broadly breakeven FY21 NPAT result.

Current Share Price: $3.40, Target Price: $4.61, Rating: Neutral.

Kathmandu

Underlying tax paid profit for the 1H FY21 ending 31 January 2021, was up 32.8% at $23.1m, revenue up 12.9% at $410.7m. A robust balance sheet with $10.1m net dept. Kathmandu will resume dividend payments with a interim dividend of 2 cents per share payable 4 June 2021, with an ex-dividend date of 20 May 2021.  Looking forward Kathmandu is focused on the strong execution of Kathmandu’s winter season in Australasia. The Board expects to see benefits from synergies and cost-out initiatives across the Group, which are expected to deliver around $15 million of annual savings in FY21. Some key initiatives planned for the second half are to further connect with their customers to drive increased sales, with implementing a loyalty program at Rip Curl, and Oboz is launching a direct-to-consumer online store. Kathmandu continues to invest in personalisation and data analytics capability, all with the aim of driving best in class customer interactions.

Current Share Price: $1.38, Forecasted Gross Dividend Yield: 3.62%, Target Price: $1.65, Rating: Buy.

Precinct Properties

Are pleased to announce that they have reached an agreement with the Manager, AMP Haumi Management Limited, to terminate the Management Services Agreement and internalise the management of Precinct. The transaction is expected to provide cost savings of $14.6 million per annum and be 6.0% accretive to adjusted funds from operations (AFFO) per share on a pro forma basis which assumes that current development projects are complete. Importantly, Precinct will retain key management personnel and the transaction positions Precinct is to deliver on the next phase of its strategy. The net cost for Precinct to internalise management is expected to be $145m and settlement will occur 31 March 2021.

Current Share Price: $1.70, Gross Dividend Yield: 3.76%, Forecasted Target Price: $1.73, Rating: Outperform.

Transpower

Is a state-owned enterprise (‘SOE’) and is 100% owned by the New Zealand Crown. Transpower is the owner and operator of New Zealand’s only national high voltage electricity transmission system (‘the National Grid’) and the provider of co-ordination and security (‘Systems Operator’) functions for the electricity system. Transpower has announced (29 March 2021) that they are offering up to $150m of unsecured, unsubordinated fixed rate bonds (TRP080) with a maturity date 8 April 2026. The indicative issuer margin (above the 5-year swap rate) is between 0.44 to 0.49%, this providing an indicative yield of 1.45 to 1.50%.  Payments are semi-annual October and April, closing date is 1pm Wednesday 31 March 2021. If you are requiring defensive assets, Infratil bonds yielding around 3.3% are a better alternative.

 

 

 

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Nathanael McDonald



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