Yovich & Co. Market Update - 21 April 2021

Apr 21, 2021 | Commentary

21 April 2021

Market Update 2021 04 19

In summary, the NZX50G had 16 companies on the downside, 4 remained unchanged and 31 companies were on the upside. The Reserve Bank of NZ signalled that it would be a “prolonged period of time” before monetary policy changes, hence leaving the OCR unchanged at 0.25%. The CPI for the Q1 2021 rose 0.8%, higher prices for transport and housing (rents and building) led the lift. The annual inflation now sits at 1.5%, slightly higher than the 1.4% in the year to December 2020, but well below the target RBNZ’s target rate of 2%.  The quarantine-free travel bubble between NZ and Australia has started. Economists are expecting little impact to GDP as most travellers will be visiting family members. The Global Dairy Trade result was down 0.1% to US$4,110 per MT, quantity sold was 25,040 MT. Whole milk powder increased 0.4% to US$4,097. The BNZ Business NZ Performance of Services Index (PSI) for March was up 2.7 points at 52.4 (a PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining).  This was the highest result since July 2020, although still below the long-term average of 53.8.

Biggest Movers 2021 04 19

Investment News

Eroad

Has announced its Q4 update highlighting unit growth of 2,726 over the March quarter, with NZ accounting for 2,295, Australia 249 and North America 182. Additionally, Eroad has sold 1,054 units of its recently released Dashcam product. NZ growth was driven equally by new and existing clients and includes 500 units installed as part of the Toll contract announced in Q3 (1,000 units). North American unit sales reflect the challenging Covid environment, however the company has noted encouraging signs across the economy in the latter half of Q4 and noted two enterprise customer prospects in pilot totalling 1,500 units. Sales of the Dashcam units began in March 2021 (launched in October 2020) and the company expects the run rate achieved (1,054 units) to be maintained. Australian growth was 249 units with the company having secured its largest enterprise customer (Ventia) to date (2,500 units) in 1Q22. EROAD remains confident with its FY21 and FY22 guidance provided on 26 November 2020 (NPAT for Q1 2020 $1m) in the half year results release. For FY22, EROAD anticipates that the percentage revenue growth in FY22 will strengthen, but not be at the level experienced in FY20.

Current Share Price: $5.54, Rating: Neutral, Target Price: $5.49.

Seeka

Advises that 99.94% of its shareholders who voted at its Annual Shareholders Meeting on 16 April, supported the acquisition of OPAC to proceed. The shareholders overwhelmingly supported the transaction, far exceeding the 50% support required. There were now only OPAC grower support and banking thresholds to be achieved for the transaction to proceed on 4 May. The integration process will start from 4 May once the remaining hurdles are cleared.

Current Share Price: $5.25, Forecasted Gross Dividend Yield: 4.75%, Target Price: $4.65.

Air New Zealand

Along with the Crown, have agreed it would be appropriate to defer the equity capital raise from 30 June 2021 to 30 September (pending economic conditions) to allow time to assess evolving circumstances further. This is on the back of many fundamental considerations, namely the recent public announcements on vaccination programme timing, the potential implications for broader border re-openings, and the announcement of the Trans-Tasman quarantine free travel bubble. The existing $900m loan facility with the Crown is to be amended, increasing an extra $600m in additional liquidity. This brings the total facility to $1.5b.

Current Share Price: $1.72, Target Price: $1.50.

Meridian Energy

Third quarter operating statistics to March end 2021, implying EBITDA down circa NZ$72m on previous corresponding period at approximately NZ$130m. The downgrade was due to dry NZ conditions and softer Australian pricing. This should have been anticipated by the market and not come as a surprise. Meridian’s Q3 total inflows were 70% of historical average and 31% lower that Q3 last year. NZ retail sale volumes were 8.2% higher at a 0.1% lower average price.

Current Share Price: $5.66, Forecasted Gross Dividend Yield: 3.03%, Target Price: $5.30.

Tilt Renewables

Has amended the Scheme Implementation Agreement (‘SIA’) with Powering Australian Renewables (‘PowAR’) and Mercury NZ Limited (‘Mercury’) to increase the scheme consideration from NZ$7.80 per share to NZ$8.10 per share. The increased consideration of NZ$8.10 per share values Tilt Renewables at an equity value of NZ$3,070 million and an enterprise value of NZ$3,238 million. Tilt has agreed to not progress any competing proposals that may be presented. Tilt Renewables’ shareholders will have the opportunity to vote on the Scheme at a meeting likely to be held in July. Therefore, shareholders do not need to take any action at this time. If approved, the Scheme is expected to be implemented in August.  

Current Share Price: $7.97, Takeover Price: $8.10

Skellerup

Stronger than expected Q3 sales and earnings has caused Skellerup to increase its forecast full year FY21 net profit after tax (NPAT) to a range of $37 to $39 million. This compares to FY20 NPAT of $29.1 million. CEO David Mair said all businesses have continued to perform well. Sales of potable water products in the USA and demand for Skellerup’s flashing and plumbing products in all markets were robust in Q3, expectations are for continued solid demand in Q4. Sales of essential dairy consumable products were also better than expected during what is a normal seasonal low period. Now moving into the peak part of the NZ season where dairy farmers undertake maintenance so expect a strong Q4 result. Demand for Skellerup’s high-performance marine foam products continues to grow in all markets. The order book remains strong, particularly in the USA.

Current Share Price: $4.42, Forecasted Gross Dividend Yield: 3.92%, Target Price: $4.43.

 

 

 

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Nathanael McDonald



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