Yovich & Co. Market Update - 17 May 2021

May 17, 2021 | Commentary

Market Update 20210517

In summary, the NZX50G had 41 companies on the downside, and 9 companies were on the upside. The NZX50G had declined every trading day last week. The 2.84% was the greatest decline since Jan 15, 2021. The releasing of a2Milk’s revised FY21 outlook dragged the market down wiping $1.3b from the company’s market capitalisation. The NASDAQ Composite Index (follows 3,000 common equities listed on the Nasdaq stock exchange) and the DOW Jones also had a sell-off, as US data showed consumer prices surging 4.2% higher in April than a year ago (0.8% for April alone), the highest rate of US inflation since 2008. However, it comes from a low base. Towards the end of the week, lower commodity prices and a stall in retail sales saw the index claw back some losses. The NZ Performance of Manufacturing Index (PMI) for April remains above the 50 points mark at 58.4. While slightly lower than March reading at 63.6 (record), 58.4 is still above the PMI’s long-term average of 53.1.

Biggest Movers 20210517

Xero

Tax paid profit for the FY21 ending 31 March 2021 was up $16.4m at $19.8m, revenue increased 18% to $848.8m, total subscribers increased 20% to 2.74m, free cash flow was $56.9m with total available liquid resources rising to $1.3b. Product spend increased from 31.4% of operating revenue in FY20 to 36.7% in FY21. CEO Steve Vamos said: “As well as responding to our customers’ needs during the pandemic, we continued to execute our strategy, with strong revenue and subscriber growth, completion of a significant capital raise, and the acquisitions of Planday, Tickstar and Waddle.” Stock price dropped 13% on the back of the announcements as investors sold off the stock due to Xero’s EBITDA short-fall of analysts’ estimates. Xero is still to announce if/when a dividend will be considered.

Current Share Price: $118.45, Target Price: $123.90.

Warehouse Group

Third quarter sales ending 2 May 2021 was up 35% at $791.2m on previous corresponding period (pcp) and up 10.8% on the same quarter in FY19. Group sales for year to date ending 2 May was up 14.5% at $2.6b. Sales growth was underpinned by significant growth in Noel Leeming and Torpedo7, continuing their growth and turnaround performances, respectively, of the past year. Group gross profit margin was 35.5% for Q3 FY21, up 295 basis points on Q3 FY20. As a result of the strength of trading through to the end of Q3, and the expectation that Q4 FY21 Group sales will be similar to Q3 FY21. Adjusted NPAT for the full year is expected to exceed $160 million, subject to no material changes in trading conditions. gross margin levels are consistent with those achieved during the first half of the financial year.

Current Share Price: $3.60, Forecasted Gross Dividend Yield: 8.46%, Target Price: $3.82.

Goodman Property Trust

Tax paid profit for the full year ending 31 March was up at $631m, including significant investment property valuation gains of $560m. Total revenue was up 5.9% at $182m. Net tangible assets (NTA) increased from $1.727 to $2.125. Goodman has a substantial balance sheet capacity, with a loan to value ratio (LVR) of 19.2% and $339 million of available liquidity at 31 March 2021. A gross dividend of 1.56 cents has an ex-dividend date of 25 May and is payable 10 June 2021.   

Current Share Price: $2.26, Forecasted Gross Dividend Yield: 2.46%, Target Price: $2.13.

Investor Property

Tax paid profit for the full year ending 31 March 2021 was $161m up from $132m in FY2020. Largely attributed to the $139.3m net valuation gain across Investor’s portfolio. Total revenue up 16.10% at $55m, (NTA) increased from $1.73 to $2.08. Investor has acquired a parcel (3.5ha) of development land in North Canterbury for $10.5m, and has an agreement in principle with Woolworths NZ to construct a new Countdown supermarket on part of the land. Total funds committed to this acquisition is expected to be $31m including the cost of the land and of stage one development. Total yield on cost for stage 1 is expected to be 5.2%. Including the North Canterbury purchase and the unconditional acquisition of Countdown Petone (announced 10 May 2021) is $68.5m. Purchases are to be funded via available debt facilities bring total LVR to 31.2% leaving undrawn debt facilities at $128m. A gross dividend of 2.1 cents has an ex-dividend date of 25 May and is payable 2 June 2021.   
Current Share Price: $2.08, Forecasted Gross Dividend Yield: 3.68%, Target Price: $2.07.

Trust Power

Underlying tax paid profit for the full year ending 31 March 2021 was up 25% at $94.2m, retail earnings (EBITDAF) was up 33% at $47m. The introduction of mobile to the company’s bundled product offering and continued customer migration to higher value broadband plans seeing a significant increase in telco revenue. Generation delivered a solid (EBITDAF) of $154.1 million, in line with the previous year, despite extended dry sequences seeing inflows only reach 83 percent of average levels. Trust Power’s guidance for FY2022, assuming the retail business is held for the course of the year is group EBITDAF in the range of $200 - $225m and group CAPEX in the range of $43 – $59m. A gross dividend (including a special dividend) of 25.69 cents has an ex-dividend date of 10 June and is payable 18 June.
Current Share Price: $8.34, Forecasted Gross Dividend Yield: 4.06%, Target Price: $8.11.

SkyCity and Precinct Property Bonds

Allocations for the SkyCity 6-year bond (maturing 21 May 2027) is in the process of being allocated to investors that participated in the offer. The bond is listed on the NZX under the quotation code SKC050. The interest rate has been set at 3.02% p.a. the first payment is due 21 August 2021.

Precinct Property is also issuing a 6-year green bond (maturing 28 May 2027) and has a minimum interest rate of 2.85%. The offer is opening from 17 May 2021 and closes 12pm, Friday, 21 May 2021. Interest payments will be made semi-annually 28 May and 28 November of each year up to and including the maturity date.

 

 

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Nathanael McDonald



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