Yovich & Co. Market Update - 25 May 2021

May 25, 2021 | Commentary

Market Update 20210525

In summary, the NZX50G had 19 companies on the downside, 2 remained unchanged and 29 companies were on the upside.  Last week, Wednesday was the only down day for the NZ50G, with the index closing the week up 0.74%. On the other side of the coin, the NASDAQ only had one positive trading day. Overnight the NASDAQ started the week on a positive note closing up 1.41%. The Dairy Global Trade closed -0.2% at US$4,150 with 21,140 metric tonnes (MT) sold, once again the auction was dominated by Chinese participants. The auction was the fifth consecutive decline (more like a sideways movement) since 16 March 2021, all products saw little movement either way. The Fonterra’s opening 2021/2022 milk price is out soon, with bank economists predicting a range of $7.50 to $8.20. NZ is waiting the announcement from the RBNZ this Wednesday with most experts expecting no change in the OCR as there is still so much uncertainty globally. 

Biggest Movers 20210525

Investment News

Ryman

Tax paid profit for the FY21 ending 31 March 2021 was up at $423m mainly from movement of investment properties, underlying profit (calculation of underlying profit aims to eliminate one-off gains or losses that are unlikely to reoccur and are not part of a company’s day to day business operations), was down 7.3% at $224m, fair value movement of investment properties were up $416m. Total assets increased 19.5% to $9.17b, with net assets of $2.83b up 23%. Net debt is currently at $2,254m and expected to grow to $2,841m by 2024, while shareholders equity is currently $2,829m expecting to be $3,706m by 2024. Ryman’s development pipeline of 25 new villages would provide homes for more than 6,800 residents and would generate anticipated capital proceeds of $5.3 billion with recurring income of $420 million, subject to market conditions and consenting outcomes. A gross dividend payment of 13.6 cents has an ex-dividend date of 3 June and is payable 18 June 2021.

Current Share Price: $12.88, Forecasted Gross Dividend Yield: 2.31%, Target Price: $13.28.

Arvida Group

Tax paid profit for the FY21 ending 31 March 2021 was up at $131m, underlying profit in line with FY20 at $51.9m, total assets was up $275m at $2.2b, gearing ratio is maintained at 30%. Total gross proceeds from new (137) sale and resale unit (243) settlements increased to $227.4 million, up 13% on the prior year. Settlements in the second half were up 87% when compared to the first half. A gross dividend of 1.5 cents per share has an ex-dividend date of 2 June and is payable 10 June 2021. Dividends are payable quarterly, March, June, September and December.  Arvida is reducing its dividend payout range from 50-70% to 40-60% of underlying profit, while also putting in place a dividend reinvestment plan (DRP). The intention behind these changes is to support the company's capital base as it looks to recycle cash into greenfield development opportunities.

Current Share Price: $1.84, Forecasted Gross Dividend Yield: 2.91%, Target Price: $1.98.

Infratil

Is making a new offer of $50m (with the right to take up a further $50m in oversubscriptions) Infratil Infrastructure Bonds. The infrastructure bond maturing 15 December 2027 provides an annual 3.60% coupon/interest rate, paid quarterly. Under the Exchange Offer, IFT220 bond holders have the option (subject to availability) to exchange each IFT220 bond for one IFT310 bond. The exchange offer opens 25 May 2021, closing 10 June 2021, the general offer closes 30 June 2021. In both instances Infratil may elect to close the offer earlier. The new bond (IFT310) will commence trading 16 June 2021. Alternatively, holders of IFT220 bonds who do not wish to participate in the Exchange Offer will have their IFT220 bonds redeemed on Tuesday, 15 June 2021 in accordance with the terms and conditions of the IFT220 bonds.

Current Share Price: $7.60, Forecasted Gross Dividend Yield: 2.43%, Target Price: $7.87.

The New Zealand Refining Company

Has today reached in-principle agreement with Z Energy Limited on key commercial terms including price for the potential future import terminal operation at Marsden Point. The agreement reached with Refining NZ’s largest customer follows a similar agreement reached with BP in February 2021. The key terms of the in-principle agreement reached with Z Energy which would apply across all customers include:

·         An initial term of 10 years, with the option for customers to extend,

·         A combination of shared annual fixed access fees and variable throughput fees linked to actual volumes – which Refining NZ estimates would result in average fees (across all customers and on a real basis) of c.$95m p.a. during the initial term, and includes a take or-pay commitment of $100m p.a. for the first 36 months, $90m p.a. for the subsequent 36 months, and then stepping down for subsequent periods,

·         Provision for third party access to unutilized Refinery to Auckland Pipeline (RAP) capacity.

Based on the in-principle agreements reached with BP and Z Energy, the Company will now prepare for a shareholder vote both on the major transaction and change in business model, and on the proposed customer agreements as a related party transaction. On current estimates, a final investment decision in Q3 2021 would enable a conversion to occur by mid-2022.

Current Share Price: $0.61, Target Price: $0.90.

Turners Automotive Group

Tax paid profit for the FY21 ending 31 March 2021 was up 28% at $26.9m, underlying NPBT was up 19% at $34.3m, revenue was down 11% at $296.5m (COVID-19 disruptions reducing the year to a 10-month trading period). Only Credit was down on last year’s result with several corporate and bank customers reluctant to pursue debt aggressively over the Covid-19 period. Demonstrating the benefits of the Group’s diversified annuity businesses, profit rose 50% in Insurance, 30% in Finance and 11% in Automotive Retail, contributing to strong and sustainable yield. Profit in the Credit Management business was down 22%. The four key areas underpinning earnings growth are retail optimisation, vehicle purchasing decision-making, growing premium lending and continued investment in digital. A gross dividend of 8.3 cents per share has an ex-dividend date of 14 July and is payable 28 July 2021. 

Current Share Price: $3.97, Forecasted Gross Dividend Yield: 4.63%, Target Price: $4.01.

 

 

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Nathanael McDonald



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