Yovich & Co. Market Update - 31 May 2021
May 31, 2021 | Commentary
In summary, the NZX50G had 19 companies on the downside, 5 remained unchanged and 26 companies were on the upside. Last week was a turnaround from the previous week with the only positive day for the NZ50G being Wednesday, with the index closing the week down 2.23%. Fonterra’s chief executive Miles Hurrell has announced the forecasted milk price for the 2021/2022 season with a mid-point of $8. Its previous highest ever opening price was $7 per kgMS. The mid-point of the forecast would see the co-operative contributing more than $12 billion to the economy next season. The RBNZ kept the OCR at 0.25% and all key policy settings remained unchanged. The RBNZ has nudged up its inflation forecast but sees inflation peaking at a lower rate and expects any pickup in pricing pressures to be largely transitory. The Current Remit sets out a flexible inflation targeting regime under which the Monetary Policy Statement (MPC) must set policies to achieve inflation between 1% and 3% with a focus on keeping future inflation near the 2% mid-point. Unlike the MPC’s price stability target, maximum sustainable employment is not defined by a single number. The RBNZ has forecasted the unemployment rate at 4.7% until 2023 (rate in 2019 and beginning of 2020 was 4.2% and 4.3% respectively).
Fisher & Paykel Healthcare
Tax paid profit for the FY ending 31 March 2021 was up 94% at $524m, operating revenue up 61% at $1.97b, revenue for the hospital (which makes up 76% company’s operating revenue) was up 94% at $1.5b. Managing Director and CEO Lewis Gradon said, “the unprecedented result was driven by our hospital product group, which includes Optiflow and Airvo systems used to deliver nasal high flow therapy. Sales of our hospital hardware and consumables have continued to track COVID-19 hospitalisation surges in countries around the world”. Margin for the year has decreased due to increased freight cost and high airfreight utilisation. With the uncertainty regarding vaccinations, lockdowns, COVID-19 variants, localised waves and return to stable hospitalisation rates around the world, the company is not providing guidance for the 2022 financial year. Investors expecting greater clarity and higher profits drove Fisher & Paykel’s share price down last week falling 14.86% in the last four days of trading. A gross dividend of 30.56 cents (a 42% increase on last year) has an ex-dividend date of 24 June and is payable 7 July 2021.
Current Share Price: $29.50, Forecasted Gross Dividend Yield: 1.50%, Target Price: $33.53.
The New Zealand Rural Land Company
Has announced a $44.3m rights offer by way of a 2 for 3 pro-rata renounceable rights offer. The proceeds will be used to reduce debt and provide further cash for acquisitions as NZL looks to continue its growth as a landowner in the New Zealand rural sector. Eligible shareholders (shares purchased before 2 June 2021) have the right to participate in the offer at $1.10 per share. This represents an 8.64% discount to the 10-day VWAP1 of $1.2041. The offer opens June 4 2021, when documents will be sent to eligible shareholders. Rights will cease trading 17 June 2021, with offer closing 23 June 2021. As at pre-trade 1 June The NZ Rural Land Company is in a trading halt and will remain in place until the earlier of: An announcement made by NZL confirming that all of the property acquisitions have settled; or market open on Wednesday 2 June 2021.
Current Share Price: $1.13.
Tax paid profit for the FY21 ending 31 March was up 18.2% at $188m, revenue up 14.5% at $3.54b, net tangible assets per share up from $6.62 to $8.27. Operating cash flows were $376m, up from $300m in the prior year, reflecting increased profitability and acceptable cash collection. Current debt facilities total $477m, of which $269m remained undrawn. Net debt at 31 March 2021, was $102m, down from $157m at 31 March 2020, a decrease of $55m. Gearing ratios continued to improve, at 8.4% compared to 14.0% at 31 March 2020. Businesses outside New Zealand now contribute over 76% of our sales revenues and over 63% of net profit. Mainfreight is a global business capable of providing supply chain logistics services for our customers around the world, competing with significantly larger global competitors. The first seven weeks of trading for the FY2022, have seen similar activity levels as those of the past six months. Thus, providing confidence of delivering further improved results in the near term. A gross dividend of 62.5 cents with an ex-dividend of 8 July is payable 16 July 2021.
Current Share Price: $75.13, Forecasted Gross Dividend Yield: 0.93%, Target Price: $70.89.
Stride Property Group
Tax paid profit for FY21 was $132m in-line with FY20, NTA increased from $1.91 to $2.15 per share, Stride’s portfolio increased 4.2% to $1.1b, management fee income increased from $18.3m to $25.1m, with funds under management at $3b. Loan to value ratio of 26.8% as at 31 March rose to 39.7% following acquisition of 46 Sale Street Auckland. A final gross dividend of 3.44 cents per share has an ex-dividend date of 3 June and is payable 14 June 2021.
Current Share Price: $2.37, Forecasted Gross Dividend Yield: 4.30%, Target Price: $2.45.
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