Yovich & Co. Market Update - 4 May 2021

May 4, 2021 | Commentary

4 May 2021

Market Update 20210504

In summary, the NZX50G had 19 companies on the downside, 5 remained unchanged and 26 companies were on the upside. The NZX50G closed slightly higher last week helped by Mainfreight, a well know blue chip company closing at a record high of $72.40, with 41,137 shares traded on Friday. The US has already started its reporting period, May is the start of the reporting period for NZ listed companies. Grant Roberston will release the Government’s 2021 Budget on May 20th. In the pre-budget announcement (May 4th) Mr Roberston stated unemployment is at 4.9% (well under the forecasted double digits), with employers mentioning it is difficult to find good employees. A low unemployment rate is a key driver of inflation.  The ANZ-Roy Morgan NZ Consumer Confidence lifted 4 points to 115 in April, the historical average is 120. The proportion of people who believe it is a good time to buy a major household item, a key retail indicator, lifted 4 points to +18. The report shows that consumers are expecting higher household inflation, this makes it easier for retailers to raise prices without fear of losing market share.  Travel to the Cook Islands is expected to open May 17, 2021, providing a boost for the Cook Island’s economy.

Biggest Movers 20210504

Investment News

New Zealand Rural Land

Has entered into conditional agreements with Van Leeuwen Group and associated entities (VLG) and their major lender to acquire fourteen large scale dairy assets in South Canterbury and North Otago totalling approximately 6,350 hectares. Under the transaction NZL will acquire 14 dairy assets for an aggregate purchase price of $114M (subject to final adjustments). NZL has also entered 3 separate lease agreements for the 14 dairy assets that will take effect on settlement of the transaction and have an aggregate annual rental of $5.796M. Transaction is due to settle 1 June 2021 if all conditions are satisfied. If transactions settle as expected this will complete the deployment of capital raised under the IPO late last year, marking significant progress towards NZL’s plan to become an owner of New Zealand rural land at scale. The completion of these acquisitions will see NZL begin paying dividends in FY2022 as was outlined in the Product Disclosure Statement (PDS) at the time of the IPO (90% to 95% of Adjusted Funds from Operations (AFFO)).

Current Share Price: $1.24.

Scales

Directors have declared a fully imputed final gross dividend for the 2020 Financial Year of 13.19 cents per share. Taking into account the interim dividend also 13.19 cents, paid in January 2021, total cash dividends for the 2020 Financial Year total 19.0 cents per share. The dividend is payable on 9 July 2021, with an ex-dividend date being 1 July 2021.

Current Share Price: $4.52, Forecasted Gross Dividend Yield: 5.76%, Target Price: $5.00.

Westpac Group

Tax paid profit for the 1HFY ending 31 March 2021 was up at $3,443m. The increase in Net Profit was largely due to large impairment charges incurred in First Half 2020 of $2,238 million, whereas First Half 2021 included an impairment benefit of $372 million. This added $1,827 million to the increase in NPAT. The NZ division cash earnings was up 98% at $583m, Mortgages increased 10% while deposits were up $5bn (7%), with growth primarily in household deposits. Earnings per share for the group increased to 97 cents per share, return on equity increased from 2.9% to 10.2%. Mr. King said after a challenging 2020, the Australian economy was now rebounding. "Most significantly, unemployment is falling and there are more people employed now than pre-Covid. A strong labour market will continue to support growth in the economy."  An interim dividend of 62.47 cents NZ (58 cents Australian), has a record date 13 May 2021 and is payable 25 June 2021

Current Share Price: AU$26.30, Forecasted Gross Dividend Yield: 4.37%, Target Price: $25.28.

Infratil

Announced that it has executed a conditional agreement to acquire between 50.1% and 60% of Pacific Radiology Group Limited (“Pacific Radiology”), a comprehensive Diagnostic Imaging business in New Zealand. The $867 million acquisition enterprise value is funded by $583 million of equity (Infratil’s share up to $350 million) with the balance funded from debt facilities. At the operating company level Pacific Radiology is the largest private diagnostic imaging service provider in New Zealand, operating 46 clinics in the South Island and lower North Island and employing 90 radiologists throughout New Zealand. Assuming those consents are given, completion is expected by 31 May 2021

Current Share Price: $7.17, Historical Gross Dividend Yield: 2.41%, Target Price: $7.70.

SkyCity

Has announced a $125m, 6 year fixed price bond offer maturing 21 May 2027. Payment dates are 21 February, May, August and November, the coupon rate will be announced 14 May. This Offer forms part of the SkyCity Group’s ongoing capital management strategy, enhancing diversity of sources of funding and lengthening the debt maturity profile. Participation in the New Zealand debt capital markets is a natural fit with SkyCity’s strong New Zealand presence. The net proceeds of the Offer will be used to reduce the drawings on SkyCity’s bank facilities. The opening date is May 10, 2021 and closing 12:00pm May 14, 2021.

Current Share Price: $3.60, Forecasted Gross Dividend Yield: 4.47%, Target Price: $3.38.

Seeka

Has advised that the amalgamation with Opotiki Packing and Cool Storage Limited [“OPAC”] has been successfully completed subject only to issue by the Companies Office of the Certificate of Amalgamation, following which OPAC will be a wholly owned subsidiary of Seeka and OPAC shareholders will all become shareholders in Seeka. All conditions of the $59m transaction were satisfied including; the overwhelming shareholder support of both companies; support of OPAC growers and banking support from Westpac. Seeka will issue 7,042,574 new shares to OPAC shareholders and assume $25.09m of OPAC debt. Seeka now moves into an integration phase to align the business processes of OPAC with Seeka. The immediate focus of management is to complete a safe and successful harvest.

Current Share Price: $5.50, Forecasted Gross Dividend Yield: 4.36%.

 

 

 

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Nathanael McDonald



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