Yovich & Co. Market Update - 10 August 2021

Aug 10, 2021 | Commentary

Market Update 20210810

In summary, the NZX50G had 21 companies on the downside, 1 remained unchanged and 29 companies were on the upside. The NZX50G index closed the week on a high note up 0.12 points or 1.39%, the highest since early June 2021.  Other indices that we follow were also up. China’s export growth slowed in July, adding to concerns the economy’s recovery will face fresh pressure in the second half of the year. Exports grew 19.3% in dollar terms in July from a year earlier, while imports rose 28.1%, Economists had forecast that exports would increase by 20% while imports would climb 33.3%. U.S. equities rose on Friday after a better-than-expected increase in U.S. payrolls fuelled expectations that the Federal Reserve is moving closer to a pullback of stimulus. U.S employers added 943,000 jobs in July, which exceeded economists’ forecasts of 860,000 jobs and drove the unemployment rate down to 5.4% from 5.9% in June.

Biggest Movers 20210810

Investment News

New Zealand Refining Company

Will stop refining crude oil from mid-2022, after shareholders in the country's sole refinery greenlighted a plan to convert it to a gasoline-import terminal. The final investment decision and binding customer (Mobil, Z Energy, and BP) agreements to be completed Q3 end, 2021. NZR will have a name change to Channel Infrastructure and be listed on the NZ stock exchange as “CNI.nz”. The NZR meets about 70% of the country's gasoline, jet fuel and diesel needs, but has become uneconomic due to low margins and competition from larger, more efficient refineries in Asia. The pandemic has accelerated the closure of older refineries in wealthy countries, while countries such as China and India increase refining capacity. Share price increased 3.61% to end the day trading at 86 cents.

Current Share Price: $0.90, Target Price: $1.08.

Briscoe Group

Tax paid profit for the half year (1 February to 1 August 2021), expected to be up 64% at $46m, total group sales up 22.58% at $358.4m, online sales as a mix of total group sales 16.16%. The Group’s homeware segment increased sales by 20.77% during this period and the sporting goods segment by 25.66%. The directors expect to release the half-year profit results on 14 September 2021, including declaration of an interim dividend. Group Managing Director, Rod Duke said “Whilst consumer demand has continued to be supportive, a number of our strategic initiatives in relation to merchandise and supply chain processes are enhancing both sales and gross profit margin. Significant preparatory work by our merchandise team in anticipating international supply chain disruptions including; factory delays, lack of shipping availability, port disruptions and increased costs, has resulted in a very healthy inventory position at half-year. Inventories will close higher than in recent years putting us in great shape for the second half to avoid being hindered by shortages we have already seen occurring across the wider retail market”.

Current Share Price: $6.20, Forecasted dividend yield: 3.99%, Target Price: $6.94.

Investore Property

Is pleased to announce it has entered into an unconditional agreement to purchase an existing large format retail property at 4 Carr Road, Mt Roskill, Auckland for $36m with an initial passing yield of 4%. The property is a 1.1 hectare, high profile, fully occupied site anchored by Rebel Sport and Briscoes with two other retail tenancies. It is located immediately adjacent to Investore’s existing property on Carr Road which is occupied by Bunnings Warehouse, and takes Investore’s aggregate land holding at Carr Road to 3.85 hectares. The Board is pleased to announce an increase in dividend guidance for FY22 and now expect to pay an annual cash dividend of 7.90 cents per share, assuming no further deterioration in economic conditions due to COVID-19. This represents an increase of 3.9% on the previous guidance announced on 18 May 2021 of 7.60 cents per share. The Board has also amended Investore’s Distribution Policy to a payout ratio of between 90% and 100% of distributable profit.

Current Share Price: $2.00, Forecasted dividend yield: 4.14%, Target Price: $2.20.

Z Energy

There is talk on the street that Vitol and Ampol are interested in purchasing the fuel distributor Z Energy. Information to be provided as it comes to light.

Current Share Price: $3.10, Forecasted dividend yield: 6.67%, Target Price: $4.07.

Auckland International Airport

Said it will start work on a new $1b domestic terminal early next year as progress with New Zealand's Covid-19 vaccination program boosts confidence in an eventual travel recovery. The terminal, which was put on hold early last year because of the pandemic, will be built alongside the international terminal to allow easier flight connections. It's expected to take about five years to complete. The domestic hub is expected to cost circa $1b. Since the outbreak of the pandemic Auckland Airport has continued to progress more than $222 million in core resilience and maintenance projects and to limit disruption to travellers, including $160 million in upgrades to the core roading network and to create a new transit system, $37 million replacement of runway slabs and pavement renewal, and $7 million renewal of airfield fuel lines.

Current Share Price: $7.23, Target Price: $7.33.

DGL Group Limited

Is a fully integrated, end-to-end specialty chemical supply chain management company. Operating across Australia, New Zealand and internationally, DGL offers specialty chemical formulation and manufacturing, warehousing and distribution, waste management and environmental solutions. Announced the strategic acquisition of Opal Australasia (“Opal”) for $8.6 million. The acquisition price of $8.6 million, includes property valued at approximately $4.3 million, and represents a valuation of 5.1x LTM earnings. The acquisition will be funded by both cash and shares, with the share component valued at $1.9 million. Founder and CEO of DGL, Simon Henry, said: “Opal brings to our business a substantial foothold in the Western Australian market. It means we can now adequately service Western Australia’s grain industry, the largest agricultural sector in the state, which also represents around 40 percent of Australia’s grain exports.

Current Share Price: $2.09.

 

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Nathanael McDonald



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