Yovich & Co. Market Update - 8 November 2021

Nov 8, 2021 | Commentary

Market Update 20211109

In summary, the NZX50G had 36 companies on the downside, and 15 companies were on the upside. The NZ dollar is still sitting at relatively high levels against USD (0.711) and the AUD (0.961). New Zealand’s unemployment rate fell to 3.4% in Q3 from 4%, showing that employers are willing to hire/hold on to staff even if they were unable to work during Alert Level 4 restrictions. The NASDAQ has increased 10% since 8 October2021, The United States House of Representatives passed the US$1 trillion Infrastructure Investment and Jobs Act. The Act includes transport, broadband and utility funding. Joe Biden’s signature is still required to officially pass the bill. The US labour market got back on track in Oct with non-farm payrolls increasing 531,000 after large upward revisions to the prior 2 months. The unemployment rate fell to 4.6%, while the labour-force participation rate was unchanged. Average hourly earnings came in line with estimates, rising the most since Feb.

Biggest Movers 20211108

Investment News 

Vulcan Steel (VSL.nz & VSL.asx)

On Thursday 4 November Vulcan Steel listed on the NZX and AUD at AU$7.10 raising AU$371.6m. Approximately 131 million shares are on issue, implying a market capitalisation of AU$930m. Vulcan Steel distributes and processes steel products in New Zealand and Australia. The company operates through two segments, Steel and Metals. It offers carbon, stainless, and engineering steel products, such as hollows, bars, merchant products, structural beams, columns and angles, coils, channels, fittings, and sheets/plates; and value-added processing services, which include laser cutting, plasma cutting, and sheet polishing for steel coils, steel plates, and stainless and engineering steel. The company serves the construction, manufacturing, and mining sectors. Vulcan Steel Limited was founded in 1995 and is based in Auckland, New Zealand. At market close on Friday, share price was at $7.45.

Current Share Price: NZ$8.00.

Briscoe Group (BGP.nz)

Third quarter total group sales ending 31 October 2021 was up 9.52% at $496m, homeware and sporting goods on par with sales growth up 9.53% and 9.50% respectively. The first half of the 3rd quarter was the strongest with sales reducing within the last 13 weeks due to lock downs restrictions.  

Current Share Price: $6.81, Forecasted dividend yield: 5.00%, Target Price: $7.29.

KiwiBank Perpetual Capital Notes (KCFHA.nz)

Is expected to be repaid early, on 25 November 2021 with the last trading date to be 11 November 2021. As of 3 November, KiwiBank has on offer a Perpetual Preference Share paying 4.93%. If you are interested in relocating your funds from the early repayment of KCFHA.nz, please get in contact with your adviser.

Trustpower

Tax paid profit for the 1H FY21 ending 30 September 2021 was up 243% at $115m, revenue up 12% at $675mNTA increased from $3.14 to $3.45, generation volumes increased 6% to 1,000 GWh. Trustpower shareholders approved the sale of its retail business to Mercury Energy at its Annual Shareholder Meeting on 22 September, and Mercury Energy had also been given the green light from the Commerce Commission, which said the $441 million deal would not substantially lessen competition. The final condition of sale is the completion of the Tauranga Energy Consumer Trust (TECT) restructure, subject to a High Court hearing scheduled for 15-17 November 2021. Ridley-Smith said “Trustpower remains focused on its current business while building the capability to prosper under Manawa Energy – the recently announced new name for Trustpower assuming the retail sale goes ahead. Looking forward, Manawa Energy will be focussed on developing new renewable generation capacity to help meet the anticipated significant increase in demand for electricity to meet New Zealand’s climate targets as well as continuing to provide high levels of service to its existing commercial and industrial customer base.” The expected FY22 EBITDAF is to be in the range of $210-$225m (excluding the costs of selling the
retail business of $9m). An interim gross dividend of 23.6 cents has an ex-dividend date 25 November, payment date 3 December 2021.

Current Share Price: $7.43, Forecasted dividend yield: 4.63%, Target Price: $7.69.

Auckland Airport

Has brought to the market NZ$100m bond offer. The bond has been given an A- rating from S&P Global, and has a term length of 5 years, maturity 17 November 2026. The coupon rate will be set, November 10, 2021, with an indicative margin range of 0.70 to 0.80 per cent above the 5-year swap rate (as at writing 2.60%). The interest will be paid semi annually on 17 May & November with the first being 17 May 2022. The bond will be listed under the market code AIA240 from 18 November 2021.

Current Share Price: $8.20, Target Price: $7.70.

Vector Limited

Is considering making an offer of up to NZ$200m of 6-year, unsecured, unsubordinated, fixed rate bonds (with the ability to accept up to an additional NZ$100m in oversubscriptions at Vector’s discretion). The bonds are expected to be assigned an issue credit rating of BBB. It is expected that full details of the offer will be released in the week commencing 15 November 2021 once a final decision has been made. The offer is expected to open at the same time.

Current Share Price: $4.03, Forecasted dividend yield: 4.20%, Target Price: $4.13.

Contact Energy

Has a NZ$200m unsecured, subordinated, redeemable, cumulative interest-bearing green capital bonds maturing on 19 November 2051 (with the ability to accept oversubscriptions of up to an additional NZ$25m at Contact's discretion). The credit rating of the capital bonds is two notches below Contact’s issuer credit rating of BBB. One notch is deducted for the capital bonds being subordinated and a second notch is deducted because of the potential for interest (coupon) payments to be deferred. The indicative coupon rate is to be set at 1.60% to 1.80% above the 5-year swap rate, noting a minimum rate of 4.15%. The coupon rate will reset 5 yearly the first being 19 November 2026. Coupon payments are made quarterly starting 19 February 2022.

Current Share Price: $8.00, Forecasted dividend yield: 4.41%, Target Price: $9.13.

Sydney Airport

Has agreed to a takeover proposal from a consortium of infrastructure investors that values the airport at AU$23.6b, several months after the consortium first bid for the airport. Shareholders still need to approve the deal, and the airport said it expects a shareholder vote to be held in the first quarter of next year. Various regulators will also need to sign off on the takeover. The deal, if approved, will see investors get A$8.75 per share. The Board said the offer price represents an uplift in equity value of about A$1.3 billion to the price of A$8.25/share, which was first offered by the consortium in July.

Current Share Price: $8.44, Takeover Price: $8.75.

 

 

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Nathanael McDonald



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Vulcan Steel Briscoe Group KiwiBank Perpetual Capital Notes Trustpower Auckland Airport Vector Limited Contact Energy Sydney Airport Investments Stock Market Shares KiwiSaver Jarrod Goodall Walter Yovich Nathanael McDonald



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