Yovich & Co. Market Update - 22 August 2019

Aug 22, 2019 | Commentary

Market News




In summary, last week saw the NZX50 with 37 companies on the downside and 12 companies were on the upside. Last week the market had 5 consecutive falls, the greatest being on Thursday at -1.34%. This is believed to be off the back of the uncertainty between USA/China “trade wars” and the unrest in Hong Kong.   The NZD/USD decreased for a fourth week by 0.61%. The reporting season is now into its second week.




Investment News

New Zealand Equities

Michael Hill

Tax paid profit for the full year 30 June was $16.5m up from $1.6m. A net debt reduction of 11.4% to $24.8m results in an equity ratio of 46.8%. The e-commerce business resulted in record on-line revenue of $16m and now represents 2.8% of total sales. Michael Hill has been focusing on inventory levels reducing from $192.m to $179.5m; this has helped with the ability to reduce debt. A final gross dividend of 1.58 cents per share provides a full year dividend of 4.19 cents.  Share price: $0.52, Gross yield: 8.38%.

Heartland Bank

Tax paid profit for the full year 30 June was up 9.04% at $73.6m, total revenue up 4.6% at $205.8m. Return on Equity unchanged at 11.1%, gross finance receivables up 10.5% at $4.4b.

Business performance (net profit): NZ reverse mortgages up 13.3% at $20.9m. Motor business was up 8% at $57.1m. Harmoney & personal lending was up 27.6% at $18.9m. Business was up $6.8 at $55.9m. Rural was down 1.9% at $31.7m, and Australian operations were up 10.7% at $22.7m.  A final gross dividend of 9 cents per share is payable 6 September. Share price: $1.61, Gross yield: 8.61%.

Precinct Properties

Tax paid profit for the full year 30 June was down 25.4% at $190.1m, revenue up 3.9% at $135.8m. Net property income up 3.9% at $97.5m. Net tangible assets (NTA) at $1.47 up from $1.40, Precinct’s portfolio is up $3m at $2.8b. The increase in NTA is due to a revaluation gain and partly offset by the fair value loss in financial instruments. The full year gross dividend is up 3.4% at 6 cents per share. A new dividend policy that is to be phased in over the next two years has Precinct forecasting a FY20 dividend of 6.3 cents per share. The fourth quarter dividend of 1.52 cents is payable 27 September. Liabilities to total assets ratio is down 2.4% at 22.4%. Share price: $1.87, Gross yield: 3.58%.

Property for Industry

Tax paid profit for the half year 30 June was up 57% at $46.3m, revenue up 36% at $72.3m. Net rental income is up 4.3% at $41m. Net tangible assets are up 3% at $1.83. The change is due to the fair value of investment properties, retained earnings and change in liability for derivative financial instruments. Loan to value ratio of 31.1%. A gross dividend of 2.4 cents per share payable 4 September. Share price: $2.39, Gross yield: 4.05%.

Napier Port

Listed on 20 August at $2.91, 31 cents (11.92%) higher than the IPO price of $2.60. During the day it reached a high of $3.04 and levelled out at $3.00. There has been a great demand for this company with very little supply offered through the IPO. Share price: $2.98, Gross yield: 4% (expected).

Mercury Energy

Tax paid profit for the full year 30 June was up 52.6% at $357m, revenue was up 11.2% at $2b. Annual hydro generation of 4,006GWh was in line with the company’s long-term average but was 941GWh down on the record established last year. Operating earnings were down 11% at $505m this was due to lower hydro generation and lower Metrix earnings due to the sale of the Matrix business. A gross dividend of 12.9 cents payable 30 September bringing total dividend payments to 21.53 cents, up 2.6% on last year. Share price: $504, Gross yield: 4.27%.

Fletcher Building

Tax paid profit for the full year 30 June up at $164m compared to a loss of $190m, total revenue down 1.7% at $9.3m. The FY19 realised the sale of the Formica and Roof Tile Group businesses for $1.25B, $700-$800m used to reduce net debt from $1.3b to $325m. Fletcher Building is commencing a $300m Share Buyback 9 September. A gross dividend of 15 cents payable 19 September, bringing total dividend to 23 cents per share. Share price: $4.76, Gross yield: 4.83%.

New Zealand Refining

Net loss after tax for the half year 30 June $3.5m. This was due to high electricity prices in the market, weakness of refining margins since the beginning of the year (driven by low gasoline prices), and reduced access to natural gas (because of on-going maintenance on the Pohukura gas field).  Total revenue was up 16% at $171m. NZR gross refining margin averaged USD 5.31 per barrel to the end of June. This was lower than last year but higher than the Singapore’s margins of USD 5.11 per barrel. A gross dividend of 2.7 cents payable 19 September, bringing total dividend to 8.95 cents per share. Share price: $2.06, Gross yield: 4.38%.


Tax paid profit for the full year 30 June was up 47% at $287m, revenue was up 41.4% at $1.3b. Earnings per share increased by 45.4% to 39.25 cents. There has been a strong sell-off (13% off the close on 20 August) as investors were expecting higher profit earnings and reports of a lower EBITD margin for the FY20 of 28.2% compared to 31.7% for FY19. Share price: $14.58.

Spark New Zealand

Tax paid profit for the full year 30 June was up 12.1% at $44m, EBITDA was up 11.1% at $109m. Net debt increased for the year $160m to $1.3b. A gross dividend of 16.15 cents will be payable 4 October, bringing total gross dividend to 32.29 cents per share, As expected there will be no special dividend in FY20. Share price: $4.22, Gross yield: 7.58%.



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Nathanael McDonald

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Weekly Update Investment Shares Bonds Investment Strategy Investment Advice Share Advice Share Investment Investing in Shares Dividend Reporting Week Michael Hill International Limited MHJ.nz Heartland Group Ltd HGH.nz Precinct Properties PCT.nz Property for Industry PFI.nz Napier Port NPH.nz Mercury NZ Limited MCY.nz Fletcher Building FBU.nz New Zealand Refining Company NZR.nz a2Milk Company ATM.nz Spark SPK.nz


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