Yovich & Co. Market Update - 23 September 2019

Sep 23, 2019 | Commentary

Market News




In summary, last week saw the NZX50 with 21 companies on the downside, 27 companies on the upside and 2 unchanged. The NZD was weaker against both the AUD and USD -0.15% and -1.85% respectively. This is a 10 Year low against USD. Stats NZ reported that the NZ economy grew 0.5% in the June quarter reaching $300b for the first time. Leading the growth was the service and primary industries up 0.7%, household spending grew 0.5%. With spending increasing in the durable goods and household services 0.8% and 0.5% respectively.

Investment News

New Zealand Equities

Abano Healthcare

Advised that on 1 July various expressions of interest had been received from parties interested in Abano and its businesses. There is no certainty that any expression of interest will lead to a proposal for shareholders to consider or to any transaction. If any agreement is entered into, it is expected to be conditional on Abano shareholder approval. Share price has reacted positively to this news, with share price increasing from $3.71 (12-09-19) to $4.37. Share Price:$4.37 Dividend Yield: 6.98%.

Auckland International Airport

Experienced total passenger growth of 0.6% in July 2019. International passengers (excl. Transits) were down 1.2%, while domestic passengers grew by 1.6% compared to July 2018. United States visitor arrivals continued strong growth up 10.0% in July 2019 compared to July 2018. Growth was primarily driven by new capacity on the AIR NZ Auckland to Chicago route, along with United Airlines operating year-round on the Auckland to San Francisco route. Share price has slowly declined from a record high of $9.85 due to a lower FY19  net profit after tax  of $523.5m (down $248.8m pcp), and slower than expected passenger volumes. Share Price: $9.22 Dividend Yield: 3.35%.

NZ King Salmon

Grows and produces Ōra King. Bloomberg recently published highlighting the increasing popularity of Ōra King salmon and referring to NZK’s salmon as the “Wagyu Beef of the Seafood World.” Ōra King has scored the “best choice” from Monterey Bay Aquarium’s Seafood Watch, (an app allowing consumers and businesses to choose seafood that's fished or farmed in ways that support a healthy ocean, now and for future generations). NZK has increased from its low of $1.84 in August to now trading at $2.41.Demand is high for the product, but fish mortality is a continuing headwind due to warming sea levels. NKZ is awaiting the final approval of NZ government to farm further out to sea in the Marlborough Sounds. If approved, we see NZK Salmon having a bright future. Share Price: $2.41 Dividend Yield: 2.88%.


Tax paid profit for the full year 31 July was up 13.7% at $57.6m, revenue up 9.7% at $545.6m with Australia leading same store sales up 2.7%. Online sales up 9.2%, which now comprises 10.1% of direct to consumer sales, net tangible assets per share up from $0.15 to $0.25. Kathmandu’s strong cash flow generated in FY19 supported a $14m repayment of debt, with net debt down to $19.3m. A gross dividend of 16.66 cents per share with an ex-dividend date 27 September is 

payable 11 October. This equates to a record full year gross dividend of 20.67 cents per share. In the first seven week of fiscal 2020 same-store sales are up 6.1%, Australia up  4.0% and NZ up 11.7% (albeit at lower gross margins for NZ). Share Price: $3.09 Dividend Yield: 6.69%.

Turners Automotive Group

Is the largest buyer and seller of vehicles and has strong brand awareness. Net profit for the FY19 was down 3% at $22.7m. A record gross dividend of 23.61 cents per share paid quarterly was achieved in FY19.  Underlying medium term demand remains robust, with over 950,000 cars more than 20 years old. Due to repairs and a stricter Warrant of Fitness regime, hundreds of thousands of vehicles are expected to need replacing over the next decade, along with growing immigration and population numbers are also driving up demand. This demand is benefiting the automotive, finance and insurance products Turners offer. Share Price: $2.60Dividend Yield: 9.08%.


New Zealand Refining

The company earned NZD $56.2m in processing fees for July/August, NZD $24m more than the May/June period. The gross refining margin was strong at USD$7.10/barrel, an uplift over the Singapore Dubai complex margin of USD$3.87. The refinery achieved throughput of 7.42 million barrels due to good utilisation by our customers and excellent refinery availability. Share Price: $2.09 Dividend Yield: 4.32%.

PGG Wrightson

Tax paid profit for the full year 30 June was up $131.8m (including the sale of Seed and Grain), total revenue was up at $809.3m from $808.7m. Operating EBITDA  for the two operating groups Agency and Retail & Water were both down at $15.4m (FY18 $20.1m) and $19.6 (FY18 $23.8m) respectively. A gross dividend of 10.42 cents per share is payable 11 October.  Share Price: $2.33 Dividend Yield: 6.42%.

Sheffield Resources

Announced that the Department of Mines, Industry Regulation and Safety (DMIRS) has approved the Thunderbird Mining Proposal and Mine Closure Plan. Bruce McFadzean commented “This key approval of the Mining Proposal and Mine Closure Plan is another milestone towards the development of Thunderbird. This tremendous achievement allows work to commence on site and paves the way for future construction activities”. Share Price: $0.39.  

Goodman Property Trust

Announced a $165m equity raise ($150m as a placement), $15m as a Retail Offer with the ability to accept oversubscriptions of up to $10m.  New units will be offered at $2.10, a 4.3% discount to the close of $2.195. Unit holders have the ability to subscribe for up to $50,000. The equity raising proceeds will initially repay bank debt (to 21.2%) and provide capacity for further acquisition and developments while remaining at the lower end of target gearing range. Goodman property Trust is now 100% focused in the Auckland industrial market. Retail Offer opens 26 September, closes 18 October. Share Price: $2.16 Dividend Yield: 3.68%.

Private Land and Property Fund

Is a new listing on the NZX as of 18/09/2019. The fund is managed by Booster Investment Management Limited and invests in unlisted agricultural, horticultural, industrial, commercial and retail properties. The fund has a property portfolio exposure of $50.7m with debt of $18.6m.Share Price: $1.04.



Disclaimer: This publication has been prepared for your general information. While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken for any errors or omissions. This publication does not constitute financial or insurance product advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication. No part of this publication may be reproduced without prior written permission from our company. Disclosure statements relating to the financial advisers associated with this newsletter are available on request and free of charge.

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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 Auckland International Airport AIA.nz Abano Healthcare ABA.nz NZK Salmon NZK.nz Kathmandu Holdings Ltd KMD.nz Turners Automotive Group TRA.nz New Zealand Refining Company NZR.nz PGG Wrightson PGW.nz Sheffield Resources Limited SFX.asx Goodman Property Trust GMT.nz Private Land Property Fund PLP.nz


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