Yovich & Co. Market Update - 16 October 2019

Oct 16, 2019 | Commentary

Market News

 

 

 

In summary, last week saw the NZX50 with 16 companies on the downside, 32 companies on the upside and 2 unchanged. The NZD was weaker against the AUD, and stronger against the USD. The ANZ Truckometer report for September, showed that the Light Traffic Index fell 0.3%, while the Heavy Traffic rose 2.4%. This is only a partial bounce-back from last month’s fall. Annual growth in the Light Traffic Index held steady in the month but remains in a declining trend, suggesting economic growth will be in decline for a while yet. The Heavy Traffic Index has had its weakest quarterly growth in 7 years, suggesting GDP growth will be weak in Q3. Remembering that the Light Traffic Index gives a six-month lead on GDP growth while the Heavy Traffic Index is real-time, both agree that the economy is going to continue to lose momentum into the Q4.  

Investment News

New Zealand Equities

Cannasouth

Has announced that it has entered into an agreement to acquire a 60% stake in Midwest Pharmaceutics NZ Limited. Midwest operates a GMP (Good Manufacturing Practice) compliant manufacturing and packing facility specialising in the manufacture, re-packing and wholesale supply of pharmaceutical raw materials, including both actives and excipients and the manufacture of dietary supplements and herbal extracts. Midwest also markets and distributes its own branded products and for the financial year ended 31 March 2019, generated revenues of $1.8 million. Cannasouth CEO, Mark Lucas said “The acquisition of Midwest is a significant milestone for the Company. Together with the recent Cannasouth Cultivation Joint Venture, we have now implemented the key strategies required to bring medicinal cannabis to the New Zealand market, when regulations permit us to do so.” Share Price: $0.76.

Air New Zealand

Has announced that the president and CEO of Walmart Inc U.S. Greg Foran, is returning home after many years abroad and will take up the position of Chief Executive Officer in the first quarter of 2020 for Air New Zealand. In Mr Foran’s position at Walmart he was responsible for the strategic direction and performance of the company’s 4,600 stores and more than 1 million staff. Last year Walmart U.S. served more than 160 million customers a week and had revenues of US$307 billion. Share Price: $2.90, Gross Yield: 10.54%.

Ryman Healthcare

Is celebrating 20 years as a listed company on the NZX. Since the IPO of $25m in 1999, Ryman has grown from eight villages worth $53m with a little over 1,000 residents and 533 staff, to now having 36 villages,11,200 residents and 5,500 staff. In the last two decades Ryman has invested $3.7b in its portfolio of villages, and they have returned more than $800m in dividends to shareholders and shares are now worth more than 45 times their value at float. Share Price: $13.46, Gross Yield: 1.69%.

 

Michael Hill International

Share price has responded positively after the FY20Q1 update, all be it MHJ still has employee remediation issues to address. Key points from the update were: Group same store sales were +11.9%. Strong sales performance across all markets, led by Canada and New Zealand – Against prior year, FY20Q1 same store sales were: Canada +16.4%; New Zealand +10.1%; Australia +6.8%. Margin compression continues, pressure on gross margin has started to alleviate with early signs of positive movement and a slight recovery from FY19Q4, though has not yet recovered to historic levels. The retail environment remains volatile and challenging. Michael Hill have a new retail operating model in place that is gaining traction. Share Price: $0.75, Gross Yield: 5.59%.

Sky Network Television

Price dropped 20% on Friday 11 October due to Spark Sport being awarded the NZ Cricket broadcasting rights for six years from 2020. This drop was short lived as share price has increased 19% (at time of writing) after the new announcement that it has reached an agreement on a revolutionary broadcast deal with the New Zealand, Australian, South African and Argentinian Rugby Unions. The new deal will see Sky deepen its investment in all levels of rugby and New Zealand Rugby (NZR) become a 5% shareholder in Sky subject to shareholder approval. The broadcast rights include exclusive coverage of all Investec Rugby Championship, Steinlager Series, Investec Super Rugby, Mitre 10 Cup and all New Zealand’s other domestic competitions. Share Price: $1.06.

Fisher & Paykel Healthcare

Share price increased 7.76% to an all-time high of $18.38 on 14 October as the company announced an earlier than expected release of the new F&P Vitera face mask, into the US market. Due to the early release Fisher & Paykel have updated their net profit for the FY2020, from NZD $245m-$255m to NZD $255m-$265m. The NZ device maker also sees annual revenue totalling NZ$1.19 billion. Share Price: $18.79, Gross Yield: 1.72%.

EBOS Group

Has announced an acquisition of Life Movement Technology (LMT), and National Surgical businesses. This acquisition provides EBOS with an initial entry point and strong platform for growth into the A$8 billion Australian and New Zealand medical devices sector. The acquisition price was A$34 million and the business generates revenue of approximately A$40 million. The acquisition is not expected to have a material effect on FY20 earnings. This acquisition represents an important development in the Group’s growth trajectory as it is the first step in building another significant platform to our Healthcare portfolio. Share Price: $25.00, Gross Yield: 3.14%

About LMT Surgical and National Surgical

LMT and National Surgical were co-founded by Jon Mills and Kerry Lawford and over the last 24 years have built a strong presence in Australia and New Zealand providing products and services to the Orthopaedic, Spine, Neuro, ENT, Plastics and most recently the Sports Medicine community. The business offers a product portfolio which covers most pathologies and philosophies, required by members of the medical community and are directly involved in partnering with healthcare professionals, throughout their careers, to achieve the best outcomes for clinicians and their patients.

 

 

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 CannaSouth CBD.nz Air New Zealand AIR.nz Ryman Healthcare Ltd RYM.nz Michael Hill International Limited MHJ.nz SKY Network Television SKT.nz Fisher & Paykel Healthcare FPH.nz Ebos Group Limited EBO.nz



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