Yovich & Co. Market Update - 23 October 2019

Oct 24, 2019 | Commentary

Market News

 

 

In summary, last week saw the NZX50 with 11 companies on the downside, 34 companies on the upside and 5 unchanged. The NZD was weaker against the AUD, and stronger against the USD; this is good for NZ domestic companies exporting product abroad into the USA. The latest GDT event increased 0.5%, this is the third consecutive increase. The average price was USD$ $3,330 per metric tonne (MT), with 38,712 MT sold. Fonterra along with leading banks have now raised their farmgate milk price. Fonterra milk price is in the range of $6.55-$7.55. Abroad, Asian markets followed Wall Street higher as investors took heart from positive noises about the US-China trade talks. US President Donald Trump said a deal was coming along nicely and China's vice foreign minister Le Yucheng said that progress had been made.

Investment News

New Zealand Equities

Australia and New Zealand Banking Group Limited

Announced it has agreed a revised price for the sale of its OnePath Pensions & Investments (OnePath P&I) business and Aligned Dealer Groups (ADGs) to IOOF Holdings Limited (IOOF) for $850 million, being a $125 million reduction from the original sale price of $975 million announced in October 2017. The sale remains consistent with their strategy to simplify operations by focussing on retail and business banking in Australia and New Zealand, and Institutional Banking across the Asia Pacific region. Share price: $29.65, Gross Dividend yield: 6.04%.

Sky Network Television

Is pleased to announce an extended Netball NZ and Sky partnership agreement to 2024. Sky will deliver netball to New Zealand fans across all platforms - broadcast over the satellite on Sky Sport 3 (the Home of Netball), streamed on Sky Go and Sky Sport Now, and free-to-air on Prime. Share price: $1.04.

Tourism Holdings

Share price decreased 10.63% to $3.70 on Monday this week, at time of writing trading at $3.57 (offering a cheap buy price); reaction is due to the company announcing that the USA vehicle sales market has been weaker over the past year than in previous years and has impacted results. Tourism Holdings stated that the weakening trend will impact FY20 earnings. The USA business, average vehicle sales margin in the first quarter of FY20 has been down approximately 40% on the prior year, while vehicle sales by units are in line with the prior year. Margin pressure is being driven by some large volume discounts in the wholesale market, and general retail price pressure. Vehicle sales in New Zealand and Australia are broadly in line with expectations. No significant changes to prior performance are expected from the New Zealand tourism businesses. Share price: $3.57, Gross Dividend yield: 8.99%.

Sky City

Share price has reacted negatively to fire at the SkyCity convention centre construction site. Shares closed at $3.98 on 21 October, and are trading at $3.80 (at time of writing). Once the fire is extinguished SkyCity will, in consultation with Fletcher Construction Company, be able to determine the impact on the project delivery timeline. Share price: $3.81, Gross Dividend yield: 7.27%.

Auckland International Airport

Total passenger volumes dropped 0.1% in August compared to the previous corresponding period. International passengers (excl. Transits) were in line with the prior corresponding period, while transit passengers were up 11.8% and domestic passengers were down by 1.4%. Taiwanese visitor arrivals continued strong growth; up 98.8% in August 2019 compared to August 2018, primarily driven by new capacity on the Auckland to Taipei route from Air New Zealand. Share price: $9.11, Gross Dividend yield: 3.39%.

 

Infratil

Has extended the IFTHC bond offer until 13 November 2019. If you are looking for a defensive asset that has a higher interest rate than current term deposits, this bond meets that criteria.

 

 

 

 

 

 

Mercury NZ

Generates 100% of its electricity from renewable sources; these are hydro, geothermal, solar and soon to be wind once the Turitea wind farm is completed. Mercury has revised their FY2020 EBITDAF guidance to be $510m up from $485m. Reasons for the increase are:

 

  • Changes to the composition of Mercury’s electricity sales with an increased bias to higher yielding spot market and commercial and industrial (C&I) channels.
  • higher spot price expectations for FY2020 with actual prices to-date and ASX electricity futures in Auckland (Otahuhu grid reference point) indicating a spot price for the year in excess of $130/MWh.
  • An expected 50 GWh increase in full year forecast hydro generation to 4,070 GWh due to wetter than average weather in the Taupo region. Share price: $5.15, Gross Dividend yield: 4.18%.

 

PGG Wrightson

Chairman Rodger Finlay announced, “Whilst it remained too soon to provide firm guidance about expectations for FY2020, the Board reaffirmed confidence that PGW would achieve Operating EBITDA in excess of $30 million”. It is the expectation of the Board that an interim dividend of not less than 8 cents per share would be declared based on trading performance remaining within current guidance. The announcements at half-year results in February 2020 are expected to provide greater full-year earnings and final dividend guidance. Share price: $2.51, Gross Dividend yield: 5.96%.

 

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 Australia and New Zealand Banking Group ANZ.nz SKY Network Television SKT.nz SKYCITY Entertainment Group SKC.nz Tourism Holdings THL.nz Auckland International Airport AIA.nz Infratil IFT.nz Mercury NZ Limited MCY.nz PGG Wrightson PGW.nz



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