Yovich & Co. Market Update - 26 November 2019

Nov 26, 2019 | Commentary

Market News



In summary, last week saw the NZX50 with 34 companies on the downside, 14 companies on the upside and 2 unchanged. As anticipated the Global Dairy Trade auction increased. The index was up 1.7% at USD$3,481 with 37,968 MT sold. Skim milk powder showed the highest increase at 3.3%.




Investment News

New Zealand Equities


Share price has increased 17.03% to $14.89 after the annual meeting on 20 November. The a2Milk company’s strategies are: 1) Maximising growth from existing products in core markets (China and US). 2) Broadening product portfolio in core markets with core consumers. 3) Taking a careful and considered approach to expanding into other targeted markets and/or different consumer groups. An increasing trend in China is the daigou network (personal shopper network products are sourced by personal shoppers and sold via an e-commerce site to consumers in China). This form of trade is nearly impossible to accurately track and measure. While maintaining their growth in China, a2Milk is diving deeper into the US market, which has sales forecasted to be approximately $27 million representing a growth rate of ~110%. The company is forecasting FY20F EBITA margins to be 29-30%, compared to 28.2% forecasted earnings in August.  Current: PE Ratio; 38.04, Share price; $14.94.

Investore Property

Has agreed to acquire three large format retail assets from Stride Property Limited (SPL) for $140.75 million. Acquisition remains subject to many conditions (shareholder, OIO, due diligence). If approved, settlement is expected April 2020. To help fund this acquisition Investore is seeking to raise up to $80 million through a $65 million underwritten share placement and a $15 million retail offer by way of a share purchase plan. Shareholders as of 18 November will be eligible to participate by applying for up to $50,000 of new shares. New shares will not carry the 1.90 cents per share dividend payable 27 November 2019.





Arvida Group

Owns 32 villages located nationally, comprised of 1,590 Care Beds (assisted living), 4,014 Village Units, split - assisted living units 1,303 and independent units 2,711. Tax paid profit for the 1H FY20 was up 47% at $45m, and revenue was up 5% at $79.6m. Arvida has 517 units in Greenfield Development with 237 in Waimea Plain and 280 in Kerikeri. Both resale margins and total resales were up 24% and 10% respectively. Progress is tracking well with 94 new units delivered and are on track for delivery of 200 units for FY20.  An interim quarterly gross dividend of 1.55 cents per share with an ex-div date 2 December payable 11 December, brings the half year dividend to 3.1 cents per share. Arvida’s portfolio is now valued at $1.8b, thus increasing the net tangible asset to $1.39 per share, up 5% on the corresponding period last year. Current: PE Ratio; 9.87, Share price; $1.61, Gross yield; 3.80%.


New Zealand retirement home operator Metlifecare soars 14% to NZ$5.80 after disclosing its board has received a preliminary and nonbinding offer to buy the company. The gains might prove overly exuberant as the company says the talks are "highly conditional" and the price currently proposed is "below the board's expectations on value for the company." Metlifecare has suspended its share buyback program while the talks are underway. At the current share price, Metlifecare has a market capitalization of about NZ$1.2B (US$793M). Current: PE Ratio; 31.52, Share price; $5.80, Gross yield; 1.90%.

Pacific Edge

Has announced a capital raising of $20 million via an up-front placement and subsequent 1 for 4.25 pro-rata renounceable rights offer, to assist the Company to progress its commercial objectives and become cash flow positive as soon as possible. The $7m underwritten placement has had strong support with the full $7m placement subscribed. The remaining $13m will be via a rights offer at 10 cents per share. With the ex-rights date being 28 November 2019.
















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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 a2Milk Company ATM.nz Investore Property Ltd IPL.nz Arvida Group Limited ARV.nz Metlifecare MET.nz Pacific Edge Limited PEB.nz


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