Yovich & Co. Market Update - 22 January 2020
Jan 22, 2020 | Commentary
22 January 2020
New Zealand Equities
In summary, the NZX50G had 10 companies on the downside, 4 remained unchanged and 36 companies were on the upside. The January 2020 ANZ NZ Truckometer data shows that the Light Traffic Index fell 2.0% m/m, while the Heavy Traffic fell 2.5% m/m for December, on top of a fall in November. Economists use this data to forecast GDP movement. The light traffic index is still lifting on an annual basis which suggests that GDP growth will bounce around the 2% mark into the middle of next year. Key points to remember are the light traffic index gives an indication of where GDP growth is headed in six months’ time, while the heavy traffic index is real-time. Last week saw phase one of the US-China trade deal signed in Washington; this has eased trade tensions and seen most markets rise in value as investors receive more stability in the markets. The latest NZIER Quarterly Survey of Business Opinion (QSBO) shows an improvement in business confidence in the final quarter of 2019, with a smaller proportion of businesses expecting a worsening in general economic conditions.
Shares have plummeted 38% since last week, to $2.35, trading lower than their $2.40 IPO in 2014. Gentrack has had a flow of adverse business updates as market conditions generally continue to deteriorate. Adding to this a key U.K. customer (E.ON) is suspending deployment of Gentrack’s billing software. On 20 January Gentrack announced that it is expecting its full year FY20 EBITDA to be between NZ$8m and $12m (November statement $25m). Considering these market conditions the Board is taking action to reduce its cost base by approximately $8m on a full year basis and half is expected to be realised this financial year. Once positive news and a convincing strategy is announced to the market, investor’s confidence could grow. Positives for Gentrack:
- A profitable and cash generative business, with a strong balance sheet and no net debt.
- Remains a market leader in the UK, NZ and Australia for utility billing and customer management systems with high customer retention.
- Gentrack’s airports business (Veovo) remains a market leader in Australia, New Zealand and the UK for airport billing, operating and passenger systems.
Current Share Price: $2.25, Gross Dividend: 4.95%.
And Westpac have entered into a $50 million, four-year sustainability-linked loan facility, the first such loan issued by Westpac NZ and one of the first of its kind in New Zealand. Contact Energy will receive a discounted interest rate on the sustainability-linked loan if it meets ambitious targets linked to its environmental, social and governance (ESG) rating determined by the independent ratings agency RobecoSAM. Conversely, Contact will pay higher interest costs if it doesn’t meet the rating targets agreed with Westpac. Current Share Price: $7.49, Gross Dividend: 6.59%, P/E ratio: 15.34.
Is a multiple award-winning cloud-based FinTech business, delivering Software as a Service payroll solutions to small and medium sized enterprises ("SMEs"), this enables business owners to pay and manage employees accurately and efficiently using the web, iOS, and Android applications. PaySauce’s price spiked early January to $1.34.
On 21 January PaySauce announced a $5.8m rights offer for growth and expansion. For every 7 shares an investor can purchase 1 share at a 61.5% discount to the theoretical ex-rights price of $0.88 and discount of 50% to the 186 day VWAP1 of $0.68. For investors that have/are looking at this company, purchasing shares before the ex-right date will give them the bonus of the rights offer. Share Price at time of rights issue announcement was 96 cents but has since dropped to 78 cents.
Has announced a new car service called “Carly”. The service allows users to lease a car on a single monthly subscription payment (with no fixed term contract), with the option to change cars within that month. The payment includes all running costs except fuel and road user charges. CEO of Turners Todd Hunter said “New concepts such as vehicle subscription and car sharing are a part of the future and provide a new revenue opportunity for car dealers and other industry players. This is an exciting opportunity for Turners to participate in the rapid growth of the 'Sharing Economy' as it relates to transportation and changing consumer preferences.” Turners went ex-div 20 January and has seen the share price shed its gross dividend of 5.56 cents per share. Current Share Price: $2.81, Gross Dividend: 8.40%, P/E ratio: 11.97.
Next month is the start of reporting season, with most companies announcing release dates already.
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