Yovich & Co. Market Update - 30 January 2020

Jan 30, 2020 | Commentary

30 January 2020

New Zealand Equities



In summary, the NZX50G had 25 companies on the downside, 1 remained unchanged and 24 companies were on the upside.  The Wuhan coronavirus had its effect on equity markets across Asia and Australia with both markets dipping midweek, as investors await a decision from the World Health Organisation on whether the outbreak will be deemed an emergency. The Sector that is likely to see the most impact is the tourism/travel sector in NZ e.g. companies such as Auckland Airport, Air New Zealand and Tourism Holdings. Australia's unemployment rate edged down for the second consecutive month to end 2019 at 5.1%, its lowest level since March last year. That lower rate may see the RBA hold the OCR at current levels on 4 February.



Investment News


Third quarter update ending 31 December 2019 has shown an increase of 4,123 units which means it has produced an annualised growth rate of 15%. The New Zealand segment has continued to grow in both new customer and expansion in existing customer’s fleets. In the North American market, small to medium business grew while large enterprise customers were stagnant. The Australian market growth in the small to medium business for Q3 was 11%, this is below EROAD’s expectation. The pipeline of larger fleet sizes of 500-1,00 remains encouraging and above original expectations. EROAD anticipates at least one of these enterprise customer opportunities to be won in Q4. Current Share Price: $3.18. 


Completes the sale of it 50% share of DFE Pharma to CVC Strategic Opportunities II. Completion of this sale is a key milestone in strengthening the Co-op’s balance sheet, with cash proceeds of $554 million, comprising the original sale proceeds of $537 million plus $17 million in settlement adjustments. Current Share Price: $4.00.

Augusta Capital

Has entered into an agreement under which Centuria Capital Group, will make a takeover offer for 100% of Augusta shares at $2.00 per share (subject to obtaining certain regulatory approvals). Executive Directors Mark Francis and Bryce Barnett, who collectively own 23.3% of shares in Augusta, have undertaken to accept the offer. Current Share Price: $1.97, Gross Dividend: 4.49, PE Ratio:49.62.

Abano Healthcare

Reported tax paid profit for 6 months ending 30 November was $0.1m, with underlying net profit after tax of $5.5m, gross revenue of $175.8m. As mentioned in March 2019 Abano’s strategic review is to change focus from acquisition growth to organic growth. Richard Keys, (CEO) said: “Our focus on organic growth has seen an increase in the number of clinical days and we continue to leverage technology to assist in the delivery of operational and clinical excellence and increase patient visits. Recruitment has been a priority for both businesses, and we are pleased to have welcomed a number of new and junior clinicians to the group.”  An update on the Scheme Implementation Agreement with Bidco is expected to be released to shareholders mid to late February 2020. Current Share Price: $5.19.


Oceania Healthcare

Major shareholder Oceania Healthcare Holdings Limited sold its 40% stake, on 29 January for $1.20 per share, to institutional and retail investors. Oceania Healthcare strategic transformation is underway with converting a greater portion of their Care Beds to Care Suites. The benefit of a Care Suite is that both Rest Home and Hospital level care can be provided in these rooms. Care Suites will provide Oceania a stable cashflow as a high portion is government funded. Underlying tax paid profit for 6 months ending 30 November 2019 was up 17.6% at $24.1m. Operating cash flow up 21.0% at $57m, primarily due to strong sales proceeds from the new developments completed in May 2019. Total assets increased to $1.5 billion, up 23.8% ($287.7 million) on November 2018, primarily due to significant development capital expenditure during the period. Oceania is expecting 265 new retirement village units and aged care beds to be completed by 31 May 2020.  Interim gross dividend is up from 2.1 to 2.3 cents per share. The ex-dividend date is 7 February 2020 and payment date 24 February 2020. Current Share Price: $1.23, Gross Dividend: 3.82, PE Ratio:18.44.


Has released a video update of the development of its cultivation facility with joint venture partner, Cannasouth Cultivation Limited. Click on the link to check it out. https://www.youtube.com/watch?v=JYPikLcn-z4&feature=youtu.be     


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Nathanael McDonald

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