Yovich & Co. Market Update - 05 February 2020

Feb 5, 2020 | Commentary

5 February 2020

New Zealand Equities

 

 

In summary, the NZX50G had 35 companies on the downside, 3 remained unchanged and 12 companies were on the upside. All major exchanges were lower last week as the outbreak of Wuhan coronavirus expands and the World Health Organisation declared the coronavirus as a Global Emergency. The NZ Government has placed immigration restrictions on all visitors who are travelling from or via mainland China for an initial 14-day period. Last week the coronavirus impacted the NZD, represented by a depreciation against many of its trading partners. The JYP and CHF outperformed last week as investors see these currencies as safe havens. The Global Dairy Trade index dropped 4.7% to USD$3,226T, at the first GDT auction since the coronavirus outbreak. Whole milk powder fell 6.2% to $3,039/T. New car sales continued their steady decline 8% year on year in January. SUV sales surged greater than 5%, there were 140 electric vehicles purchased in the month of January.

Investment News

Skycity Entertainment

Has seen its share price drop by more than 10% last week as the coronavirus spreads. Skycity is in the tourism industry and as there are restrictions on Chinese visitors, revenue will be affected. Current Share Price: $3.70, Gross Dividend: 7.51, PE Ratio:17.43.

Briscoes

Share price was at a 2-year high ($4.49), last week almost reaching its record high of $4.55 held on 24 February 2017. Fourth quarter sales to 26 January 2020 results were up 1.84% at $209.7m. Briscoes produced record quarterly sales of $209.7m up 1.84% and $653m up 3.34% for the full financial year. Online sales grew by 16.20% as consumers are increasingly using the internet to purchase goods. Sporting goods sales growth (Rebel Sports) was higher than Homeware sales 5.84% and 1.92% respectively. Full year NPAT is expected to be at least $64.0 million up 1.0%. Current Share Price: $4.10, Gross Dividend: 6.94, PE Ratio:14.58.

Fisher & Paykel Healthcare

The launch of F&P Evora, a new nasal mask for the treatment of obstructive sleep apnea (OSA) will go on sale in NZ and Australia this month. The compact "Evora" nasal mask will also be sold in Canada and Europe and then other countries pending regulatory clearances. The compact mask is easier to fit but gives the same benefits as a full mask, according to Fisher & Paykel Healthcare. Current Share Price: $23.87, Gross Dividend: 1.48%, PE Ratio: 58.76.

ANZ

Has successfully completed the sale of its OnePath Pensions & Investments (OnePath P&I) business to IOOF Holdings Limited (IOOF). The final sale price of $850m included $25m that ANZ had already received for the sale of its Aligned Dealer Groups in October 2018. ANZ estimates proceeds from the transaction will increase its CET1 capital ratio by 20 basis points. Current Share Price: $27.01, Gross Dividend: 6.19%, PE Ratio: 12.03.

 

Steel &Tube

Forecasted earnings before interest and tax (EBIT) loss for the six months ending 31 December 2019 (1H20) is to be in the range of $36m-$37m (Including impairment, Project Strive execution costs and debt write-offs and provisioning). Normalised EBIT for the period is expected to be approximately $2m - $3m excluding the impact of NZ IFRS 16 (1H19: $9.6m) due to the impact of lower revenues and $2m debt-write-offs. Whilst Steel & Tube has maintained market share and margins, the adverse trading conditions have continued, including reduced vertical construction work and a contraction in the stainless steel market. The board’s focus is to manage cost that they can control: operating cost reductions, margin management and working capital discipline. Strong cashflows allowed further debt reduction approximately $11m from $15m at 30 June 2019. Current Share Price: $0.81, Gross Dividend: 8.57%, PE Ratio: 11.95.

ResMed

Announced its second quarter results ending 31 December (FY2020). Tax paid profit for the 3 months up 29% at $160.6m Revenue up 13% at $736.2m. Driven predominantly by strong sales, particularly in masks, coupled with controlled operating costs, ResMed is in the process of acquiring SnapWorx, a privately held software company providing patient contact management and workflow optimization for the sleep apnea resupply market. The combination of Brightree ReSupply’s technology and live call services with SnapWorx creates the most comprehensive set of resupply solutions in the industry. Ex-dividend date 12 February, payment date 19 March, paying a gross dividend of 4.05 cents per share. Current Share Price: $24.95, Gross Dividend: 0.47%, PE Ratio: 61.85.

 

AFT Pharmaceuticals

Has licensed its Maxigesic® intravenous medicine (Maxigesic® IV) in 21 new countries across the Commonwealth of Independent States (CIS) and Central America, territories with a combined population of more than 220 million people. The agreement follows the registration of Maxigesic® IV in Australia and New Zealand in 2019 and is part of AFT’s continuing drive to capitalise on the strong global potential it sees for its patented Maxigesic pain-relief platform. Sales of Maxigesic in these new territories should be commencing in late FY2 and FY22. Current Share Price: $3.70, PE Ratio: 30.86.

 

Tourism Holdings

Tax paid profit for the year ending June 2020 is expected to be down 20% at $24m, due to the Australian wildfires, the coronavirus outbreak in China, and lower motorhome sales in the U.S. There is positive momentum in many areas of the business. New Zealand and Australia have had solid performances in vehicle sales from both a volume and margin perspective. Recent activity in the USA vehicle sales has been positive and provides greater confidence of margin and volume recovery going into FY21. Current Share Price: $2,95 Gross Dividend: 10.88% PE Ratio: 12.41.

 

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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