Yovich & Co. Market Update - 11 February 2020

Feb 12, 2020 | Commentary

11 February 2020

New Zealand Equities



In summary, the NZX50G had 29 companies on the downside and 21 companies were on the upside. The NZX50G recovered slightly last week to regain the losses contributed by the coronavirus. According to TMM's OCR Preview Survey (the survey of leading New Zealand economists) 100% of commentators believe the OCR will stay on hold next week amid signs of green shoots in the economy and rising house prices. However the coronavirus is likely to have an impact on China's major trading partners, including New Zealand, this could force the Reserve Bank to adopt a more negative outlook on the economy. The Reserve Bank of Australia left the OCR unchanged at 0.75% at the announcement on 5 February. 



Investment News

Contact Energy

Underlying tax paid profit for 6 months ending 31 December 2019 was $59m, down 44.9% from $107m. The reduced profit is due to rising costs of thermal generation and lower sales to commercial and industrial customers. Contact will be paying an interim gross dividend of 19.89 cents per share payable 7 April, ex-dividend date 18 March. OMV NZ has agreed to supply Contact Energy with 37 petajoules (PJ) of gas to be delivered from 2020 to 2025. Chief Generation and Development Officer, James Kilty said: “Contact was pleased to secure this supply. There is an ongoing need for gas generation to firm intermittent sources of renewable generation such as wind and hydro generation. We need to ensure there are affordable and stable alternatives when weather-dependent generation options are unavailable.” Current Share Price: $7.47, Gross dividend Yield:6.52%, PE Ratio:41.85, Target Price: $8.37.

Napier Port

Construction of a new 350-metre-long wharf started today with a ground-breaking and blessing ceremony for workers, this was held at Napier Port 10 February. Those interested in the 6 Wharf project are encouraged to visit 6wharf.co.nz and sign-up to receive updates. Napier Port has come off its highs of $4.25 at 30 December 2019. The coronavirus has affected share price as of late with China placing a halt on NZ logs.  Bulk cargo (75% of which is logs) contributed $32.1m of the total $99.6m revenue for the FY19. Current Share Price: $3.50.


Released an update on its sales and earnings for the half year ended 31 January 2020 (H1 FY2020). Group underlying EBIT for H1 FY2020 is expected to be up 40% on the same period last year following the successful acquisition of Rip Curl. Across the group same store sales have increased. The Outdoor segment online sales grew by over 30% in H1 FY2020, underpinned by enhancements made to the online platform in the first half of last year. Share price surged 15.7% on the back of the update from $3.16 to $3.54 Current Share Price: $3.53, Gross dividend Yield: 5.66%, PE Ratio:14.51, Target Price: $3.65.

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Nathanael McDonald

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