Yovich & Co. Market Update - 17 February 2020

Feb 18, 2020 | Commentary

17 February 2020

New Zealand Equities

In summary, the NZX50G had 23 companies on the downside 3 remained unchanged and 24 companies were on the upside. The NZX50G recovered slightly last week to regain the losses contributed by the coronavirus. With CPI at 1.9% (mid-point of RBNZ’s target range) and employment at or slightly above maximum sustainable level the RBNZ, as expected, kept the OCR rate unchanged at 1%.

Investment News

Skellerup

Tax paid profit for the first half FY2020 ending 31 December 2019 was down 10% at $12.1m, revenue was up 2% at $122m. FY2020 results are expected to be in line with FY2019, meaning that Skellerup is expecting a greater second half performance. The Agri division increased by 5% to $10.1m and is expecting a second half year boost from the recently acquired Silclear business. Industrial division was reduced by 15% to $9.9m, earnings are expected to pick up with growth from new products sold into roofing and marine foam applications, and the addition of the Nexus business acquired in April 2019. A gross dividend of 6.57 cents per share with an ex-dividend date 5 March, is payable 19 March 2020. Current Share Price: $2.27, Gross dividend yield: 6.84%, PE Ratio: 15.95, Target Price: $2.25.

Skycity

Share price is slowly recovering from $3.50 to $3.66, after a week of negative market reaction to the coronavirus outbreak.  Tax paid profit for the six months ending 31 December 2019 was up 296% at $328. This was due to an increase of revenue $721.7m. The one-off sale of the Auckland car park ($66.5m) and the fire at the NZ International Convention Centre ($186.3m). Normalised tax paid profit was down 16.4% at $75m from $89.7m. Skycity said its international or junket business suffered fewer visits by high rollers and lower average spend per customer (junket operators work with the casinos to usher in critical VIP gamers). Geopolitical tensions and other factors were behind the downturn, reflecting the weaker outlook for international business. Sky City said it now expects normalized full-year net profit of around NZ$130 million and normalized underlying earnings of slightly under NZ$300 million. A gross dividend of 13.89 cents per share with the ex-dividend date 27 February, is payable 13 March 2020. Current Share Price: $3.66, Gross dividend yield: 7.59%, PE Ratio: 6.34, Target Price: $4.00.

Sky Network Television

Tax paid profit for the first half year ending 31 December was down 78.1% at $11.7m from $53.4m, revenue declined 4.5% to $384.4m. Reduced profitability reflects the costs of restructuring from the old satellite TV to streaming, this a new technological strategy change for Sky TV. The loss of legacy satellite TV customers slowed in the first half. Slowing the decline in satellite customer numbers is an important achievement, as it shows that Sky TV can manage the transition to a streaming future.  Total customers numbered 795,000 in the first half, up from 750,000 a year earlier, driven by growth in its streaming services. Sky TV is on track to achieve their goal to have 1 million customers by 2021. The company reaffirmed full-year guidance of underlying earnings of NZ$170 million to NZ$190 million.  Current Share Price: $0.60, Target Price: $0.73.

Synlait Milk

Is expecting its FY2020 net profit after tax (NPAT) to be in the range of $70m to $80m. This is contrary to its earlier forecast of expecting a growth rate in par with FY19 over FY18 which was 10%. First half (HY20) NPAT is to be in the range of $26.5m to $28.5m compared to HY19 results of $37.3m. The downgrade in earnings is due to:

 

  • Significantly lower than anticipated infant base powder sales due to China infant nutrition market consolidation causing a reduction in demand from brand owners who are yet to receive brand registration.
  • lactoferrin prices being more volatile than previously anticipated; and while Synlait still anticipates growth in consumer-packaged infant formula sales volumes over the full year, this growth is not as strong as initially envisaged. The a2 Milk Company’s contribution to this growth has not changed.
  • First half results are also hurt by increased cost for Synlait’s Pokeno Plant.

 

Synlait share price opened at $6.45 on 17 February, (23.56%) lower than the close on February 13. Trading at a two-year low. Current Share Price: $6.50, PE Ratio: 14.16, Target Price: $7.55.

 

Hallenstein Glasson

Tax paid profit for the half year ended 1 February is expected to be between $15.2m and $15.7m, down from NZ$16m a year earlier. Half-year sales rose 5.7% to NZ$160.3m compared to 1HFY19. Full results and a dividend will be released on 27 March. Current Share Price: $5.75, Gross dividend yield: 10.63%, PE Ratio: 11.82.

Oceania Healthcare

Has advised that the strike price for the Dividend Reinvestment Plan (DRP) operating in respect of the dividend payable on 24 February 2020 has been set at NZ$1.1750 per share, a 4.68% discount on current share price of $1.23. This was well received with a large portion of clients participating in the DRP instead of receiving the dividend payment. Current Share Price: $1.23, Gross dividend yield: 3.98%, PE Ratio: 18.44, Target Price: $1.24. 

Upcoming Ex-dividend Dates

 

 

 

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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