Yovich & Co. Market Update - 27 February 2020

Feb 26, 2020 | Commentary Education

27 February 2020

New Zealand Equities

Market update 2020-02-27

In summary, the NZX50G had 21 companies on the downside 3 remained unchanged and 27 companies were on the upside. The NZX50G made history last week at a new record high of 12107 to close the week at 12073 this is in spite of the fear developing around COVID-19. Early this week has seen a lot of selling pressure. On February 24 the NASDAQ and S&P 500 closed down 3.70% and 3.35% respectively. The NZD has been depreciating against major trading partners as NZ starts to feel the effect of the COVID-19. While the lower NZD is good for exporting industries, if this continues NZ imports will start to be expensive to our trading partners. Clients talking to their advisers will have noticed that their adviser may have been trimming a portion of the international equities to take profits due to the low NZD. The Global Dairy Trade auction was down 2.9%, average price was US$3,176 per tonne.

Biggest movers 2020-02-27

Investment News

Seeka


Tax paid profit for year end 31 December 2019 was up 3.5% at $6.8m, total revenue up 16% at $23.8m. Sale of its Northland orchard portfolio totalling $10.1m is now complete and this will be used  to reduce debt, along with another $4.95m from an unrelated unconditional sale which settles on April 9. Total gross sales to date is $51.7m and the gain on sales is $6.1m. All sales to date have included a term supply commitment back to Seeka. Seeka has embarked on a strategy of refurbishing the orchards then selling orchards with committed supply. A significant rebuild of the post harvest facility, with $27.4m invested in the facility to date, including original acquisition costs, is another part of Seeka’s strategy. A final gross dividend of 16.67 cents per share with an ex-dividend date March 18 is payable April 17. Current Share Price: $4.25, Gross dividend yield: 7.84%, PE Ratio: 19.34, Target Price: $6.28.

Summerset


Underlying tax paid profit for first half FY20 ending 31 December was up 8% at $106.2m. Net profit, which includes the impact of unrealised movements in the fair value of investment property, was down 18% on FY2018 at NZ$175.3 million. Total assets up 21% at NZ$3.3b. Land bank total of 5,380 retirement units and 826 care beds. Summerset expands its Australian portfolio with a 8.3ha property in Torquay, on the Bellarine Peninsula southwest of Melbourne. Final gross dividend of NZ 7.7 cents per share, with an ex-dividend date March 9 and a payment date March 23, brings the total dividend payment for 2019 to NZ 14.1 cents per share, up 6.8% on 2018. Current Share Price: $8.10, Gross dividend yield: 1.68%, PE Ratio: 10.45, Target Price: $8.25.

Freightways


Tax paid profit for the first half FH20 ending 31 December was down 13% at $29.1m. Total revenue was up 1% at $318.9m. Net tangible assets increased to $0.58 per share from $0.52. Freightways has four main revenue streams: Express Package, Postal, Storage & Handling and Destruction Activities. Of these the Destruction Activities showed the greatest increase of 6.1% to $31.9m. The Agreement to acquire Big Chill Distribution Limited is pending Overseas Investment Office approval, which is expected around the end of Q3 FY20. A gross interim dividend of 20.83 cents per share, with an ex-dividend date March 12 is payable April 1.  Current Share Price: $7.85, Gross dividend yield: 5.40%, PE Ratio: 20.63, Target Price: $8.20.

Spark NZ


Tax paid profit for first half FY20 was up 9.2% at $167m, revenue up 4% at $1,824m. This is the strongest revenue growth in three years achieved through particularly strong performance in mobile, with high-margin mobile service revenue up 5.5%. Revenues were also buoyed by cloud, security and service management growth (up 12.3%). Spark Chair Justine Smyth said the Company’s shift to Agile ways-of-working and its long-term investment in IT and network infrastructure was delivering better experiences for its customers and people and supporting robust performance. An interim gross dividend of 16.15 cents per share with an ex-dividend date March 12 is payable April 3. Current Share Price: $4.70, Gross dividend yield: 6.86%, PE Ratio: 20.43. 

Scales


Tax paid profit for FY19 ending 31 December 2019 was up 196% at $121.5m due to gains made from the sale of its cold storage business ($73m) and part sale of Meateor’s NZ operation ($9.8M). Underlying net profit was up 2% at $36.4m. Scales remains committed to reinvesting the proceeds from divestments and is making significant progress in developing both organic growth opportunities, as well as reviewing and progressing a number of prospective acquisition opportunities.  The purchase of 60% of US based pet food ingredients business Shelby Foods in December 2018, delivered a pleasing result for its first year. Underlying Net Profit guidance (FY2020) has been reconfirmed by the Board at between $30m and $36m. Current Share Price: $4.40, Gross dividend yield: 6.00%, PE Ratio: 12.78, Target Price: $4.77.

Mercury Energy


Tax paid profit for first half FY20 ending 31 December was down 20.2% at $83m, revenue down 14% at $928m. Net tangible assets per share have increased from $2.32 to $2.50. Below average generation and the divestment of smart metering business Metrix impacted Mercury’s earnings. Lower generation was due to drier conditions in the Waikato and important scheduled maintenance on several geothermal stations. An interim gross dividend of 8.89 cents per share with an ex-dividend date Mach 12 is payable April 1. Current Share Price: $5.08, Gross dividend yield: 4.24%, PE Ratio: 20.60.

EBOS


Tax paid profit for first half FY20 ending 31 December was up 15.8% at $84.2m revenue up 25.2% at $4.4b. Earnings per share were up 9.1% at 52.2 cents per share. EBOS had very strong performance in the Community Pharmacy business demonstrating its leading position with revenues increasing by 35.4%. The Directors declared a gross interim dividend of NZ 41.15 cents per share, an increase of 8.7% on the prior corresponding period. The interim gross dividend of 41.15 cents per share with an ex-dividend date Mach 12 is payable April 3. Current Share Price: $24.50, Gross dividend yield: 3.20%, PE Ratio: 24.56.

Meridian Energy


Tax paid profit for first half FY20 ending 31 December was up 26% at $191m, a record high. Along with a record level of hydro generation in New Zealand, the results reflect significant customer and sales volume growth across all segments, including a 39% growth in corporate sales. The outcome of the strategic review into New Zealand Aluminium Smelter (NZAS) by the Tiwai smelter's shareholder Rio Tinto PLC will affect Meridian and the broader industry. This review is scheduled for completion by the first quarter ending March 31, 2020. An interim gross dividend of 7.61c and a special dividend of 2.44 cents per share with an ex-dividend date Mach 30 is payable April 16. Current Share Price: $5.04, Gross dividend yield: 5.32%, PE: 34.17.

 

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Nathanael McDonald



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