Yovich & Co. Market Update - 19 May 2020
May 18, 2020 | Commentary
19 May 2020
As of 11.59pm 13 May New Zealand is at alert level 2, and we will be progressively moving back to the office when practically possible. COVID-19 has not affected any services Yovich & Co provide and remember to keep up with social distancing, stay safe and shop local.
New Zealand Equities
In summary, last week the NZ50G saw 25 companies on the downside, 5 remained unchanged and 20 on the upside. The Reserve Bank has announced that it plans to commence the large scale asset purchase (LSAP) of potentially up to $60b New Zealand government nominal bonds (NZGB), up from the previous $33b limit. These purchases support the economy by pushing down longer-term interest rates, depreciating the NZD and reducing the Government’s funding costs. This allows the Monetary Policy Committee (MPC) to influence key interest rates in New Zealand without altering the OCR (RBNZ). As expected the OCR is to stay at 0.25%. Budget 2020 was announced 14 May. The government has allocated a slush fund of $50b to COVID-19 recovery ($14b already allocated),$16b allocated in the 2020 Budget and $20b unallocated, expect some of the $20b to be allocated pre election. Net debt to GDP expected to reach 54% by 2023/24, reducing to 40% by 2034. Unemployment is forecast to increase significantly, peaking at 9.8 per cent in the September 2020 quarter before recovering thereafter. (The Treasury, Stats NZ). Click on this link to view the Wellbeing Budget 2020 highlights https://budget.govt.nz/budget/2020/wellbeing/index.htm. As investors try to navigate the post COVID-19 world, Yovich & Co are advising that if clients’ goals and time frames have not changed then to stay the investment course. If at all concerned please contact your adviser.
Hallenstein Glasson Holdings
Tax paid profit for the 6 months ending 1 February was down 3.8% at $15.44m (impacted by the new IFRS16 standard). Group sales were up 5.7% at $160m, 6 months earnings per share was down at $0.2588 from $0.2689. Gross margin on sales was 58.3% versus 59.8%, due to exchange rates and higher promotional activity in the competitive market place particularly during November and December. E-commerce increase 15% (remember this is pre-COVID-19) over all groups. The board has found it prudent not to pay an interim dividend, this will be reassessed at the end of FY2020 (August). Current Share Price: $4.11, Price/NTA: 3.35, EPS: $0.47, PE ratio: 8.76.
Bank of New Zealand (“BNZ100”) Bond
Matures 18 June 2020, final day of trading is 4 June 2020, payment pate 18 June. If you hold this bond in your portfolio, contact your adviser to find a new asset to reinvest funds.
Group revenue dropped on average by about 32% during the month of April, but showed a steady improvement through that period of time, both in volume and in the type of activity being performed. An additional $50m of debt facilities, and an extension of existing facilities maturing in 2021 by 2 more years, increases Freightways available headroom to $100m. Estimates are that Freightways would need to see no material improvement in trading conditions for the next 4-5 months before its ND / EBITDA covenant was breached, which appears very unlikely. Current Share Price: $7.25, EPS: $0.38, PE ratio: 19.05, Target price: $8.20.
Has re-opened its NZ and Australia dental practices since the start of alert level 2. Both networks have recommenced marketing, including promotion of payment plans such as interest free and pay later options, and booking patient appointments. Additional costs will be incurred with re-opening practices, including additional sanitisation and cleaning protocols to ensure equipment is ready for use. Returning to a full range of dental services will provide a benefit in the final two weeks of Abano’s FY20 financial year (ending 31 May 2020). The company has therefore extended its guidance range for FY20 to be underlying EBITDA of between $17m and $20m. Current Share Price: $2.35, EPS: $0.065, PE ratio: 35.71.
Under alert level 2 is fully open. Turners has been able to operate at reduced levels under previous alert levels. Trading levels for April reflected levels significantly better than initial projections made at the commencement of Level 4 lock-down, with three of our four businesses (Oxford Finance, Autosure Insurance and EC Credit Control) trading in profit. Turners reaffirms that its FY20 result is expected to be within previously stated guidance of $28-$30m net profit before tax. Current Share Price: 1.65, Price/NTA: EPS: $0.23, PE ratio: 7.03.
Third quarter ending 31 March saw like for like net property income grew 2.1% at $74m from $72.4m, “Directors valuations” showed net revaluation gains of NZ$8m, externally portfolio valuations will be released 30 June 2020. Settlement of the three Australian aged care assets for a total of NZ$59.1m. Which are leased to one of Australasia’s oldest and most reputable operators, Bolton Clarke, for a weighted average lease expiry (WALE) of 16.5 years and provide a 6.5% yield on the purchase price. Debt to net assets up 2.5% at 37.6% from 35.1% and net tangible assets per unit lightly lower at 1.8% at $2.32. Gross dividend of 2.74 cents per share with an ex-dividend date 10 June payment date 25 June. Current Share Price: $2.40, Price/NTA: 1.03, EPS: $0.29, PE ratio: 8.34.
Confirms it has filed a Statement of Claim in the High Court of NZ seeking orders that Asia Pacific Village Group Limited (APVG) fulfil its contractual obligations under the Scheme Implementation Agreement (SIA) entered on 29 December 2019. Metlifecare believe that there is no lawful reason to terminate the SIA that APVG would purchase all of Metlifecare’s shares for $7.00. The matter is expected to initially be heard in the High Court on 28 May 2020, at which time Metlifecare will make a request for an expedited court timetable. Current Share Price: $4.30, Price/NTA: 0.61, EPS: $0.185, PE ratio: 23.29.
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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