Yovich & Co. Weekly Update - 19 August 2013
Aug 19, 2013 | Commentary
This Week's Themes
• The local market continues to trade in a narrow range between 4500 and 4600 as the results season delivers mixed announcements from the large constituents in the index.
• The Australian market traded close to post GFC highs, helped by a record result from the Commonwealth Bank of Australia (CBA), the largest company on the ASX.
• U.S. stocks went the other way and tumbled on Thursday after poor earnings were announced by Wal-Mart and Cisco.
• The Kiwi continued to recover after Fonterra's Botulism scare trading close to recent highs against both the Aussie and U.S. dollars.
Methven (MVN.nz) – Buying Opportunity after Good Result and Price Dip
Methven has been on my radar over the past 18 months as I look for businesses that have a clear growth strategy and high dividends and Methven is a company that ticks both of these boxes. Also appealing to me is their strategy of pursuing opportunities in China and other emerging markets. In the AGM, they highlighted their takeover of Invention Sanitary, a premium Chinese tapware and valve manufacturer. This acquisition helps secure the supply chain for Methven and ensures global competitiveness while adding $3 million in earnings per year. Since the result announcement, the share price quickly moved up to $1.45 but has since dropped back to a pre announcement price of $1.26 as the dust settled. First NZ Capital values Methven at $1.73 using the Discounted Cash Flow methodology and has assigned an outperform rating and $1.50 target price reflecting uncertainty in the European and Australian markets. A 4.5 cent dividend was also declared indicating a gross dividend yield of around 8.5%.
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