Yovich & Co. Market Update - 18 January 2016

Jan 18, 2016 | Commentary

Changes in Market

  


 

Market Themes

  • It has been a tough start to the year for markets with growth concerns out of China spooking investors.
  • The New Zealand market has held up relatively strongly, recording a negative return of around 3% since January 5th, a much smaller fall compared to the major markets around the world.

  • Commodity and energy prices have also tumbled to cyclical  lows as resource companies and the major oil producing nations continue to ramp up supply despite lack lustre demand.

  • Of the two market conditions and events above, I am most interested in the the resource and commodity sectors. I think that this will be where the biggest concerns will be centred and it is difficult to see that the volatility in these markets will return to normal, as all of the big low cost producers seem dedicated to increase volumes instead of improving margins.

  • As we continually mention, the general increase in volatility provides opportunities to pick up good quality companies at good prices.

  • With traders reducing risk over the past four weeks, we have seen the USD strengthen significantly against the Kiwi.

Investment News

The New Zealand Refining Company (NZR.nz) – Record Fee and Volume.

The following is extracted from the market announcement from 19 January 2016:

“Refining NZ finished the year with an all-time record Processing Fee for the year of NZD 378.7 million. This was earned on a throughput of 42.6 million barrels, another all-time record and 4.5% ahead of our original guidance of 40.8 million barrels.

The Gross Refinery Margin) (GRM) for the November/December period – prior to Cap adjustments – was USD 10.82 per barrel, resulting in a Processing Fee income of NZD 72.6 million. The Cap adjustment for the period was NZD 7.2 million and for the full year ended at NZD 14.4 million.

The Singapore complex margin for the period strengthened to an average of USD 6.37 per barrel. Refining NZ’s margin uplift over the Singapore complex margin was USD 4.45 per barrel. A throughput of 7.0 million barrels was achieved for the period.

The Te Mahi Hou project was started up during the last week in November and is operating in line with expectations.”

The following forecasts are taken from First NZ Capital Research dated 16 November 2016 and does not take into account the most recent announcement. We believe that these could be revised up given the strength of the result and we are expecting a strong dividend to be announced for March 2016.

Financials & Forecasts

 

 

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Jarrod Goodall



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Weekly Update Investment Shares Bonds Market Commentary Year in Review The New Zealand Refining Company NZR.nz



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