Yovich & Co. Market Update - 31 October 2016
Oct 31, 2016 | Commentary
- Shares in NZ have continued their slide, with the correction now reflecting an 8.5% fall from the high of 7585 recoded on the 8th of September. To keep this in perspective, the NZ 50 Gross index is still up 16% for the past 12 months.
- The positive sentiment from the uplift in commodity prices has been short lived across the Tasman as some earnings disappointments prompted a sudden fall in the market last week.
- Markets in the U.S are in a holding pattern as we wait for the Presidential election to start in November.
- Currency markets have been trading in a tight range over the past month and there has been little change against the Greenback and the Aussie.
IFT is scheduled to announce their results for the previous six months on November 11th. In the previous results announcement in May, it was highlighted that there were more deals in the pipeline and in the past six months they have made the following investments:
- ANU Student Accommodation- A 50% stake in in a Joint Venture to develop Student Accommodation in Canberra, and
- Canberra Data Centre – A 48% stake was purchased in July.
First NZ Capital’s previous recommendation was as follows:
Our sum-of-the-parts valuation indicates a $3.72/sh value today, however this translates into a $3.35/sh trading guideline and $3.36/sh target price (previously $3.37) after a typical 10% trading discount. We like IFTs approach and opportunities, but investors will recognise that the portfolio is being rebuilt and likely will take many years to realise gains. We retain our Neutral rating.
In September Bapcor made a bid to takeover Hellaby for $3.30 a share and the share price has moved above this price since the announcement. Today, the independent Valuation report was released and the independent Directors of Hellaby have advised of the following reasons to reject the offer:
The $3.30 Offer Price is significantly below the Independent Adviser’s valuation range of $3.60 to $4.12 per Hellaby share.
The Offer Price of $3.30 per Hellaby share fails to fully value Hellaby’s Automotive Group and, in particular, does not fairly recognise its unique value to Bapcor.
The Offer Price of $3.30 per Hellaby share fails to fully value Hellaby’s other Groups, Resource Services and Footwear.
The Offer fails to reflect the considerable opportunity ahead and the value of Hellaby’s new strategy, strong leadership and clear future plans for growth, both organically and through mergers and acquisitions.
Bapcor’s Offer does not value the significant synergies and other benefits from a merger of the two Automotive businesses, which would be realised by Bapcor, and not by Hellaby shareholders.
The timing of the Offer is opportunistic, is made at a relative low point in Hellaby’s recent financial history, and the Offer Price is below the current share price.
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