Yovich & Co. Market Update - 21 November 2016

Nov 21, 2016 | Commentary

Changes In Market

 

 

 

Market Themes

  • The correction on the NZX might have found a floor as we have bounced off the low that was reached on November 9th. The fall from the all time high to the recent low represents a 12.5% sell off.
  • Resource Stocks in Australia have continued their march higher with the S&P ASX 200 Resources index now recording a 61% gain since the 10 year low recorded in January.
  • Volatility which is measured by the Chicago Board Options Exchange VIX index has returned to normal after spiking during the US Election day. US Markets have reacted positively to the Trump win with the S&P500 now sitting back at all time highs.
  • The Trump victory has also seen the US Dollar index rally as expectations for inflation and stimulatory government spending increase.

Investment News

Ryman Healthcare  (RYM.nz) – First Half Result

Ryman Healthcare’s underlying profit rose 9% to $76.5 million in the first half, while valuation gains lifted reported profit after tax by 41% to $187 million. Ryman shareholders will receive an increase of 16% in their interim dividend to 8.5 cents per share, which will be paid on December 9. The record date for entitlements is December 2. Chairman Dr David Kerr said strong gains from the resale of occupancy rights had driven the result and, as previously signalled, a busy construction programme has set the stage for a bigger second half.

“We've made good progress thanks to growing resident demand for our unique Ryman-style villages and a strong real estate market. The four new villages we opened this year are rapidly expanding to meet that demand, and are on track to be completed within the next 12-18 months."

On completion the four new villages in Birkenhead, Rangiora, Pukekohe and Petone will collectively be home to over 2,200 residents.

Shareholders’ equity had increased by 23% to $1.46 billion compared to last September, as pent up gains in the portfolio continued to lift. A strong balance sheet and growing operating cash flows had allowed Ryman to invest a record $272 million in new villages, innovation and upgrades to existing villages during the half. Occupancy in Ryman’s established care centres was running at 97% during the first half, well ahead of the industry average of 89%.

Dr Kerr said the first half had been the busiest on record across all fronts, and had also seen the successful implementation of several new innovations. All of Ryman’s frontline village staff received new uniforms, and the rollout of the first stage of Ryman’s new app, myRyman Roster, was close to completion. Project Delicious, a revamp of Ryman’s food delivery, was also on its way to villages.

“Our focus continues to be on delivering a better experience for our residents and our staff,’’ Dr Kerr said. “The innovations we’ve introduced at our villages have been really well received, and the next cab off the rank is food service. Food is a subject close to our residents’ hearts, and we think Project Delicious will win a lot of fans.’’

Tegel  (TGH.nz) – Recovery in Poultry Price

Frist NZ Capital has commented with the following:

On Statistics New Zealand (Stats NZ) data, poultry retail prices were up approximately 4.5% in October compared with September and were also broadly flat year on year in October. This compared with an approximately 10% year on year decline reported for the September quarter. While this series can be volatile, we view this turnaround as an indication that we may be through the worst of the oversupply conditions endured by the poultry industry in the past year.

TGH is well positioned to enjoy a further rise in poultry’s share of the NZ consumer’s meat-protein plate over time, in our view. TGH’s business strategy is also positioning the company to capture potential growth in demand for higher convenience consumer products, as well as the opportunities arising from both existing and new export markets that are becoming available for NZ poultry products.

The 12 month target price remains unchanged at NZ$2.10: This is based on our rolled forward NZ$1.98 spot DCF valuation. 

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Jarrod Goodall



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