Yovich & Co. Weekly Update - 28 May 2012

May 28, 2012 | Commentary

This Week's Themes

  • Global markets were mixed with U.S. and U.K. markets bouncing back while Asian markets were still bearish.
  • Eyes are still on Greece and the election that is scheduled for 17 June after the May elections resulted in a coalition not being formed.
  • The “Zero Budget” was announced with few surprises. I would sum it up as prudent, with little growth policy in uncertain economic times.

Company News

Argosy Property Limited (ARG.nz) – has achieved a net distributable income of $33.4 million which, despite the sale of 15 properties during the year, is comparable to the previous year’s $33.5 million. The successful internalisation of the management contract in August 2011 delivered significant savings. They declared a 6 cent dividend for the year and guidance for a similar level in 2013. That equates to a Gross Yield of 9.6%.

NPT Limited (NPT.nz) – announced trading profit of $9.3m although after unrealised gains and loses the after tax loss was $2.298m. After the corporatisation in April 2011 there has been savings of $728,000. The dividend payout has been increased to 4c, with a final div of 1.75 thanks to most of the issues affecting the Christchurch assets being resolved.

Pharmacybrands (PHB.nz) – posted a 93% jump in 2012 profit. The net profit was $9.9, up from $5.16m mostly due to the acquisition of Radius Pharmacy and Radius Medical.

Comvita (CVT.nz) – posted a net profit of $8.2 million compared to $0.5 million last year with sales growth of 17%. Positive sales trends were seen in NZ, Australia and Asia while the economic climate in Europe had impacted sales in that region.

Xero (XRO.nz) – increased revenue by 107% from $9.3m to $19.3m in 2012 with significant offshore growth of $5.6m. Revenue from offshore markets now makes up 52% of income. They added 42,000 new clients last year with a total of 78,000 business customers. With a proven product and cash of $39m, Xero are well placed for continued growth although underlying losses are of concern.

Iluka Resources (ILU.asx) – said at their AGM that they expect earnings to rise in 2012 despite weakening Zircon demand. The company still expects an increase in earnings and will keep a cash buffer until volatile markets subside. Iluka was also added to the conviction buy list by Goldman Sachs.

Other News

  • Earnings results to keep an eye out for this week include Mainfreight.
  • Facebook has slumped after the hype of the first day, shares traded below $31 this week, representing a fall of 19% from its IPO price of $38. The current price for Facebook is based on future earning potential from online advertising. As a comparison with Google, which earns the majority of its revenue from online advertising, FB is being priced at over 100 times current earnings while Google is much cheaper at only 18 times.

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Jarrod Goodall



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