Yovich & Co. Weekly Update - 25 June 2012

Jun 25, 2012 | Commentary

This Week's Themes

  • The economic release for GDP in the March Quarter surprised with growth of 1.1%. The positive result had little impact on the market with current sentiment for the economy being poor.
  • The New Democracy Party has formed a coalition after the Greek elections. This is a good result for the Euro with the coalition committed to austerity and the European Union. This has halted concerns that the European Union will break up but the focus now turns to the possibility of a fiscal and banking union. This would ultimately take the power away from European governments to over spend like they have done, but will also inhibit a country’s ability to stimulate their economies in times of recession.
  • The US Federal Reserve disappointed the market by not announcing further stimulation despite cutting its forecast for US growth. US markets were mixed for the week with the tech sector outperforming the wider market.

Company News

APN Media (APN.nz) has acquired an 82% share in brandsExclsuive, an Australian online shopping website for A$36 million. The purchase confirms APN’s strategy to increase their stake in the eCommerce sector and reduce their reliance on news. brandsExclusive is an online club that offers discounts on premium consumer goods and compliments APN’s existing websites such as GrabOne.

Renaissance Corp (RNS.nz) announced the sale of its IT distribution division to Exeed Ltd, halving the size of its balance sheet. The IT company has had the right to distribute Apple products in New Zealand, but with reduced credit and shrinking margins the distribution business has not been performing. The market reacted positively to the news.

Mighty River Power has been granted resource consent for a 53 turbine wind farm in the Manawatu. It might be a while before development starts but with the multi year lead time to secure resource consent it is a valuable option to have as demand for power increases. Mighty River Power is also building a geothermal power plant near Taupo which will be on the grid in mid 2013. 

Other News

  • The passing of the Assets Sales Bill has been delayed by the opposition but is likely to become law this week. It has been mentioned that the size of the share parcels might be as little as $1,000 to ensure that most New Zealanders are able to participate in the offer. 
  • The vote on the Fonterra Trading Amongst Farmers (TAF) scheme was contradictory. 66.45% voted for the scheme where a 50% majority was required, but the vote to change the constitution missed the 75% threshold required with 72% in favour. It appears that there will need to be a second vote on the change in the constitution to give the board authority to implement the TAF.

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Jarrod Goodall

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