Yovich & Co. Weekly Update - 9 July 2012
Jul 9, 2012 | Commentary
This Week's Themes
- The retailers and Fletcher Building lead the New Zealand market higher last week as Australasian markets try to catch up to the strong rebound in U.S. and Europe markets since the Greek Elections.
- U.S. markets gave up the week’s gains after a poor report was released outlining that only 80,000 new jobs were created in June compared to the 100,000 that analysts were expecting.
- The U.K. market was strong after the Bank of England announced that they plan to boost stimulus with an investment of £50 billion pounds into the English economy.
- The NZD dipped below 80 cent U.S after the non-farm payroll report in the U.S. saw risk being taken off the table.
- The GlobalDairyTrade Auction resulted in the Dairy price falling 5.9%. Commodity prices continue to weaken with the ANZ commodity index sitting at a 21 month low.
Summerset Group Holdings (SUM.nz) released a trading update last week outlining a strong first half for sales with 83 new sales and 88 re-sales. First NZ Capital are forecasting profit for the year to be $14.9 million, an increase of 84% compared to last year’s profit of $8.1 million. SUM is proving that they are able to deliver on their growth strategy and is well positioned to benefit form the ageing population demographic.
Fletcher Building (FBU.nz) announced the sale of their metals distributions business for $70 million and that they also intend to sell other non-core businesses. The market reacted well to the news with the stock surging to end the week 5.6% higher.
New Zealand Refining (NZR.nz) has not performed as we expected since Shareholders approved the CCR project in April. The anticipated value added by the project is expected to be 75 cents per share once the project is completed in 2016. Despite the positive implications for the project, we have seen a reduction in the price of NZR to $2.32 compared to $2.85 before the vote. As well as the high Kiwi dollar and the low Singapore margin affecting the stock price, it is also the uncertain and likely to be low dividend yield while the CCR project is being funded that is weighing on the stock. This is prompting investors to sell in search of a better short term return. If you are willing to take a long term view till after CCR project is completed, NZR looks to be good value at these prices, especially if the NZD and Singapore margin return to more ‘normal’ levels.
- The Reserve Bank of Australia sliced rates for the second month in a row. The rate is now 3.5% after this month’s cut of 0.25%. The RBA identified slow global growth and further risk from deterioration in the Euro Zone as reasons for the cut.
- The New Zealand Government announced that the planned changes to the Emissions Trading Scheme will be suspended indefinitely.
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