Yovich & Co. Weekly Update - 6 August 2012

Aug 6, 2012 | Commentary

This Week's Themes

  • It was a strong week across the board. The New Zealand market has now rallied 5% over the past 5 weeks.
  • The Federal Reserve and the European Central Bank both disappointed by not making any firm announcements about further stimulus measures.
  • Despite this, markets were buoyant, helped by positive job numbers that were announced in the U.S.
  • Risk appetite has increased resulting in a further increase in the Kiwi dollar. The NZD ended the week at its highest level since May, just shy of 82 U.S. cents.

Company News

TrustPower (TPW.nz) announced their first quarter result last week with a slight drop in sales and production compared to the corresponding period last year. The small reduction in performance is not surprising considering the strong growth that TPW has delivered with 10 consecutive years of increasing profits. TPW is currently raising cash through a subordinated bond offer to replace existing debt facilities. The indicative coupon rate is between 6.75 & 7% with payments made quarterly. The term is 7 years with a maturity date of 15 September 2019. Applications need to be received before 11 September 2012.

Fletcher Building (FBU.nz). Building consents issued in New Zealand have increased indicating that the Christchurch rebuild is starting to pick up momentum. New Zealand recorded 15,400 new building consents in the year to June, an increase of 14% on the previous year. This corresponds with the expectation that Australia is near the trough for their building cycle and is placing a ceiling on the share price. FBU remains a stock that clearly has the potential for a rally but will need to see a turnaround in their Australian business before the stock price moves significantly.  

Bathurst Resources Limited (BTU.nz) is a producer of high quality hard coking coal used in manufacturing steel. Since the acquisition of L&M Coal Limited in November 2010 they are now focussed on Coal Mining in the Buller Region in the South Island. The flagship mine of the Buller Project is the Escarpment mine on the Denniston Plateau, near Westport. This mine will be open cast and is well located to rail, power, infrastructure and the Port in Westport. If the consents are successful, the Buller Project is expected to add over 2 mega tonnes per annum of production to BTU within the next 4 years. The current share price of 39 cents is not reflective of the value that this project will add. The company is confident that the environmental consents will be granted at the Appeals Hearing on the 29th of October and could provide a catalyst for the share price to move higher.

Other News

  • Stocks hosting their annual meetings this week include Goodman Property Trust (GMT.nz) and Kiwi Income Property Trust (KIP.nz).

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Jarrod Goodall



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weekly update investment shares bonds market commentary trustpower tpw tpw.nz fletcher building fbu fbu.nz bathurst bathurst resources limited btu



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