Yovich & Co. Weeklyl Update - 13 August 2012

Aug 13, 2012 | Commentary

This Week's Themes

  • The NZX50 was once again strong, with broad buying as positive sentiment emerges ahead of companies reporting this week.
  • There was surprising domestic data released showing a contraction in employment mainly due to a reduction in the number employed in part time work.
  • Earlier in the week there was positive data on wage inflation, showing an increase of 0.5% for the quarter. A strong sign given the sluggish movement in wages since the Global Financial Crisis started in 2008.
  • Offshore markets were also strong with data in the U.S. showing a further pick up in property prices and markets continuing to price in European Central Bank stimulus.
  • The Kiwi Dollar pared the gains that it has made over the past 8 weeks after trading above 82 U.S. cents for the first time since May.

Company News

Steel & Tube Holdings (STU.nz)announced annual net profit of $13.1 million, a fall of 23% on last years result. With exposure to the construction industry it is not surprising to see such a fall in profit but the strong dividend yield of 6.5% pa is helping the share price to hold up. As a play on a pick up in domestic construction, both residential and industrial, STU is well placed to benefit from increased economic activity.

Freightways (FRE.nz) released a strong full year result with profit increasing to $37 million from $30 million in the previous year. The increase in profit of 24% was in part due to increased volumes, better margins and acquisitions in the data management business. EBITDA growth recorded in their core business of express package and business mail was 8% while the main gain was in their newer, information management business with an increase of 18%. FRE has indicated that they expect further growth in 2013 and confirmed a final dividend of 9.5cents, equating to an annual yield of 4.6%.

Rio Tinto (RIO.asx) reported first half earnings of USD10.1 billion and underlying earnings of USD1.15 billion, slightly above expectations. The improved result was mainly due to better than expected results from the Copper, Energy and Diamond businesses. They also mentioned that the Pilbara iron ore network in Western Australia is now operating at increased capacity of 230million tonnes per annum (Mt/a) and that they have shipped their first load of hard coking coal from the Benga Mine in Mozambique. RIO has also been in the news in New Zealand for trying to renegotiate their energy contract with Meridian for the electricity used by the Tiwai Aluminium Smelter in Bluff. RIO has warned of difficult decisions if smelters are not economic, placing political pressure to ensure that the smelter is profitable. Meridian has indicated that they will not enter into talks with RIO while the question mark over Meridian’s largest consumer will also put the Governments plan for partial privatisation at risk.

Other News

  • Stocks hosting their annual meetings this week include DNZ Property Fund (DNZ.nz) and Infratil (IFT.nz).

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Jarrod Goodall



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Weekly Update Investment Shares Bonds Market Commentary Steel & Tube Holdings STU STU.nz Freightways FRE FRE.nz Rio Tinto RIO RIO.asx



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