Yovich & Co. Weekly Update - 27 August 2012
Aug 27, 2012 | Commentary
This Week's Themes
- Strong reports from local stocks could not stop a sell off last week as global markets fell on expectations that Europe will not find a unified solution to the debt laden Euro zone economies.
- Economic data released last week was mixed. Credit card spending was down in July by 1.5% although it is slightly up from the level last year. Expectations for inflation are unchanged at around 2%.
- U.S. markets dipped from their recent highs as relatively strong economic data reduces the likelihood that the U.S. Federal Reserve will embark on further stimulus in the near future.
- The Kiwi Dollar remained strong and moved above 81 U.S cents.
SKY Network Television (SKT.nz) reported profit of $122.8 million, a 2% increase from the profit recorded last year. The revenue numbers showed higher growth of 5.8% but margin capture was disappointing. Guidance for next year has been lowered with SKY CEO John Fleet admitting that the Olympics coverage was an expensive lesson. SKT offers a defensive cash flow and solid dividend yield of 6.1%.
Telecom (TEL.nz) has announced a 9% increase to underlying earnings of $422 million. Although the result looks strong, there are several factors that are clouding Telecoms future, including a more competitive environment. The new CEO Simon Moutter will not deliver his strategy until early 2013 and along with TEL not providing much guidance regarding earnings for the next year it has seen investors sell TEL shares heavily with the stock falling 14% over the past week.
Chorus (CNU.nz) surprised the market by announcing that they expect to pay a dividend for 2013 of 25.5 cents per share fully imputed. There are concerns that dividends such as this may not be sustainable until the regulatory environment has been defined but it will certainly hold the value of the shares up. A maiden profit of $102 million was posted in its first 7 months after splitting off from Telecom earlier in the year and was inline with expectations.
Summerset (SUM.nz) posted a substantial increase in net profit of $6.9 million with increased sales and developer margins contributing to the result. The result was not as good as expected with resale numbers not hitting the mark but they gave guidance that they are on target to exceed annual profit of $9.7 million. Highlights over the past 6 months have been the developments in Dunedin and a waterfront site in Hobsonville in Auckland. SUM also indicated that they expect to pay their first dividend following the full year 2012 result early next year.
Fletcher Building (FBU.nz) reported a disappointing net profit of $185 million with impairment charges of $132 million significantly impacting the bottom line. Other than a general slow down in construction activity in New Zealand and Australia, the closing of a Formica plant in Spain and the removal of an insulation subsidy in Australia has impacted net earnings. FBU will pay a final dividend of 17 cents in October and takes the yield for the year to 6.1%
TradeMe (TME.nz) beat forecasts by announcing net profit of $75.6 million, a 10% improvement on the figure targeted in their IPO prospectus. TradeMe chairman David Kirk said the results were good to see, especially in “variable” economic conditions. “The business has made a smooth transition to life as a public company. We’ve delivered on the numbers set out in the IPO documents back in December and turned in another year of record profit.” TME will pay their first dividend of 7.8 cents in September.
NZ Oil & Gas (NZO.nz) achieved in increase of revenue of 9% to record net profit of $19.9 million. Prospects for future production rely on the opportunities in Tunisia and Indonesia, with 2014 being the earliest that the Tunisia project will come on board. NZO is in a strong cash position with net cash equalling $162 million, enabling the company to fund these and other opportunities. There will be a dividend of 6 cents paid in September.
Hallenstein Glasson (HLG.nz) provided a trading update, declaring net profit guidance of between $20.4 million to $20.8 million and equating to an increase of 13%. CEO Graeme Popplewell commented “Notwithstanding an exceptionally challenging retail environment all brands have shown positive same store growth and grown market share. Gross margin on sales improved and market anomalies as a result of the Christchurch earthquakes are now behind us.”
Fisher & Paykel Healthcare (FPH.nz) had its annual shareholders meeting and announced altered profit guidance for 2013 to between $65 & $69 million. The improved numbers are a result of better trading conditions and successful application of their growth strategy. The improved revenue in U.S Dollars has been partially offset by an amended assumption for the FX rate of between 78 & 82 U.S. cents.
Skellerup (SKL.nz) reported full year net profit of $24.7 million, up 22% on last years record profit. CEO David Mair said: “Skellerup has high quality assets across both its divisions that have considerable potential. What we are seeing with our latest result is the organic growth opportunities that can be generated from this asset base by focusing on customers, our supply chain and our production capability.” Net debt has improved to $4.3 million and SKL declared a total of 8 cents in dividends for the year, yielding 5% net.
NZ Refining (NZR.nz) provided a first half 2012 briefing with a loss of $1.5 million. The perfect storm continues with the weak U.S. dollar and refining margin significantly impacting on the bottom line. The global refining industry is going through a period of consolidation with un-economic refineries being closed and should reverse the supply pressure and improve margins for NZR.
Fortescue Metals (FMG.asx) result was largely inline with expectations reporting net profit of AU$1.6 billion. FMG is still bullish on the Iron Ore price and are highly geared to the sea born iron ore market with an aggressive US$10.6 billion expansion to triple production. FMG has declared a total of 8 cents of dividends in 2012.
Atlas Iron (AGO.asx) announced 2012 tax paid profit of AU$72.2 million on revenue of AU$617.5 million. This was down on 2011 profit of AU$169 million and revenue of AU$585 million. The second half was weak with only AU$10 million of profit being generated due to wet season difficulties leading to the shipping of mineralised waste that reduced revenues but not mining costs. A dividend of 3 cents per share will be paid in September.
- Results season is coming to an end with announcements in the next week from Heartland NZ (HNZ.nz, Port of Tauranga (POT.nz), Auckland Airport (AIA.nz) and Air New Zealand (AIR.nz).
SKY Network Television SKT SKT.nz Sky TV Telecom TEL TEL.nz Weekly Update Investment Shares Bonds Market Commentary Chorus CNU.nz CNU Summerset SUM SUM.nz Fletcher Building FBU FBU.nz Trademe TME TME.nz NZ Oil Gas NZ Oil & Gas NZO NZO.nz Hallenstein Glasson HLG HLG.nz Fisher & Paykel Healthcare FPH FPH.nz Skellerup SKL SKL.nz NZ Refining NZR NZR.nz Fortescue Metals FMG FMG.asx las Iron AGO AGO.asx