Yovich & Co. Weekly Update - 1 October 2012

Oct 1, 2012 | Commentary

This Week's Themes

  • The New Zealand market continued to edge higher marking another post GFC high last week.
  • The Chinese market rebounded last week after expectations that the China Securities Regulatory Commission will ask local mutual funds to step in and “stabilise” the local market.
  • Spain’s cabinet approved the budget for 2013, with plans to cut the deficit by around 18 billion Euros, although this does not seem to be enough to ensure that they will not require further financial help from the European Central Bank.
  • The NZ Dollar closed the week at 83 US cents with traders chasing the higher yields offered by the NZ Government and local banks.

Investment News

New Zealand Refining (NZR.nz) released their throughput and refining margin for July and August with processing of 7.3 million barrels, exchange rate 0.80 U.S. cents and margins at US$6.10 per barrel. The margin is up on the average for the year which is currently running US$4.81 per barrel. The net result of these figures was a processing fee of $38 million. It is anticipated that the margins will continue to improve but the high NZD value relative to the USD remains a key negative in the short term.

Nuplex Industries (NPX.nz) announced a restructure last week with plans to close three of their seven sites as a result of an assessment of demand conditions which look to remain subdued. The cost of the restructure including redundancy, remediation and write-offs for old equipment will total $16.35 million while also investing $13 million to upgrade capacity at the remaining sites. With a Price to Earnings ratio of 7.9 times, NPX looks to be good value and now that the necessary steps have been put in place to control costs there is now more certainty around future cash flow.

Fonterra announced net profit of $624 million, down 19% compared to last year, although this was significantly impacted by tax credits used in the previous period. When the tax credits are excluded, the net profit after tax has improved 10%. Highlights of the report include a record year for milk flows with an increase of 11%, export volumes were also up 11% and the gearing of the balance sheet is now below 40%. The Fonterra Shareholders Council has voted in favour of the Trading Among Farmers Scheme with 97% support. This is the last of the preconditions to be signed off and gives the TAF scheme the green light, if the fund is to be listed before Christmas we expect prospectuses to be available towards the end of the month.

MOA Brewing Co is a craft beer brewing company from Marlborough and founded by Josh Scott, son of wine maker Alan Scott. MOA is considering listing on the NZX to raise $15 million to fund an expansion of the brewery as well as increase working capital and if approved, it plans to list pre-Christmas. The Executive Chairmen is Geoff Ross who successfully listed 42 Below vodka in 2003.

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Jarrod Goodall

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Shares Bonds Market Commentary Weekly Update Investments Fonterra Moa Brewing Co New Zealand Refining NZR NZR.nz Nuplex Industries NPX NPX.nz


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