Yovich & Co. Weekly Update - 8 October 2012
Oct 8, 2012 | Commentary
This Week’s Themes
- The NZX continues to march upward with further gains after sentiment continues to improve in the U.S.
- The Chinese market was closed for the Moon Festival.
- U.S Purchasing Managers' Index (PMI) surprised to the upside, with indications that Manufacturing activity is increasing.
- On the other hand, Chinese PMI came in below expectations, but was out weighed by the strong numbers in the U.S.
- The Currency fell from a 6 month high this week as jitters surrounding Spain resurfaced and had traders taking profits on the recent rally in the Australasian currencies.
Fisher & Paykel Appliances (FPA.nz) The independent directors have rejected the offer of $1.20 per share by Haier and recommended that shareholders do the same. The valuation by Grant Samuels recommended that FPA was worth between $1.28 and $1.57 per share. At this stage Haier has an agreement in place with the second largest shareholder to take their total shareholding to 37.46%, so only needs another 13% to gain control. The market has reacted positively to the report with FPA shares now trading at a premium over the offer price at $1.245. Haier has stated that they believe that the valuation of $1.28 to $1.57 is “overly optimistic”. The game of Poker has started with Haier making a statement that for FPA to achieve the valuation they would be relying on their 5 year plan playing out, but there was a “high degree of risk” in achieving the plan’s objectives.
ANZ Banking Group (ANZ.nz) announced a branch network reconfiguration programme in Australia as well as the rebranding of the National Bank of New Zealand. The Australian branch reconfiguration is expected to reduce property related expenses by 25% over time. ANZ is demonstrating good industry leadership positioning them as both an attractive cost restructuring story in the domestic Australasian markets as well as being leveraged to Asian growth and banking liquidity pools. ANZ has been a great performer over the past 12 months with a total return of 28%.
NZ Equity Strategy – First NZ Capital Research
- International developments likely to dominate domestic events.
- Key near-term event risks include re-emerging European risks (Spain/Greece), together with some complacency surrounding US fiscal spending.
- Synchronised QE supports global equities, but a consolidation phase is likely before further gains.
- Upcoming NZ AGMs expected to be cautious, but shouldn’t pose undue risk.
- NZ equities supported by lower-for-longer interest rate settings, but global QE reinforce an elevated NZ dollar – sustainable yield an enduring theme.
- Relative risk of NZ equities reduced by earthquake rebuild, albeit direct exposure is limited – supports outlook for mid-to-high single digit EPS growth.
- Valuations full, but not yet fully stretched.
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