Yovich & Co. Weekly Update - 17 March 2014

Mar 17, 2014 | Commentary Offers

March 17th 2014

Changes in Market

This Week’s Themes

  • The most significant event last week was the Reserve Bank’s announcement that they have raised the OCR 25 basis points to 2.75%. This is the first move since March 2011and the share market’s reaction was muted as the move had been anticipated. I found it more interesting that they intend for the rate to continue to move upwards throughout the year to a possible 3.75%. This looks very aggressive considering that New Zealand is the only Western economy looking to raise rates.
  • The listing of Genesis Energy was announced by the Government. Below is a summary of the offer.
  • Rising tensions in Ukraine and weak Chinese data proved enough reason for investors to take profits in the Aussie market after it reached post GFC highs the week before.
  • The possibility of war in the Ukraine also dragged most other markets down last week.
  • The OCR announcement helped push the Kiwi towards 95 Aussie cents, close to a post float high.

Investment News

Genesis Energy Listing – Deal Details:

Last week the Government announced the details for the listing of Genesis Energy. Unlike the previous listings, we are able to make a bid as a firm and this will give our clients the best chance to get all the shares they are after. We need to receive your orders BEFORE CLOSE OF BUSINESS ON WEDNESDAY THE 26th OF MARCH (next Wednesday).

  • Indicative price range - $1.35 to $1.65 per share (final price set via a book-build on 27 & 28 March.)
  • Indicative Dividend Yield – 2014 – 10.8% to 13.2%. 2015 – 13.5% to 16.5%.
  • Loyalty Shares – 1 for 15 shares, maximum of 2,000 bonus shares if owned for 12 months.
  • Minimum Application - $1,000 worth of shares.
  • Firm Offer Orders Close Date – 26 March 2014.
  • General Offer Open – 29 March 2014.
  • General Close Date – 11 April 2014.
  • Intended NZX Listing Date - 17 April 2014.

When comparing the relative values against the other listed electricity companies, Genesis looks like a good deal. The below table compares the Enterprise Value of each company compared to their Earnings, this is the metric commonly used to value Electricity Generators. A lower number indicates better value.

Share performances

Investors should also consider their current exposure to the energy sector as a change of Government could have a significant impact on the value of all of these companies.

 

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About the author



Jarrod Goodall



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