Weekly Market Update and Spotlight on Port of Tauranga: A Key Player in New Zealand's Industrial Growth.

This past week saw a mix of movements across major indices, driven by various global and domestic factors. The NZX 50 fell by 0.66% to close at 12,447.68, reflecting cautious sentiment among investors as global economic uncertainties continue to weigh on the market. Specific declines in key stocks, such as those in the technology and consumer sectors, contributed to the overall dip.

However, despite the market dip, recent data from ANZ's Business Outlook has shown a significant boost in business confidence, soaring to its highest level in a decade. The surge in confidence is driven by optimism regarding future economic conditions and expectations of improved business activity, signalling a potential turnaround in market sentiment as the year progresses.

Conversely, the All Ordinaries in Australia rose by 0.82%, buoyed by strong performances in the financial and materials sectors. This uptick can be attributed to positive corporate earnings reports and a general sense of optimism in the Australian market. The Dow Jones Industrial Average also experienced a notable gain of 0.94%, reaching 41,563.08, driven by solid earnings in several blue-chip companies.

Meanwhile, the Nasdaq saw a decline of 0.92%, largely due to disappointing results from tech giants like NVIDIA, which fell short of market expectations despite strong year-over-year growth.

NZD gained against both the AUD and USD, reflecting stronger business confidence and expectations of economic stability in the near term.

 Weekly Market Movers

Investment News

Heartland Group Holdings (HGH.NZ): Heartland Group Holdings recently reported its FY24 results, showing a solid performance driven by growth in its core loan book, particularly in reverse mortgages and motor vehicle financing. However, the company has highlighted that higher interest rates and increased funding costs are putting pressure on margins. This has resulted in a decline in key metrics like net sales and net income.  Despite this, Heartland remains optimistic about the future, citing strong demand for its niche financial products.

Heartland's strategic focus is now on digital transformation, aimed at enhancing customer experience and improving operational efficiency. This strategy is expected to help the company navigate the current economic challenges and support long-term growth. While profitability has been squeezed, Heartland's solid financial management and strategic initiatives provide a pathway for potential recovery and continued success in its niche markets.
Current Share Price: $1.09, Consensus Target Price: $1.31, Consensus Forecast Dividend Yield: 8.1%, Total Return: 28.3%

Ryman Healthcare (RYM.NZ): Ryman Healthcare has been navigating significant financial and operational challenges, leading to a drastic drop in net profit from NZ$257 million to NZ$4.8 million. This sharp decline is largely due to rising construction costs, delays in new village developments, and higher operating expenses outpacing revenue gains. In response, Ryman has implemented a strategic overhaul, including raising prices for new residents, suspending new construction projects until 2026, and restructuring its senior management team, with three top executives made redundant.

These changes aim to stabilise finances and ensure long-term sustainability. The company is also adjusting its deferred management fee and weekly charges for new residents to better cover rising costs. Despite the current challenges, Ryman remains committed to completing ongoing projects and is positioning itself to benefit from more favourable economic conditions in the future. The outcome of these strategic initiatives will be crucial for its recovery and growth.

Current Share Price: $4.96, Consensus Target Price: $6.08, Consensus Forecast Dividend Yield: 0%, Total Return: 22.6%

Genesis Energy (GNE.NZ): Genesis Energy has recently been in the news for its commitment to transitioning away from coal by 2025, as part of its broader sustainability strategy. The company is investing heavily in renewable energy projects, including new wind and solar farms, to replace its coal-based generation. Genesis also reported strong financial results for FY24, with increased earnings from its retail segment due to higher electricity prices. However, the company faces challenges related to the volatility of energy prices and the need to balance its generation mix to ensure a reliable supply of electricity​. However, the company’s commitment to sustainability and its strong financial performance highlights its positive future outlook.

Current Share Price: $2.23, Consensus Target Price: $2.54, Consensus Forecast Dividend Yield: 8.6%, Total Return: 22.8%

Spotlight on Port of Tauranga: A Key Player in New Zealand's Industrial Growth

The industrial sector in New Zealand, particularly the companies within the NZX 50, have recently been trading at a discount. This presents significant upside potential, especially as the broader economic environment hints at recovery. This is notably true for sectors like logistics and transportation, where companies like Port of Tauranga are crucial to New Zealand’s infrastructure and economy. As expectations for lower interest rates and improved economic conditions grow, these industrial giants are well-positioned to capitalise on new opportunities and drive forward their strategic initiatives.

GICS Sector: Industrials; NZX 50 Companies; Sources: IRESS, Yovich & Co. Wealth Management

Company Profile: Port of Tauranga, New Zealand's largest port, released its annual financial report on August 23, 2024, demonstrating resilience in a challenging economic environment. The company remains a key player in New Zealand’s logistics and infrastructure, with ongoing investments in capacity and technological upgrades.

Fundamental Analysis

Port of Tauranga reported a revenue of NZD 417 million for FY2024, with a forecasted growth of 5.77% in FY2025. Despite the global economic uncertainties, the port's EBITDA margin remains strong at 47.03%, highlighting operational efficiency. However, the growth rates in key financial metrics show some declines, with Net Sales Growth at -0.84%, EBITDA Growth at -5.65%, and Net Income Growth at -22.44%. These figures reflect the impact of the challenging economic conditions but also set a new base for potential recovery as market conditions improve.

Profitability and Margins
Port of Tauranga maintains robust profitability metrics, with a Return on Equity (ROE) of 4.21% and a Return on Assets (ROA) of 3.39%. These figures, although modest, are expected to improve as the company leverages its strategic investments in infrastructure. The port's EBIT Margin stands at a healthy 37.14%, and its Net Profit Margin is 21.77%, indicating strong profitability despite the downturn.

Capital Structure and Debt Management
The port’s capital structure is conservative, with a Total Debt to Equity Ratio of 0.24 and Net Debt to EBITDA at 2.59, reflecting a strong balance sheet and manageable leverage. The Interest Cover Ratio (EBIT) is 6.75, indicating that the company comfortably meets its interest obligations. This conservative approach to debt positions Port of Tauranga well for future growth, allowing it to invest in expansion without compromising financial stability.

Recent Developments and Strategic Initiatives
Port of Tauranga has completed several significant projects, including dredging operations to accommodate larger vessels and the expansion of inland freight hubs. These initiatives are designed to enhance the port’s capacity and efficiency, ensuring it remains competitive on a global scale. The port's recent focus on automation and technological upgrades is expected to drive long-term cost savings and operational improvements.

Analysts have maintained a positive outlook on Port of Tauranga, with the company’s strategic initiatives expected to drive future growth. The port's shares are currently trading on a 12-month forward PE of 36.65x, with a forecasted dividend yield of 2.77%. The company’s robust cash flow and strategic investments make it an attractive option for investors looking for stable returns in the infrastructure sector.

In conclusion, while Port of Tauranga has faced some challenges in FY2024, its strong profitability, conservative capital structure, and strategic investments position it well for recovery and growth. As global trade stabilises and demand for New Zealand’s exports continues, the port is expected to remain a critical player in the country’s economic landscape.

Current Share Price: $5.53, Consensus Target Price: $5.98, Consensus Forecast Dividend Yield: 3.8%, Total Return: 11.94%

Upcoming Dividends: 3^rd September to 3^rd October

---

For more information and to stay updated subscribe to our newsletter and consult with your Financial Adviser to tailor your investment strategy.

Disclaimer: “Yovich & Co Limited believes the information in this publication is correct, and it has reasonable grounds for any opinion or recommendation found within this publication on the date of this publication. However, no liability is accepted for any loss or damage incurred by any person as a result of any error in any information, opinion or recommendation in this publication. Nothing in this publication is, or should be taken as, an offer, invitation or recommendation to buy, sell or retain any investment in or make any deposit with any person. The information contained in this publication is general in nature. It may not be relevant to individual circumstances. Before making any investment, insurance or other financial decisions, you should consult a professional financial adviser. This publication is for the use of persons in New Zealand only. Copyright in this publication is owned by Yovich & Co Limited. You must not reproduce or distribute content from this publication or any part of it without prior permission