Yovich & Co. Market Update - 4 November 2020

Nov 4, 2020 | Commentary

 New Zealand Equities

Market update 2020-11-04

In summary, last week the NZ50G saw 44 companies on the downside, 1 remained unchanged and 5 on the upside. Last week saw the greatest decrease for the NZ50G since the week ending 13 March 2020. The reason is, as mentioned last week regarding the uncertainty around the world; new cases of COVID-19, and the upcoming US elections. As long-term investors, the advisers of Yovich & Co are using this volatility for clients as buying opportunities, to purchase companies that are trading at a discounted price to fair value/target price. More important than the election is to ensure that your portfolio is aligned to your risk profile (asset allocation) and that the investments are suitable for your long-term goals. Short term investors will be using this volatility to try and time the market. To get this correct, the short-term investors must execute two transactions correctly, the time to get out and the time to get back in. The reality is that it's time in the market, not timing the market, that is key. The Reserve Bank of Australia cut the cash rate to a record low 0.1% and committed to a A$100 billion bond buying programme to keep interest rates low and assist the recovery of the Australian economy. The S&P/ASX 200 was up more than 2 percent - its biggest climb in almost a month. The Global Dairy Trade fell 2% overnight as response to the growth in offshore milk collections, coupled with lockdowns in a number of countries across Europe.

Biggest movers 2020-11-04

 

Investment News

 

ANZ

Tax paid profit for the FY2020 ending 30 September, was down 40% as ANZ absorbed one-off items including impairment charges related to the impact of Covid-19. Australia's fourth-largest lender by market capitalization reported a statutory profit of AU$3.58b. Cash Profit for its continuing operations fell by 42% to AU$3.76b. Return on equity (ROE) was down 42% at 6.2%. ANZ’s  full year pay-out dropped to AU$0.64 from AU$1.70 in fiscal 2019, having paid a deferred interim gross dividend of 27 cents (AUD) on Sept. 30. The final gross dividend of 37 cents (AUD) carries an ex-dividend date of November 19 and is payable December 16, 2020.

Current Share Price: $20.50, EPS: $1.36, PE ratio: 15.03, Gross dividend yield: 5.39%.

 

Skellerup

Has forecasted record profits in FY21 to be within the range of $30 to $35 million. Share price increased sharply on the back of this announcement from $2.97 to a high of $3.23 and at time of writing, trading at $3.08. Skellerup has net debt of just 10% of total assets at end of FY20, this allows the company to be agile and carry out strategic acquisitions, and is able to absorb economic shock and sustain dividends.

Current Share Price: $3.08, EPS: $0.14, PE ratio: 20.64, Gross dividend yield: 5.04%, Target price: $3.50, Rating: Outperform.

 

AMP 

Received an indicative, non-binding, conditional proposal (October 30, 2020) from Ares Management Corporation, a US-based company, to acquire 100 per cent of the shares in AMP Limited by way of scheme of arrangement. On November 2, Ares confirmed the announced takeover proposal with an implied value of A$1.85/share. The takeover offer saw AMP.nz shares increase 28.1%.

Current Share Price: $1.75.

 

Vital Healthcare

Is pleased to announce that its $25m unit purchase plan (UPP) closed oversubscribed. NorthWest Healthcare Properties Management Limited (the Manager) of Vital Healthcare received applications totaling $67.4m. The Manager elected to accept additional applications of $7.5m, bringing the total amount accepted under the UPP to $32.5m. Due to the oversubscription, applications have been scaled, surplus application amounts will be refunded approximately 5 business days from the allotment date (4 November).

Current Share Price: $2.92, Gross dividend yield: 3.42%.

 

Z Energy

Announced 1H FY21 results loss after tax was down 30.7% at -$58m. This result was driven by the impacts of COVID-19 due to higher cost inventory sold at lower product prices, and reduced volumes during lockdown, with additional reduction in fuel demand for Jet fuel (-72% versus PCP) in particular. Half year EBITDA was down 48% at $95m within guidance of $85m-$100m. Z Energy outlined its four-point improvement plan; reduce costs, hold market share, monetise scale, manage capital. FY21 EBITDA is forecasted to be between $235m and $265m. Z anticipates shareholder distributions to resume after 1HFY22.  

Share Price: $2.94, Target price: $3.81, Rating: Outperform.

 
AFT Pharmaceuticals

Has launched a “Kiwi Health” flagship store in China on Alibaba’s Tmall Global platform, in preparation for Alibaba’s 11.11 global shopping festival to be held on 11 November. The store aims to leverage the strong brand awareness of AFT’s product range under the “Kiwis thinking about health” branding and the regard for New Zealand products in China. New Zealand products have a strong reputation and remain a popular choice with consumers in China who care more about their health and wellness than ever before. AFT also signed exclusive Maxigesic IV distribution and supply agreements for the UK and Hong Kong, with the company targeting sales of the medicine in these territories in 2022. The agreements cover territories with a combined population of more than 73.9m. Today AFT and SETEK (a 100% New Zealand-owned and operated company based in Taupo), announce an agreement which will see SETEK provide Good Manufacturing Practice (GMP) quality pharmaceutical-grade medicinal cannabis ingredients to AFT. The agreement envisages AFT selling medicinal cannabis products into selected markets starting with Australia and New Zealand.

Share Price: $5.13, Target price: $6.50, Rating: Outperform.

 

 

 

Disclaimer: This publication has been prepared for your general information. While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken for any errors or omissions. This publication does not constitute financial or insurance product advice. It may not be relevant to individual circumstances. 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. You should seek professional advice before taking any action in relation to the matters dealt within this publication. No part of this publication may be reproduced without prior written permission from our company. Disclosure statements relating to the financial advisers associated with this newsletter are available on request and free of charge.

 

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Nathanael McDonald



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