Keeping you up to date with the latest market moves, in association with Investment firm Jarden
NZX Market Wrap
Steel and Tube's trading update yielded a positive reaction, with the stock opening up 5.4 per cent. The stock closed up 3.6 per cent as investors locked in gains. Fletcher Building also rose by 3.3 per cent, although still down by a large 33.6 per cent so far this year.
Kathmandu seemingly broke out of its recent downtrend, up for the past few trading days, and up a further 3.6 per cent today. Pacific Edge continues to drop, closing at 70 cents.
Vital Healthcare Property results marginally positive
Listed property investment fund Vital Healthcare's annual result was positive, but underwhelming - its stock price remained flat despite the company reporting 5.6 per cent increase in adjusted free funds from operations (a measure considered by many analysts to be more appropriate for real estate investment trusts than ebitda or profit).
Rent collection for FY20 was over 95 per cent reflecting tenancy portfolio weighted towards healthcare, which received strong government support throughout recent period.
Total rental abatements were only $300,000, out of total rental income of $100 million. The company laid out its five-year portfolio strategy to increase exposure to aged care properties, decreasing exposure to hospitals as a percentage of total portfolio value.
Meridian drops on Tiwai Point update
Meridian fell by 3.5 per cent, after announcements from itself and Anglo-Australian smelter operator Rio Tinto. Rio Tinto stated there are no plans to restart production at its fourth potline, which it had earlier closed because of Covid-19.
The Potline 4 contract allowed for Meridian to supply an additional 438 gigawatt-hours of electricity per year, originally set to run through to December 2022.
After media speculation that this could mean an even earlier departure than announced, Meridian advised it still expects the previous date of August 31, 2021, to stand.
It also confirmed it had put through a confidential proposal suggesting Tiwai Point might close down over a longer period of time, which to date has not been accepted.
On the other hand, Contact Energy, which also has heavy demand exposure to the smelter, rose by 2.0 per cent after releasing a more positive than expected annual result.
Revenue was down to $2.1 billion compared to $2.5b last year, the result of lower renewable generation, lower wholesale prices and the impact of rising costs of thermal generation and restricted gas supply. However, lower operating expenses ($1.6b compared to $2b) muted the impact on the bottom line; underlying profit was $129 million, although still down from $179m last year.
A wide range of estimates exist for Contact's 2021 earnings, with research teams from leading investment banks' providing profit numbers ranging from $121m on the low end to $233m on the high end.
On average, profit is expected to be around $164m - which would be a significant upside on this year's performance. The biggest impact on these figures going forward will likely be further Tiwai updates, and whether the smelter will close in line with expectations.
Contact also announced it has exercised its option to take full ownership of white label and electricity services company Simply Energy – allowing it to acquire the remaining half of the company for $7.3m, to be paid over the next three financial years.
Other utilities stocks were flat for the most part, apart from Mercury, which fell a 1.7 per cent.
The Chinese Markets moved between the red and the green with the trade tension weighing on investors' minds - China announced they were going to sanction 11 Americans. The Shanghai index was up 0.75 per cent while the Shenzhen was up 0.06 per cent.
The US markets begun the week strongly despite ongoing trade tension and the inability to secure an agreement on the relief package. At the time of writing the Dow Jones (+1.15 per cent) outperforms, while the S&P 500 (+0.2 per cent) and the Nasdaq (-0.4 per cent) lag, with tech stocks having another small sell off. Amazon(-0.6 per cent), Facebook(-1.75 per cent), Netflix (-1.9 per cent), Microsoft (-2.4 per cent) and Google (-0.2 per cent) pull the Nasdaq down, while Apple (+1.7 per cent) continues its positive run now just below its record level set last week. With 90 per cent of companies already reporting, economic news will play a greater role in determining which way the market will go this week.
The S&P 500 and Dow Jones have risen approximately 4.5 per cent and 7.2 per cent respectively over the past couple of weeks, with close to 80 per cent of companies beating analyst expectations and close to 58 per cent beating expectations by more than one standard deviation. With analyst expectations being so low, companies looked to have handled the Coronavirus very well. This performance proved a positive catalyst for many. However, investors must also consider shrinking year on year profits, which may be the larger legacy of Covid-19. Buoyant stock prices mean investors pay a higher premium. If no positive news appears over the upcoming months, stocks may begin to falter.
Nikola Motors (+20 per cent) secures its first large deal for 2500 electric garbage trucks, working with Republic Services to develop and produce the vehicles. With Nikola's earnings last week demonstrating the company was still in the "hypothetical" stage with revenue being so low, this deal may shed some light on the possible future earnings.
WTI Oil starts the week off strongly, up over 2 per cent, now sitting around US$42.10 per barrel. Gold also recovered some of its gains lost late last week, up 0.5 per cent, at levels close to US$2040 per ounce. The US 10-year treasury yield continues a small fight back to 0.58 per cent.
ASX Market Wrap
The ASX climbed 1.8 per cent yesterday, buoyed by a strong US July labour force market and the extension of key economic support from President Trump. The major banks led the market gains ahead of CBA full year earnings on Wednesday. Overall, the financials sector rose 2.6 per cent. CBA lifted 3.4 per cent, closely followed by an uptick of 3.3 per cent from Westpac, 3.0 per cent from the National Australia Bank, with ANZ rising 2.8 per cent.
Rail freight company, Aurizon climbed 2.2 per cent to A$4.56 following a strong financial year result which saw its net profit rise to A$605 million, meeting its pre-covid guidance. The firm expects underlying ebit to drop to A$830 million in the new financial year.
Property group GPT shares rose 0.5 per cent to A$3.85 despite the company reporting weak interim earnings. A net loss after tax of A$519.1 million was recorded as negative property revaluations of $711.3 million hurt the group. Half-year revenue fell 10 per cent as shopping malls felt this impact.
E-Commerce business Kogan.com has provided a strong trading update for July as gross sales grew over 110% YoY. The shift to online shopping throughout the pandemic appears to be driving an upsurge in sales for online retailers. Time will tell if this is a structural shift toward increased online sales. Full financial year results are released August 17.
ANZ is set to release its "Truckometer" report at 10 today, a report which tracks light and heavy traffic across the country. The report can serve as an early indication on economic activity for researchers and analysts; light vehicle traffic representing consumer activity, and heavy vehicle traffic representing business activity.
Similarly, card spending figures are also set to be released - the two reports together should give an interesting insight on whether macro-economic recovery under the new, post-lockdown normal has been sustained, or if consumer activity is beginning to slow down.
A big week ahead as reporting season kicks off. In Australia today, business confidence and conditions are released. Those reporting earnings include investment manager Challenger; coal miner Coronado Global; building materials firm James Hardie; and SCA Property.
Economic data out tomorrow in the US includes the Consumer Price Index, Core CPI and the Federal budget.
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- NZ Herald