Daily Market Insights
Global markets generally made gains overnight, although the energy sector sold off after the highly-anticipated Organization of the Petroleum Exporting Countries (OPEC) meeting disappointed investors.
While OPEC did extend oil production cuts for another 9-months, there was disappointment that Saudi Arabia failed to deepen the cuts. Given markets were expecting something more, the price of oil fell about 4% overnight.
Closer to home, several companies continue to report earnings, with Metro Performance Glass (MPG.NZ) being the latest to announce annual profits.
Stock in Focus: Metro Performance Glass (MPG.NZ)
MPG shares made gains after reporting a 30% boost in sales from the acquisition of Australian Glass Group. Profit dipped to $19.4 million due to costs associated with the acquisition but was in line with revised lower guidance that sent the share price lower in February. Overall it was a decent result, and as mentioned in line with previous guidance.
Reflecting the Australian Glass Group (AGG) acquisition last September, total revenue rose 30% to $244.3m, with operating earnings up 20% to $44.9m. MPG CEO Nigel Rigby noted that "While it is still early days for us, AGG has proved a sound investment to date".
While MPG didn’t provide formal outlook comments, they said that “strong residential and commercial construction markets, particularly in the upper North Island, as well as the growth opportunities available across the Tasman, will underpin improved results in the 2018 financial year”.
The result was welcome relief for MPG shareholders, which have seen MPG shares move significantly lower this year. We had noted in our last report that a significant amount of negativity was being reflected in the share price at current levels and it has not taken much to please the market – namely that further negative earnings revisions were avoided.
We are currently BUY rated on MPG. Overall MPG continues to trade at a cheap valuation multiple, although there are risks in terms of operational risks and the AU/NZ building cycles.
Members should look out for a full update on MPG to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian share market moved higher on Wednesday (ASX 200 index +0.36%) as gains across the Resources sector offset another brutal sell-off across Retail stocks.
The retail sector was hit hard yesterday, with stocks such as Myer, JB Hi-Fi, and Harvey Norman falling after the company operating Topshop’s Australian stores became the latest fashion retailer to go out of business. Further, JP Morgan published a gloomy report pointing to the deteriorating consumer sector, while the entry of Amazon into the Australian market continues to weigh on the minds of investors.
The New Zealand market edged out gains yesterday (NZX 50 index +0.17%) on small volumes. In terms of economic headlines, Finance Minister Steven Joyce unveiled his maiden budget which dominated headlines. With stronger economic and tax forecasts giving him room to return money to households through changes to tax thresholds, Working for Families and the accommodation supplement, while also boosting infrastructure spending, a third of which will go into transport.
3 Things Markets Will be Watching this Week
1. US political developments and whether they drive markets for another week.
2. Members of OPEC meet on the 25th to discuss the possibility of another oil production deal.
3. Minutes from the last US Federal Reserve meeting are released Thursday.
Have a Great Day,
Team