Global markets continued to rebound overnight as global equities recover from this month's correction. Gains in technology and industrial shares boosted Wall Street on Monday, with investors also awaiting Federal Reserve Chair Jerome Powell's testimony for his views on the path of interest rate hikes.
The local earnings season continues this week with a number of Australian & NZ companies reporting profit figures. So far, the Australian reporting season has been solid, while the NZ reporting season continues to show company earnings are largely growing at a modest pace, quelling fears stock prices are getting stretched.
Stock in Focus: Spark (SPK:NZ / SPK:AX)
Shares in Spark have continued to slide after reporting earnings last week. Spark announced that first-half profit fell -3.4% t to $172 million as it ramped up spending on a new transformation programme aimed at making it the nation's lowest cost operator.
Looking at some of the detail, mobile revenue was up +8% to 635m as Spark continues to close the gap on Vodafone, while broadband revenues slipped -0.9% to 341m. While the result was disappointing in the short term, investment into its cost out/automation programme should reap benefits going forward. Spark also left its dividend unchanged (interim dividend of 12.5 cents), and at current prices offers an attractive yield of over 7%. We believe the dividend yield should at the least support the share price in terms of any further downside.
We currently have a BUY rating on Spark.
Members should look out for a full update on Spark to be released in tomorrow’s weekly report.
Australia & New Zealand Market Movers
The Australian share market was higher yesterday (ASX 200 index +0.71%) as shares gained for the fourth-straight session, with investors piling into the banks.
Among shares to report, Ardent Leisure shares climbed as It narrowed its half-year net loss to $15.6 million. The result included an impairment charge related to the firm's Dreamworld theme park where a tragic fatal accident took place in late 2016.
QBE fell with the insurance giant detailing that it swung to a widely-expected loss (which it had already warned the market on). A series of catastrophic weather events and a one-off hit to its Northern operation forced QBE's profit down -248%, compared with profit a year earlier of $US844 million. BlueScope Steel shares rose after telling shareholders that its profit jumped 23% to $441.2 million and that it will pay a first-half dividend of 6¢ a share.
The New Zealand market was higher on Monday (NZX 50 index +0.47%) as shares joined a global rally, buoyed by optimism over local earnings with retirement village operator Summerset Group gaining for a second day and as A2 Milk also moved higher.
in contrast, Metlifecare disappointed investors after NZ’s second-largest listed retirement village operator posted a -66% drop in first-half profit as the property market slowed and it missed out on sales gains after it bought back units to temporarily rehouse residents while it fixed up leaky buildings in their villages. Excluding the unrealised valuation gains and other non-cash items, underlying pre-tax profit slipped -6.2% to $36.2 million, and the company said that while it expects to deliver a stronger second-half performance, underlying operating cash flow and profit for the 2018 financial year are expected to be "in line" with last year, before rising again in 2019.
In other news, Chorus was unchanged after reporting a -29% decline in first-half profit as it lost customers in the growing battle for connections, although efforts to reduce costs had annual earnings guidance tracking near the top of the network operator's forecast range. Comvita extended its loss following a -2.7% decline on Friday when the honey products maker reported a return to first-half profit, while warning bad weather was weighing on the 2018 season's honey crop.
3 Things Markets Will be Watching this Week
1. Local AU/NZ companies continue to report profit figures as earnings season is likely to dominate news flow.
2. New US Federal Reserve Chair Jerome Powell makes a speech to US legislators this week.
3. Important US economic data is released on Thursday (AU/NZ time), including GDP and inflation figures.
Have a Great Day,
Team