Global markets were mixed overnight in a quiet night for news flow. Investors were also weighing prospects for more US trade protectionism after new White House appointee Larry Kudlow signalled support for a strong dollar and took a tough line on China.
Closer to home, quarterly NZ GDP data showed the NZ economy expanded 0.6% in the fourth quarter, falling short of expectations as hot weather hampered dairy production. The economy grew at a 2.9% annual pace, less than the 3.1% expected by analysts. The tepid result stemmed mostly from weakness in production of dairy.
Stock in Focus: PGG Wrightson (PGW:NZ)
Diversified agri-business PGG Wrightson (PGW) said it is "open to options" after it hired investment bankers for a strategic review of the business and Australian media reported that it is preparing non-disclosure agreements with interested parties.
PGW is indirectly controlled by China's Agria Corp, which owns a 50.2% stake via Agria (Singapore) and is reportedly looking to offload its stake in PGW. News reports have named ASX-listed Ruralco Holdings and Elders, Agrium-owned agribusiness Landmark, and Champ Private Equity as potential suitors, while Hong Kong-listed CK Life Sciences is said to be interested in Wrightson's seeds business. Elders (which we also have positive research coverage on) is the most like for like business being a 179-year old Aussie agribusiness (PGW has a more than 160-year heritage in New Zealand and employs about 2,100 people).
PGW also recently released first half earnings which beat expectations, and management upgraded their outlook for the full year as its agricultural businesses traded better than anticipate. Management have had a history of being conservative with guidance, and now forecast full-year operating earnings to be between $65m to $70m, an improvement from its previous forecast for earnings to be in line with last year's $64.5m.
We currently have a BUY rating on PGW.
Members should look out for a full update on PGW to be released in next week’s weekly report
Australia & New Zealand Market Movers
The Australian share market continued to sell-off on Thursday (ASX 200 index -0.24%) as shares fell for the third straight session as banks wilted under the spotlight of the Hayne inquiry. The ASX started on the backfoot and the mood didn't improve through the session as the banks were punished during the third day of substantive hearings of the financial services royal commission in Melbourne. In addition, a report from the consumer watchdog said it had found "signs of less-than-vigorous price competition" on mortgages between the big four.
The New Zealand market was higher yesterday (NZX 50 index +0.41%) shares were mixed, with Fletcher Building and Sky Network Television rebounding after recent selling and companies including Spark New Zealand and Ebos Group shedding their rights to dividends. Ebos Group said it has hired Telstra executive Shaun Hughes as chief financial officer after the health-care and pet-care products group promoted John Cullity to chief executive.
3 Things Markets Will be Watching this Week
1. Global politics as details around trade tariffs to be implemented by the Trump Administration are announced.
2. US inflation data is released Wednesday morning (AU/NZ time).
3. NZ economic growth (GDP) data is published on Thursday.
Have a Great Day,
Team