Global markets were higher on Friday, US Markets (S&P 500 Index, +2.5%) trading higher, and after two strong sessions in a row reported its first weekly gain snapping a 7-week losing streak –recording its best weekly gain since November 2020 (S&P500 up +6.5% for the week).
US Inflation figures for the month April rose +4.9%, showing a sign of slowing down which gave investors a piece of positive news to hold one, as well as some stronger results. However, while increasing at a slower rate, rising inflation will continue to put pressure on consumers it will still be a difficult path ahead. Risk appetite appears to be back on the table as some investors tempted by currently ‘cheap’ valuations – but there is still a large level of uncertainty over the horizon.
Tech stocks were some of the strongest gainers, the NASDAQ index rose 3.3% on Friday, on the back of some strong results, while consumer discretionary was the best performer – being the most heavily sold-off in recent weeks.
European markets (Stoxx 600 index, +1.5%) closed higher as tech stocks lead gains.
Oceania Healthcare (OCA:NZX)
Oceania managed to deliver a solid result for the 2022 financial year through covid restrictions.
Underlying operating earnings (EBITDA) rose +16% from last year to $76.2m, helped by strong sales volumes for both independent living and care suites up a and increased premium revenue which helped maintain margins and offset rising costs – particularly from covid.
We remain BUY rated on Oceania as it provides attractive value, especially amongst peers, when taking into account the major sell off this year. With a greater exposure to care earnings which delivers higher margins and benefit from increase funding -will help offset rising costs. Oceania trades cheaply compared to past as well as its pears at a 25% discount to its net tangible asset per share of $1.38 which is up from $1.28 a year ago.
OCA has a healthy balance sheet and headroom debt to help fund a growth in development activity, and going forward should earn higher operating earnings from their premium care services. We also do not foresee a major collapse in property prices but are wary of softening in the market (which is taken into account given the heavy discount to NTA). Overall business fundamentals remain strong with tailwinds of an ageing population remain firmly intact in terms of driving retirement village demand, making it better placed than pure property plays.
Australia & New Zealand Market Movers
The Australian market was down yesterday (ASX200 index, +0.7%).
Sell-off was broad base with all sectors trading lower except for tech. Appen shares surged +29% after receiving a take bid of $9.50 per share, which helped lift other heavily beaten down tech shares higher.
Endeavour group (the beverage and entertainment business) sank -6% at its investors day presentation highlighting that they expect inflation to increase wages and rents and rising interest rates may reduce consumer demand.
The New Zealand market (NZX 50 index, -0.6%) was down on Thursday not helped by RBNZ’s increase in hawkishness and a couple of disappoint results.
Eroad shares slumped -8.7% and Rakon was down -6.8% both results missing expectations.
Mainfreight shares rose +1.3% after reporting a record result boosted by strong demand for air and ocean shipping across the world which lifted revenue +47.2% and profits by 89%.
3 Things Markets will be Watching this Week
- Geopolitical risks remain elevated given the Russia/Ukraine conflict.
- RNBZ monetary policy decision
- Local earnings from Kiwi Property Group, Arvida, Fisher & Paykel Healthcare, Pacific Edge, Mainfreight, Tower Insurance, Elders, and Select Harvest.