New Zealand Market Movers
The New Zealand Market (NZX50 Index, -0.9%) fell yesterday as local earnings season begins.
Fletcher Building was the major drag on the market down -5.4%, after surprising the market with a weak earnings update, ahead of the release of its full result on Wednesday. Full year earnings are expected to be between $800m to $855m down from its previous guidance of above $855m.
Auckland-based electricity lines company Vector ended the day up +0.7% despite announcing that about 13,000 homes were without power, whilst thousands of power connections have been restored new outages are regularly being reported as the aftermath of the cyclone continues.
Australia Market Movers
The Australian market (ASX200 Index, -0.5%) fell on Monday, Star Entertainment slumped -20.8% after flagging a $1.6B write-down on its Syndey casino as duty rates are set to rise significantly and competition from Crown’s Syndey casino mounts.
Rare Earth miner Lynas shares fell -4.8% driven by concerns over its Malaysian operations. According to the Singapore-based The Straits Times, the Pakatan Harapan-led government in Malaysia plans to force Lynas to operate radiation-free at its advanced materials plant in The Gebeng Industrial Park by July.
US Market Movers
The S&P 500 advanced +1.14% as the market priced in a lower CPI print tomorrow. The data analytics firm Palantir surged +20% aftermarket, after reporting its first-ever profit (1 cent EPS, vs. expectations of -8c). It’s an indication that Palantir’s choppy contract-based model (similar to government contracting) is starting to pay off. Across the ditch, John Malone’s Liberty Global acquired a ~5% stake in Vodafone PLC. The telecommunications stock has been trading at depressed levels for a long time, and Liberty’s stake may be an indication that the communications giant is planning another acqusition or spin-off. Meanwhile, Amazon signalled a renewed effort in the supermarket game – indicating sustained investment in launching hundreds new supermarket branches in the US. We’re holding our breath: the e-commerce giant hasn’t quite gotten the nack for physical retail yet, even after their acquistion of Whole Foods. If the company can make the supermarket concept stick it may be a game-changer in America’s staid grocery scene.
Stock in Focus: Contact Energy (CEN.NZX)
Contact Energy shares ended the day up +0.5% after delivering their 2023 half year result, which was down from the previous year but in-line with expectations. Operating earnings (EBITDAF) came in at $246m, down -24% from the previous year largely due to weaker wholesale pricing against a stronger corresponding period. Contact also reported a non-cash write down of $120m due to the lower storage capacity of tis Ahurua gas storage facility resulting in a reported net loss of $7m.
Contact’s 2023 full year earnings (EBITDAF) guidance was lifted to $530m, implying a better second half.
We are Buy rated on Contact as our NZ renewable energy exposure, offering an attractive dividend especially from 2025 onwards. CEN is trading on undemanding multiples compared to renewable energy peers, and pays a healthy gross dividend yield of ~6.0% (net dividend yield 4.5%).
What Markets will be Watching this Week (UTC +13)
Monday
Contact Energy Earnings
CSL Earnings
Tuesday
Westpac Consumer Confidence Index
CBA Earnings
FMG Earnings
James Hardie Earnings
Wednesday
US and UK Inflation (CPI) Data for January
Wesfarmers Earnings
Treasury Wines Earnings
Fletcher Building Earnings
SkyCity Earnings
Thursday
Telstra Earnings
QBE Insurance Earnings
Friday
US Building Permits Data