NZ & Aus
Fruit and Vegetable producer Costa Group shares slipped -2.1% after it told shareholders that a late start to the citrus season meant most earnings would fall into the second half of the year. It also forecast the crop would take a $30 million hit from weather-related problems. Neutral-Rated.
Harvey Norman shares jumped +5.2%, the market anticipating a weak result, but the result came in better than expected. Revenue only declined -3.8% to $9,193m, and profit slumped -28% to $1,103m – largely due to subdue trade and inflated costs. Remain Neutral – not a fan of retail, and see further headwinds ahead.
Reserve Bank figures for July show that specific impairments on mortgages rose by $20m (12.1%) from the previous month to a total of $185m. That’s the highest total in this data series that dates back to March 2018.
Loans past 90 days due but not impaired rose in the month by 4.6% to $1.139 billion – also the highest total since the start of this data series.
Seeing reports that Kiwi Property Group is not selling the Aurora Centre — per the press release: “Kiwi Property has today advised that the terms for the conditional sale of the Aurora Centre in Wellington have not been met and the transaction will not proceed at this time”. Read through > commercial property is getting hard to sell…Who will be the buyers of Ben Cook’s portfolio…? We’re starting to wonder if REITs are getting oversold but waiting to see a little more pain before we go gung-ho.
UBS’ Big Profit
Switzerland’s UBS Group has posted the largest quarterly profit on record for a lender as a result of the emergency takeover of rival Credit Suisse. The bank reported a $29 billion profit, a result of the accounting difference between the value of Credit Suisse’s balance sheet and the $3.8 billion UBS paid for the bank. That tops the $14.3 billion profit JPMorgan Chase made in the first quarter of 2021. The news sent UBS shares soaring in Zurich, with investors seeing positive signs on the integration of the two companies.
Dollar General becomes a bottom dollar bargain
We initiated coverage of Dollar General (NYSE: DG) in a short note here — it did well for us until recently, when management issued their second cut in guidance citing a weakening consumer dollar and inventory overfills. Down ~12% today and sitting at $130.00 per share or 13x earnings. We like Dollar General because it sells goods – including groceries – to small-town America, which isn’t covered by Walmart. A couple of takeaways here: the consumer is indeed becoming strained — this is a very strong sign of a weakening economic climate — but, optimistically, we don’t think the business case for Dollar General has changed — it remains a good compounder which is facing near-term headwinds. Added to our US model portfolio accordingly as well as advising clients to add or establish a position — trading at 3 1/2 year lows. Retain buy.
Noting Shopify has struck a ‘buy with Prime’ deal with Amazon — will enable Shopify merchants to add Amazon’s buy with Prime service (better deals, fast shipping) into their store fronts. We retain Amazon as a buy — ‘Prime’ continues to buy mindshare from consumers, like Costco — quoting Nick Sleep —
“The act of purchasing membership has the effect of raising the company’s share of mind with the customer in the same way that consumer goods companies hope to achieve with conventional advertising. At Costco, the consumer has chosen to commit to the retailer. In other words, people shop at Costco because it is Costco, not because Costco stocks Coke.”
Replace “Costco” with “Prime” > same thing.
Meanwhile — in France Over in Europe we think Bolloré SE is starting to look interesting. Bolloré is controlled by French billionaire Vincent Bollore — it owns everything from shares in UMG to Vivendi. Good breakdown of sum-of-the-parts below, from Andrew Brown’s tour-de-force letter on the complex web of companies at the heart of Vincent Bolloré’s empire. Trades at 5.46 euro — good discount to sum of parts. No view here — something we are starting to look at.
Chart – BRICS ain’t slowing down…
