A Smaller Infrastructure Package | Tourism Holdings

25 June 2021

Global markets were higher overnight, with the S&P 500 index up +0.58% as it broke out to new all-time highs, boosted by improved market sentiment towards the economy and Joe Biden striking a tentative new deal to approve US$579 billion in new infrastructure spending.

The Tech heavy Nasdaq jumped +0.7%, making it its third day in the green as in charge into new highs, as the mega-cap tech shares making a strong run this week. Consumer discretionary & tech outperformed while defensive utilities & real estate lagged, however volumes remain muted -15% below average value. Financials were also stronger as YS Fed stress tests cleared them to announce dividend increases & stock buy-backs. 

In stock news,. Tesla jumped +3.5% after Elon Musk said Tesla shareholders would be eligible to buy SpaceX's space internet venture Starlink – when its cashflow becomes more predictable. 

European markets (Stoxx 600 index, +0.9%) were up +0.9% as investors eye out a steady economic recovery, with travel and leisure shares leading gains.

Interestingly, locally Westpac economists are now calling that RBNZ will raise cash rate in August 2022 (previously no change until 2023), ANZ bought forward its view last week that will now raise OCR in Feb 2022. We have been expecting a rate rise next year for some time now and are watching developments closely.  

Tourism Holdings Limited (THL:NZX)

Tourism Holding shares jumped +3.6% yesterday, after announcing its 2021 full year loss will be on the lower end of its previous guidance of $14m to $18m. Thanks to earlier payments for new vehicles in the US net debt is expected to be $50m, much lower than the $90m previously guided, but management were not able to provide guidance for 2022 given the high level of uncertainty with the Aussie travel bubble. 

While the outlook is still rocky, THL has managed through the peak of the pandemic well and does provide attractive upside assuming a gradual recovery in tourism over the medium-term, while managing cash flow and minimising losses over the interim. For this reason we remain BUY (High-Risk) rated and favour THL over the likes of Air NZ.


Australia & New Zealand Market Movers

The Australian market fell yesterday (ASX 200 index -0.3%), with most sectors trading weaker.
Woolworth's shares were down to reflect the shedding its Endeavor Business. Westpac shares fell -1%, as it decided not to proceed with the demerger of its bank in New Zealand, other major banks slipping slightly also. 

The Tech sector managed to buck the trend led by Afterpay jumping +6%, as it would allow some of its US users to shop at a broader range of retailers. 

Materials managed to eke out a gain  BHP up +1%, and Rio Tinto jumping +1.2% as metal prices edged higher on less bad news around China state reserves.

The New Zealand market (NZX 50 index +0.3%) was higher on Wednesday.
Oceania Healthcare shares were lowering following their AGM, with no new news, with other property related stocks also weaker – Argosy down -2.6%, Summerset Group down -0.7% and Kiwi Property sliding -0.4%.

3 Things Markets will be Watching this Week

  1. Key events this week include Bank of England interest rate decision, US GDP numbers, and Fed Chair Powell testifying to Congress on the Covid-19 response and economy 
  2. In Australia there will be retail sales for the month of May and Westpac Consumer Confidence data.
  3. In NZ, Oceania Healthcare has scheduled its AGM for this week. 
Global markets were higher overnight, with the S&P 500 index up +0.58% as it broke out to new all-time highs, boosted by improved market sentiment towards the economy and Joe Biden striking a tentative new deal to approve US$579 billion in new infrastruct

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