AstraZeneca’s Error | Argosy Update

29 November 2020

Global markets were mixed in very quiet trade overnight as the US markets were closed for Thanksgiving holiday.

Overnight there has been negative vaccine news. The AstraZeneca vaccine developed in conjunction with Oxford University will be studied with a new trial, after reports that the apparent effectiveness followed a manufacturing error – where the vaccine was found to be more effective (90%) with an initial half dose manufactured in error, used in a sample of a younger group of participants. The lower rate of effectiveness (62%) when the vaccine was applied with two full doses was achieved in a group included participants aged over 55.

Argosy Property (ARG:NZX)
Shares in Argosy were higher yesterday as a better than expected outcome out of COVID saw Argosy modestly raise its dividend.  We continue to remain BUY rated on relative valuation support and now see ARG as our top property sector pick.

ARG lifted 2021 distribution guidance +0.10 cents to 6.45 cents per share (6% gross dividend yield), with management motivated to continue its streak of growing dividends. The highlight of yesterday's result was +4.3% revaluation gains leading to +8.5% net tangible assets (NTA) growth, attributable to solid rental growth and capitalisation rate compression.

ARG continues to trade on undemanding metrics versus peers, on a 3% premium to NTA versus the property sector average of approx. 13%.

Australia & New Zealand Market Movers

The Australian market pulled back on Thursday (ASX 200 Index -0.7%) as momentum that has driven one of the strongest months in decades for investors ceded to hesitation ahead of the US Thanksgiving holiday. Technology was back in relative favour on Thursday as the rally in energy, industrials and financials sector indices paused.

In stock news, Origin Energy upgraded its LNG production guidance for its Gladstone export facility and said it would start work on the design of a hydrogen export project in North Queensland.

Materials companies with an exposure to the electrification trend in transport further rallied. Shares in lithium producer Orocobre jumped 7%, leaving the stock 46% higher since the start of the month.

Shares in the coal miners underperformed as evidence that stalling sales and shipments to China were politically motivated weighed on the earnings outlook for stocks such as Whitehaven Coal and New Hope.

The New Zealand market was lower yesterday (NZX 50 Index -0.5%) as investors booked profits on recent gains, and a resurgent kiwi dollar threatens to derail local export earnings.

Pacific Edge led the market lower, dropping -5% after the cancer diagnostics firm reported a smaller first-half loss and increased revenue as the benefit of its recent US contracts started to bear fruit. The fall has to be put into context of its tremendous run this year.

There was positive news for Scales and other wine and horticulture operators with the NZ Government announcing that 2,000 horticultural workers will enter NZ under the RSE scheme to help with the upcoming harvests. However, companies will have to pay for managed isolation and a minimum wage of $22.10.

Finance Minister Grant Robertson said he believes Labour wouldn’t be breaking its pre-election promise to not introduce new taxes, other than a new top income tax bracket, if it extended the bright-line test. Under the test, anyone who sells a residential property within five years of buying it, has to pay income tax on any gains made. The rule excludes the family home and inherited property.


3 Things Markets Will be Watching this Week

  1. ​​​​​​​​​​​​​​In a shortened trading week in the US for Thanksgiving, the re-introduction of COVID restrictions and second wave news will remain at the top of headlines.
  2. At the same time, vaccines are also front of mind with growing speculation that a vaccine will be rolled out this year.
  3. ​​​​​​In New Zealand results season continues with Kiwi Property and Goodman results today and Fisher & Paykel Healthcare due later this week.


Global markets were mixed in very quiet trade overnight as the US markets were closed for Thanksgiving holiday.

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