Australia Opening Up | Scales Corporation

6 May 2020

Global markets were up overnight (S&P 500 +1%) as a number of US states and countries around the world start to ease covid-19 induced restrictions in an attempt to revive their economies. 
Gains were led by large tech companies and the healthcare sector with drug companies (Pfizer and Regeneron Pharmaceuticals) working on possible covid-19 vaccines and experimental antibody treatments.

The Australian cabinet has approved a comprehensive set of health protocols to enable a safe reopening of their economy with most businesses expected to be up and running by July 2020, with an aim to lift restrictions in three steps. Cafes restaurants and retail are expected to be among the first to be allowed to commence business.
 

Scales Corporation (SCL:NZX)

Scales Corporation (SCL)  shares have recovered strongly since the heavy sell-off in March as it was considered an 'essential service' and continued to remain operational throughout the New Zealand lock down period.

Yesterday Scales announced a final dividend of 9.5 cents per share, bringing their 2020 full year dividend to 19 cents per share, which is inline with the previous year, helped by favourable trading and operating conditions despite covid-19 related challenges which were mitigated.

We remain BUY rated on SCL as they will come out of the covid-19 pandemic relatively unscathed and are sitting on ample cash for a possible acquisition 

 

   
Australia & New Zealand Market Movers

The Australian market (ASX 200 Index +1.6%) climbed higher yesterday clawing back heavy losses occurred last week, as markets price in a global recession but optimism on an early opening for the Australian economy buoyed sentiment.
Gains were made across all sectors except healthcare. James Hardie shares rose +4.9% after refining its guidance and reporting performance of its Australian and North American businesses had remained firm despite covid-19, and would suspend dividend payments and lower capital expenditure to protect its balance sheet. 

The banking sector edged higher despite Westpac delivering a weak result with investors already pricing that in from last week's sell off. WBC announced a -70% drop in first half cash profit and like ANZ told investors it was deferring a decision on when, if at all, an interim dividend would be paid.
An Ooh! Media update provided additional cost savings of over $19m, however revenue guidance for the second quarter is expected to be extremely weak given the circumstances, with the third and fourth quarter revenue likely to be significantly lower compared to the previous year.
Transurban held its investor briefing assuring shareholders it had no plans to raise equity and announced traffic was slowly returning to Australian major toll roads after falls in April of 50-60%.

The New Zealand market edged higher on Tuesday (NZX 50 +0.1%) after the NZ government announced a second day in a row of no covid-19 cases, giving investors hope of a possible easing of restrictions on which cabinet will decide next Monday.
Kathmandu shares were the best performer yesterday up +11% after announcing a surge in online sales and staged reopening of stores in Australia with robust safety protocols in place (opening stores ahead of expectations). 

 

3 Things Markets Will be Watching this Week

  1. ​Covid-19 and lock-down news-flow remains key in terms of market moves.
  2. In the US, earnings will continue to dominate headlines, with the likes of Disney and PayPal due to report results. Investors are also bracing themselves for an awful jobs report, which is likely to see the US unemployment rate surge to about 16.0%.
  3. Locally, the RBA meets this week, NZ employment data is due while earnings are expected from Westpac, Macquarie Group, Orica and Pushpay.

 

Have a Great Day,
 

Team

The Australian cabinet has approved a comprehensive set of health protocols to enable a safe reopening of their economy with most businesses expected to be up and running by July 2020, with an aim to lift restrictions in three steps.

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