Pavan Sharma

The New Zealand market (NZX 50 Index, +0.5%) advanced on Wednesday as NZ inflation data came in below RBNZ’s expectations. 

Myer’s shares have been on a strong run reaching a fresh 5-year high, recovering from a turn around in profitability and stronger sales update from rivals over the Christmas period as well as Private Equity companies circles competitors like David Jones and City Chic. We remain underweight retail, as we think secular pressures are likely to hit retail hard, especially discretionary retail. That majority of its value is now on a potential takeover.

The New Zealand market (NZX 50 Index, -0.1%) slipped marginally on Tuesday. Today at 10:45 am we receive the December quarter inflation rate, which is forecast to show a slowing pace in the rise of consumer prices. Rate sensitive retirement stocks ruled the market on Tuesday, led by Ryman Healthcare (+5.7%), Summerset Group (+2.0%), and Arvida Group (+1.8%). AFT Pharmaceuticals (+2.4%) advanced after announcing that it had secured a licensing and distribution deal for nine eastern Europe countries.  

Wastewater treatment company De.mem shares jumped +25% yesterday after revealing their fourth quarter operations. Cash receipts came in at $6.7m for the quarter, and $22.9m for the year, both at record highs with 15 consecutive quarters of cash receipt growth. Recurring revenue growth was also strong for the year up +41% from the previous year to $19.5m (on the top end of guidance) and representing 85% of total cash receipts at higher margins. 

We see too much optimism “priced into” Netflix’s latest results. EPS fell to 11c from $1.33 in the comparable quarter in ‘21. Analyst expectations came in at 55c. In spite of this the stock rose on very strong subscriber numbers. Subs grew 7.6M vs. the company’s projected 4.5M. Churn was kept to a minimum, with several hit shows (“Wednesday” “Harry & Meghan”) breaking records – “Wednesday” was NFLX’s second-most popular series ever and “Harry and Meghan” the streaming service’s second-most popular documentary. All this reads well, however the company’s overall revenue came in flat at +2% growth. To be fair, FX was partially the culprit here — revenue grew 10% on a FX neutral basis. Yet signs of weakness remain – on a FX neutral basis APAC revenues declined 4% whilst EMEA revenues grew only 5% (2% deceleration). We think any sign of excitement is premature, especially because Netflix is still expensive – it trades at 25x earnings, above Disney x20 and WarnerBrothersDiscovery x10.

US markets (S&P 500 Index +1.2%) rose as markets anticipate a less aggressive rate hikes by the Fed.  Semiconductor stocks were a winner on the day, Advanced Micro Devices (+9.2%), Qualcomm (+6.6%), and Nvidia (+7.6%), as well as Tesla (+7.7%) and Apple (+2.4%) register healthy gains on the day on China reopening would boost business operations.

Markets continued on an upswing last week with the US S&P 500 up nearly 4% year to date and the Nasdaq Tech index gaining 7% in January so far, driven by i) consensus that inflation has ‘peaked’ and ii) markets assuming a rate hike of 25 bps by the Fed next week.

Manchester United is one of the most famous names in the world of football. Alongside Chelsea and Liverpool, the club is an incredibly recognisable brand with a fiercely loyal fanbase. The Glazer family bought the club in 2005. It has indicated the club is up “on the auction block”. INEOS founder Jim Ratcliffe, the richest man in the UK, has indicated that he has entered bidding for the company. Ratcliff recently bid +£4B in a failed attempt to purchase Chelsea. The other major party who has formally entered the bidding process is the government of Saudi Arabia.

The New Zealand market (NZX 50 Index, -0.3%) took the shock resignation of Prime Minister Jacinda Ardern in its stride on Thursday. The fact that this is an election year with a high probability of a change in government contributed to its muted impact on the market.