Biden’s Super Stimulus | Infratil Acquisition

30 April 2021

Global markets were mixed overnight (S&P 500 index +0.7%) as the US market broke out to a new record close and is no up over 6% for the month!
Investors digested the latest batch of corporate earnings and data that showed the American economy gained steam in the first three months of the year.

Apple shares ended the day flat despite their blowout result where sales jumped +54% during the quarter, with each product category seeing double-digit growth – amidst concerns that the iPhone maker may not sustain growth after the huge result. Facebook shares on the other hand jumped +7.3% to all time highs, as higher priced ads and big advertising volume increased revenue by +48%. McDonald’s rose +1.2% after beating estimates for comparable sales and returning to pre-pandemic levels of growth.

Thursday marked President Joe Biden’s 100th day in office, and he made his first address to a joint session of Congress where he pushed his so-far popular agenda, which includes a $2 trillion infrastructure plan as well as a freshly unveiled $1.8 trillion plan for families, children and students. Biden aims to raise $1.5 trillion to fund the above by taxing the rich, increasing the top income and capital gains tax rates, changing the taxation of wealthy estates, closing so-called tax loopholes and focusing audits of the rich to prevent tax evasion.

European markets (Stoxx 600 -0.3%) reacted to US Fed decision to keep rates on hold, with bank stocks performing strongly and reaching 14 month highs after their results beat expectations, however this was offset by a -2.6% slide in Auto's. Finnish telecoms giant Nokia soared 8% after beating first-quarter revenue and profit expectations on the back of strong network and 5G sales.

Infratil (IFT:NZX)

Infrastructure investment company Infratil (IFT) shares rose +0.7% yesterday after announcing it would acquire a majority stake (50.1% to 60%) in Pacific Radiology for up to NZ$350m. Pacific Radiology is the largest private diagnostic imaging service provider in New Zealand, operating 46 clinics in the South Island and lower North Island and employing 90 radiologists, with 70% market share outside of Auckland.

The acquisition appears fairly priced and fits with Infratil's healthcare thematic focusing on aging population and preventative care, similar to the Qscan acquisition made in Australia.     

We continue to remain BUY rated on Infratil, with the market discounting the cash from the sale of Tilt Renewables as being difficult to allocate and fading expectations of an increased takeover bid by Australian Super. We believe there is upside potential and back Infratil given their track record of making attractive business acquisitions and increasing investment into their current businesses.   

Australia & New Zealand Market Movers

The Australian market closed higher on Wednesday (ASX 200 index +0.3%), breaking through into a fresh 14-month high and is just 0.3% shy of its February 2020 high. 

Miners were generally stronger despite iron ore prices slipping back, BHP rose +0.9%, and Rio Tinto added +0.9%, with minor miners also up strongly, Nickel Mines (+7.9%), Lynas (+4.8%), and Mineral Resources (+3.5%). The Tech sector led the market on the back of strong results from US tech companies overnight – Afterpay rose +3.5%, Xero was up +2.2%, and EML payments climbed 3.1%.

Woolworths was one of the bigger losers of the day, falling -3.9% as despite its supermarket sales outperforming Coles the market was expecting a bigger beat from its supermarket business. CSL rose +0.9% and has been recovering, as the rapid vaccine rollout helped lift plasma collection volumes over the last two weeks.  

The New Zealand market (NZX 50 index +0.5%) was higher again yesterday. 

Z Energy was one of the stronger performers up +3.5%, a week before it reporting its 2021 full year result, where a broker spurred investor enthusiasm with the fuel retailer would hit the top end of the company's guidance. EBOS was up +3.1% recovering from recent selling, 

Fisher and Paykel Healthcare rose +1.9%, continuing its 5 day long streak, as the number covid-19 cases globally (particularly in India) continue to run rampant. On the flip side Tourism Holdings was the biggest loser down -2.6%, as it delays the "return to normality" .     

3 Things Markets will be Watching this Week

  1. Investors this week will focus on corporate earnings with tech heavy weights such as Microsoft, Alphabet, Apple and Facebook all set to present updates.
  2. The US Federal Reserve and the Bank of Japan are releasing monetary policy statements.
  3. President Biden's unveiling of his US$1.5t American Families Plan, and 1st quarter US GDP data Thursday is expected to show 6.9% annualized growth after a more moderate 4.3% rate in the previous quarter.
Global markets were mixed overnight (S&P 500 index +0.7%) as the US market broke out to a new record close and is now up over 6% for the month!

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