Cautious Trading | Delegat’s Record Update

17 July 2018

Global markets were lower overnight as investors traded cautiously awaiting developments on the US-China tariff war, US earnings results and key economic data. 

As we touched on yesterday, US Federal Reserve chairman Jerome Powell is set to address congress this week and a meeting between US President Donald Trump and Russian President Vladimir Putin in Finland this week is also a key focus for investors. 

On the US corporate earnings front, Bank of America’s strong results reinforced expectations of earnings growth for US companies. On the flipside, Netflix looks to have missed growth expectations with its shares selling off heavily after hours. Another strong round of US profit announcements is a key reason to remain bullish on markets and we are watching developments closely.

 

Stock in Focus: Delegat Group (DGL:NZ)
Shares in Delegat Group were higher yesterday as New Zealand’s largest listed winemaker said its operating net profit in the year to June lifted 17% to a record $44.9 million. The result was underpinned by record global case sales, lower cost of sales per case, higher yielding 2016 and 2017 vintages and lower financing costs.

Delegat’s updated its case sales forecast out to 2021, and re-forecasted global case sales to increase by 8% in the 2019 financial year and estimates it will achieve a three year compound average growth rate of 7%. The Group said it remains focused on achieving its strategic goal of Super Premium wine category leadership in all varietals across all markets. 

This was a solid update and reinforces our positive view that Delegat’s is a solid operator which will also benefit from weakness in the NZ dollar (given the large amount of wine it exports).

We currently have a BUY rating on Delegat Group.

Members should look out for a full update on Delegat’s to be released in tomorrow’s weekly report.

Australia & New Zealand Market Movers

The Australian share market was lower on Monday (ASX 200 index -0.43%) weighed on by the material and finance sector heavyweights. There were media reports yesterday that the G8 Education board had engaged the services of investment bank UBS and law firm Allens to keep an eye on trading in the company's shares and other moves in the child care market as private equity companies eye off the sector. Shares in the early childhood education company rose +5%.

 
The New Zealand market sold off yesterday (NZX 50 index -0.49%) in a region-wide selloff as trade war fears rose, with Fisher & Paykel Healthcare and Synlait Milk leading losses for the market index. Markets appear nervous heading into earnings season in the US, with NZ stocks set to follow in terms of reporting profits. Retailer Kathmandu was the best performer as it continued to rally after reporting a solid trading update

 

3 Things Markets Will be Watching this Week

1.               US corporate earnings season means investors will be shifting their focus back to company profit announcements.

2.               Trade will remain in the headlines after the United States announced further tariffs on an extra $US200 billion worth of Chinese goods.

3.               Key economic news flow includes – Chinese economic data (GDP figures and retails sales) are published on Monday. Australian employment figures are released on Thursday

 

Have a Great Day,

Team

Global markets were lower overnight as investors traded cautiously awaiting developments on the US-China tariff war, US earnings results and key economic data. 

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