Global markets continued to trend higher overnight with the technology sector leading gains. In US stock moves, Walt Disney gained as its much-anticipated streaming service debuted.
Stock in Focus: Kiwi Property Group (KPG:NZX)
Shares in New Zealand’s largest listed property vehicle Kiwi Property Group (KPG) fell after announcing their plan to raise up to $210m, with a capital raise issuing new shares at $1.58 per share (a -5.4% discount to what they were trading at prior to the announcement).
It appears to be an opportune time to conduct an equity raise as KGP shares have been on a strong run this year and were trading at all-time highs. With the proceeds used to pay down debt to allow headroom to proceed with further development at their mixed-use site or even pursue acquisition opportunities.
$180m has been successfully raised by institutional investors, with $20m available for New Zealand retail investors (with the ability to take up $10m more depending on demand). Given KGP’s current valuation (well above NTA of $1.43) and the price the new shares are on offer, we would not recommend taking on the offer. KPG is our preferred New Zealand commercial property exposure given the quality of assets in their portfolio. However, we maintain our HOLD given its relatively expensive valuation given its strong run this year (now trading above net tangible asset per share) and only paying 4.4% dividend we see limited upside potential at the current juncture.
Australia & New Zealand Market Movers
The Australian market retraced yesterday (-0.29%) as healthcare and financials weighed on the market, while tech and consumer staples were higher. Over the past three months the S&P ASX 200 Health Care Index has surged 16.4%, compared to a 2.8% rise in the wider benchmark.
The big banks were mixed, as CBA shares were higher following the release of its first quarter results. Despite the gloomy assessments in the last month from the big four banks, Commonwealth managed a cash profit of $2.3 billion in the three months ended September. The result is a 5% improvement on the average of the last two quarters. Key positives from the update were a lower-than-expected impairment charge and stable asset quality. Offsetting this was a lower net interest margin (a key measure of bank profitability), impacted by the low rate environment.
Nine Entertainment weighed on the ASX as the media company downgraded its full-year earnings guidance to low single-digit growth.
The New Zealand market was slightly higher on Tuesday (+0.06%) as Mercury NZ's decision to press ahead with the second stage of what will be the country's biggest wind farm had some investors revisiting their fears of the energy-hungry Tiwai Point smelter closing. Mercury will join the MSCI New Zealand Index later this month, which means among other things, that a lot of passive index tracking funds will start to invest in the company. Heartland Group shares rose after forecasting another increase in annual profit at its annual meeting.
3 Things Markets Will be Watching this Week
- Trade related news-flow is likely to continue to sway investor sentiment.
- Global quarterly corporate earnings season enters its final stages.
- The Reserve Bank of New Zealand makes an interest rate decision on Wednesday.
Have a Great Day,