China Recovering | Genesis Energy

8 May 2020

Global markets were higher overnight (S&P 500 +1.1%) as an upbeat outlook from PayPal and a surprise rise in Chinese exports raised hopes of a faster economic recovery from what is expected to be a deep coronavirus-led global recession.

Genesis Energy (GNE:NZX / GNE:ASX)

​Genesis shares have been caught up in the covid-19 sell off but have recovered partly due to lowered risk of the potential closure of Tiwai Point and supportive guidance for the 2020 financial year. Genesis expect operating earnings (EBITDAF) for the 2020 financial year to be between $355m and $365m, shaving $5m off its previous guidance.

The retail side of business is performing strongly, offsetting weakness from wholesale power generation. The country’s level 4 lockdown that commenced on 26 March has positively impacted residential demand by 10-15%, with SME demand being down 45% and industrial demand down 25%, as businesses were forced to shutdown.

We ​recently ​upgraded ​Genesis to a BUY due to its current valuation and dividend yield of 6% which is attractive especially in an extremely low interest rate environment.


Australia & New Zealand Market Movers

​The Australian sharemarket closed​ ​lower for a second day running on Thursday​ (ASX 200 Index -0.4%) as investors adopted a more risk averse stance in light of a number of economic red flags. 
The big banks led the weakness on the local market. Energy stocks also traded lower after oil prices reverses a strong run, giving up some of their gains with stockpiles continuing to build.​ ​The major miners closed firmer with base metal and iron ore prices rising. Australia's March trade surplus also shot to an all-time record $10.6 billion driven by a huge rebound in iron ore and coal​,​ mostly to China.
CSL climbed​ as company said it had secured an additional $US750 million in debt from offshore investors and was starting production of a therapy for COVID-19 using the antibodies from the plasma of recovered patients.​ ​Goodman Group rose after reaffirming its earnings and distribution guidance, saying it had benefited from new logistics space demand driven by online sales.

​The NZ market was higher yesterday (NZX 50 Index +0.7%) as Pushpay led gains for another day in a row as investors continued to rally around the stock following its bold forward guidance.
Shares rose after investor confidence was bolstered by Prime Minister Jacinda Ardern's outline of alert level 2 restrictions. The goal remains to minimise contact with strangers, but will allow life to return to “safer normal”.
Tourism Holdings ​also jumped on the back of travel restrictions within New Zealand being relaxed. Holiday and other travel around New Zealand will be permitted when the country moves to alert level 2, potentially throwing tourism a lifeline. Restaurant Brands is another stock set to benefit from easing restrictions, with level-2 allowing them to reopen dine-in options.


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,


Global markets were higher overnight as an upbeat outlook from PayPal and a surprise rise in Chinese exports raised hopes of a faster economic recovery from what is expected to be a deep coronavirus-led global recession.

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