China Tech Bounces Back | Summerset Soars on Result

26 August 2021

Global markets were up overnight, as US markets (S&P 500 +0.1%) closed at a new record high ahead of the a summit meeting of global central bankers later this week – referred to as Jackson Hole.

Investor sentiment improved following the FDA’s approval of Pfizers COVID vaccine, as well as news COVID cases in China are dropping, easing nerves around the world’s second largest economy. This saw the price of crude oil and other commodities pick up – with the Energy sector again outperforming the market as well as other re-opening plays.

European Markets were flat overnight (The Stoxx 600 index, +0.0%) despite strong economic data from Germany, as major sectors swung in opposite directions to offset each other.

Hong Kong’s (Hang Seng Index +2.5%) and China’s (Shanghai Composite Index CSI 300, +1.1%) traded higher as investors bought into beaten down Chinese exposed tech shares following increased clarity around Chinese regulation on the sector. Alibaba jumped +9.5% and Tencent rose +8.8% 

Summerset Group (SUM:NZX / SNZ:ASX)

Summerset share rose +4.6% yesterday and have opened another +3% higher this morning, trading at a new record high after delivering solid result for the first half of the 2021 financial year. This was pleasing to see as Summerset has been one of ore core retirement village BUY recommendations.

Underlying net profit after tax came in at $75.5m, up 67.5% from last year on the back of strong sales and development activity. Strong cash flow generation also meant net debt decreased over the period down to $643.3m – with gearing at a comfortable level of 28.5% with plenty of debt facility headroom to expand.

We remain BUY rated as our favoured large cap NZ retirement village with strong growth potential, while also remaining reasonably priced. SUM have revalued their NTA (net tangible asset value per share) by +20% relative to 2020, reflecting a buoyant property market, which means the shares are trading at 2x NTA  – while also having more upcoming growth in the tank versus Ryman.


Australia & New Zealand Market Movers

The Australian market was up slightly yesterday (ASX 200 index +0.2%).
Energy and Materials both traded strongly as commodity prices recovered, while once again Tech shares continued to perform., a benefactor of last year’s lockdown, saw its shares slump -15.8% after scrapping its dividend on a weak result with profits slumping 87% to just $3.5m driven by heavy discounting on excess inventory and higher shipping costs.

The New Zealand market was up a touch on Tuesday (NZX 50 index, +0.1%), on strong earnings results.

Heartland group shares rose +2.9% after delivering strong earnings for the 2021 financial year, net profit after tax coming in at $87m up +21% from the previous year. 

Pushpay shares were up strongly as investors digested new of its recent acquisition up +4.2%. Pacific Edge, EBOS and Mainfreight continue to rise strongly, all three hitting fresh all-time highs up +3%,  +1.9%, and +0.3% respectively.

a handful of market heavy weights traded lower offsetting gains such as Fisher and Paykel down -1.8%, and Meridian Energy slipped -2.5%

Z Energy retraced -1.7% as investors weigh up the likelihood of the Ampol takeover deal going ahead .

3 Things Markets will be Watching this Week

  1. ​Local corporate earnings is underway. Major names reporting this week include Chorus, Freightways, Boral, Oil Search, Scentre Group, Summerset, Afterpay, Wisetech Global, Meridian, SkyCity, Flight Centre, Link Administration, Next DC, Qantas, Qube Logistics, Ramsay Health Care, Woolworths, Air NZ, A2 Milk and Wesfarmers.
  2. ​COVID & Lockdown updates are front & centre on both sides of the Tasman. 
  3. Globally, economic events this week include US 2nd Quarter GDP data, manufacturing data across Europe and Australia, and the latest retail sales prints in Australia and NZ.
We remain BUY rated as our favoured large cap NZ retirement village with strong growth potential, while also remaining reasonably priced.

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