China Woes | Kiwi Property Group 

29 November 2022

New Zealand Market Movers 

The New Zealand market (NZX 50 Index, -0.7%) fell even as aged care stocks partially recovered losses from last week on the back of the government announcement concerning pay rises for the sector’s nurses. Leading aged care stocks were Oceania Healthcare (+6.4%), and Arvida Group (+4.4%), and Summerset Group (+2.8%). 

Task Group (formerly Plexure) (+16.4%) found buying activity after announcing half-year group revenue of $26.6 million, up 97% on the previous corresponding period, which reflects the merged revenue of Plexure and TASK. 

Smartpay (+6.7%) also rallied after delivering its earnings for the six months to September 30. Revenue for the company rose +68% to $35.4 million with Australian transaction revenue doubling. 

Australia Market Movers 

The Australian market (ASX 200 Index, -0.4%) fell on Monday, with the Materials (-0.9%) sector hit by unrest in China and Energy (-1.7%) hit by Crude Oil dropping to its lowest level all year. 

Retail sales in Australia for the month of October fell –0.2% from the previous month, reporting its first monthly decline since December 2021, as consumers act more cautiously. 

The Bank of Queensland (-5.6%) sank after the market learned of Chief Executive George Frazis’ resignation. 

Europe Market Movers  

European markets (Stoxx 600 Index, -0.7%) closed lower on Monday with Oil and Gas (-1.4%) stocks leading sectorial losses. 

US Market Movers 

US markets (S&P 500 Index –1.5%) failed to advance on Monday as unrest in China and weak oil outlook weigh on global markets. Over the weekend, demonstrations in mainland China broke out in response surging Covid cases and the country’s zero-Covid policy. This has spooked markets that were getting used to the idea that China was on its way to reopening. Company’s relying on Chinese manufacturer have come under pressure with Apple (-3.9%) tumbling on the day. 

Further weighing on markets is St. Louis Federal Reserve President’s notes on Monday suggesting that the markets may be underestimating the chance that the central bank stays or becomes more aggressive in its tightening.  

Stock In Focus: Kiwi Property Group (KPG.NZX) 

Kiwi Property Group shares slipped after delivering their 2023 half year result. Reported net loss came in at -$151.1m, due to incurring a non-cash revaluation loss of its portfolio of $213.3m, which was flagged earlier reflecting higher interest rate environment softening cap rates on investment properties. 
Net tangible asset fell from $1.45 down to $1.31, with KPG trading at a large discount to account for further weakening over the near-term which appears likely.  

Operating profit before tax rose +4.2% from last year to $65.1m, helped by improved rental performance at Sylvia Park post restrictions, allowing the group to pay a 2.85 cent per share dividend for the half (split over two quarters) and reiterated full year dividends of 5.7 cents per share (implies a ~9% gross dividend – pre-tax). 
We remain BUY rated on Kiwi Property Group as one of our preferred REIT’s as it trades at an attractive discount to its NTA, and offers investors an attractive gross dividend of ~8%, which accounts for a –10% cut from current level in light of difficult trading ahead, and believe majority of the downside is priced in.  

What Markets will be Watching this Week (UTC +13) 

Monday 
NZ Kiwi Property Group earnings 

Tuesday 
NZ Fisher & Paykel Healthcare earnings 

EA Economic Sentiment NOV 

Wednesday 
EA Inflation Rate YoY November 

Thursday 
US ADP Employment Change November 

US JOLTS Job Openings October 

US Salesforce earnings 

EA Unemployment Rate October 

Friday 
US Personal Income MoM OCT 

Saturday 
US Non Farm Payrolls November 

The New Zealand market (NZX 50 Index, -0.7%) fell even as aged care stocks partially recovered losses from last week on the back of the government announcement concerning pay rises for the sector’s nurses. Leading aged care stocks were Oceania Healthcare (+6.4%), and Arvida Group (+4.4%), and Summerset Group (+2.8%). 

Do You Want Daily Market Insights?

If you’re interested in staying up-to-date with the latest news and analysis on stocks, be sure to sign up to BlackBull Research.

1 Month Free Trial

Access our expert stock market research Free of charge with no obligation

Free 1 Month Free Trial

Unlock this article & access our expert stock market research

ASX, NZX & USD Stock Buy, Hold, Sell recommendations. Model Portfolios. Daily news and more

[pmpro_checkout]