Global markets were mixed overnight (US S&P 500 Index -0.4%), with the US market closing lower, snapping a three-day winning streak. News of spiking covid-19 cases across the Southern US states and parts of the world including Beijing put a damper on the speed of the apparent economic recovery priced into the market. Technology shares continue to make modest gains being relatively immune, while airlines, cruise ships and retail which benefit from a fully opened economy were weaker and financials and energy were hardest hit.
Despite cases continuing to emerge, it appears there might not be as a strict lock downs enforced again as many countries (not including South America) believe their health system can cater to a rise in new cases. In saying that, we do maintain a defensive view especially at current valuations given we could see a return to some social distancing measures, with tight border restrictions likely to remain enforced.
Sky City Entertainment (SKC:NZX / SKC:ASX)
Sky City shares (SKC) were placed into a trading halt yesterday as it announced it aims to raise $230m in fresh equity offering new shares at $2.50 per share, with the funds used to strengthen its balance sheet and secure liquidity amidst the difficult trading conditions created by covid-19. This will allow SKC to weather economic uncertainty.as $180m will be in the form of an institutional placement and the remaining $50m in share purchase plan for existing retail shareholders.
Additionally, SKC will also gain $160m of new debt facilities, as well as an extension of $170m of existing bank facilities.
SKC also provided guidance for the 2020 financial year expecting normalised operating earrings (EBITDA) to be between $185m and $205m, down significantly from $342.7m in the previous year.
We remain HOLD rated on SKC at its current valuation
Australia & New Zealand Market Movers
The Australian market (ASX 200 Index +0.8%) extended its recovery on Wednesday, as equity markets continue to remain upbeat despite growing concerns of a second wave of covid-19 emerging, reacting positively to better-than-expected rebound in consumer spending in the US.
Qantas announced it has cancelled all international flights, except for services to NZ until late October, with the tourism ministers decision to keep Australian boarder closed for the remainder of the year as 23 new covid-19 cases emerged yesterday, with an exception for a possible trans tasman bubble with NZ and special flights for international students.
The New Zealand market was up strongly yesterday (NZX 50 Index +3.5%) boosted by stronger lead from Wall Street, which saw market heavy weights A2 Milk (+7.2%) and Fisher and Paykel (+6.2%) charge higher. Taking these two out of teh index return, the market was up around ~1.5%, with other large caps making modest gains.
Z Energy provided its weekly fuel update, showing +5% increase over the previous week, with retail demand getting stronger while commercial remains weak, with total fuel volumes still down -26% compared to pre covid-19 (when excluding jet fuel). Abano healthcare reported the biggest fall down -10.3%, after considering a potential capital raise or a take over offer of $3 and $3.25 per share, below what Abanao had been trading at recently.
3 Things Markets Will be Watching this Week
- Covid-19 related newsflow, namely the re-opening of economies around the globe and new case growth in Southern US States.
- Economic data including retail sales and a raft of housing data in the US along with a data dump in China.
- Locally, employment data in Australia and Q1 GDP in NZ will be closely watched.
Have a Great Day,
