Stock in Focus: Delegat Group (DGL.NZX)
Wine maker Delegat Group slipped despite delivering a modest result for the first half of the 2023 financial year. Operating revenue increased by +11.2% to $198.8m, as favorable currency and increased pricing offset lower volumes. However, this did not flow down well to the profit line. Operating net profit after tax was only a touch higher at +1.6%, reaching $40.2m, as higher operating expenses and elevated freight costs hit margins and profitability.
Delegat Group’s shares have significantly decreased since our last report. We were wary of its full valuation and inability to meet a high growth rate to maintain its share price at the time. Although we believe in the quality of the brand and business, which is likely to continue to perform, we still see limited sales growth and margin pressure that does not justify DGL’s current deflated valuations. Therefore, we are still HOLD rated.
New Zealand Market Movers
The New Zealand market (NZX50, +0.4%) was up heading into a quiet week for the local market.
Kiwi Property Group was a touch lower (-0.5%) after revealing its mixed used portfolio fell by $134.7m or -4.1% in value for the six months ending March 2023, which was widely expected given it trades well below its new NTA of ~$1.22 per share. KPG added that operationally it is doing well with 100% occupancy with sales rental up over the second half of the year. Retain buy.
Pushpay was the biggest loser of the day down –6.5% as shareholders rejected the $1.34 per share takeover bid, with pressure on arbitrage investors that bought heavily into the stock heading into the takeover – the stock now trades around the pre-takeover rumour price, and if there is no news of an increased bid, we’ll remain on the fence at current levels (~$1.15-$1.20) until they report their full year result in May – and continue to HOLD onto the stock in our NZ portfolio.
Australia Market Movers
The Australian Market (ASX200, +0.6%) closed higher on Monday, following a strong lead from global markets over the weekend, with most sectors higher except for materials and energy as investors looked to take profit from their strong performance last week.
Lynas sold off again, on speculation Tesla would aim to use less rare-earth minerals in its electric vehicles in an attempt to simplify its supply chain.
US Market Movers
Another slow news day in the US as traders await non-farm payroll data. Notably Manchester United gained 2.93% as the rumor-fuelled selloff from last week reverses; we think the acquisition looks likely to continue. The other big news out of the companies we cover is Starbucks – the company is reversing its sale of its company-owned UK outlets and is building 100 more (yesterday’s graphic re: hospitality’s comeback springs to mind). We read this as an attempt by management to reposition from China (currently the chain’s second-largest market). Starbucks’ growth in China looks woeful – even after China’s reopening revenue fell 31% and same-store sales fell 29%. The UK may prove more fertile ground. We are still hold-rated on the stock; we love the core business but China is a major issue – especially as it represents +6,000 stores. The bottom line on +100 UK stores is good, but not enough to move the needle.
What Markets will be Watching this Week
Monday
Tuesday
Reserve Bank of Australia (RBA) interest rate decision
Wednesday
Thursday
Bank of Canada (BoC) interest rate decision
Friday
US Non-Farm Payrolls
Bank of Japan (BoJ) interest rate decision