Europe Rebounds | Invocare

8 September 2020

Global markets edged higher overnight (Euro Stoxx 600 index up +1.7%) led by European markets, as the US market was closed for Labour Day holiday. European markets, which have fewer technology stocks compared with the United States, started the week in the black, driven by a 2% gain in Germany’s DAX and London’s FTSE 100.

The recent volatility in the US market is likely to continue, predominantly due to stretched valuations of the tech sector, with the FAANG stocks (Facebook, Apple, Amazon, Netflix and Google) representing 20% of the US stock market, as well as a few other big names such as Tesla and Microsoft. Earnings or other metrics will now be required to justify these elevated valuations. 

The US Dollar gained slightly, on the other hand oil (WTI -1.8%) extended its losses from last week falling to US$39.07/bbl as a price cut by Saudi Arabia signalled fuel consumption is wavering in key markets.

Invocare  (IVC:ASX)
Funeral operator InvoCare shares have been under pressure as it continued to struggle with covid-19 restriction on funeral attendees on both sides of the Tasman. As  result its 2020 first half result was impacted revenue for the period down -6.2% and operating earnings (EBITDA) slumped -22.7% from last year down to $48.6m. 

Invocare  is seeing customer preferences return to pre-COVID trends since restrictions have eased, with higher attendances expected to drive earnings uplift for the second half of 2020, however there will be some limitations predominately across Victoria and Auckland – with a full recovery over the medium-term once restrictions are fully lifted.

We maintain a BUY rating on Invocare based on a full recovery over the medium-term view.

Australia & New Zealand Market Movers

The Australian market edged higher on Monday  (ASX 200 Index +0.3%), following  a sharp fall on Friday as investors grappled with the implications of the demanding restrictions plan for Australia's second-largest state and the risk of further volatility in US.

Companies exposed to Victoria were generally weaker, after the covid-19 stricken state unveiled its "aggressive elimination" plan on Sunday, and investors were forced to readjust earnings expectations.

The major banks and miners were the main support by market value, The big four lenders ended the session between +1% and +1.8% higher, while BHP shares jumped +2.4% and Rio Tinto were up +2.5%.

The New Zealand market also edged higher yesterday (NZX 50 Index +0.3%) in a quiet day of trading.
Sky Network Television led the local market higher, up  +5.8% heading towards its earnings result announcement on Thursday. The sale of MediaWorks' free-to-air television division to the Discovery Channel announced today may have brought extra attention to the stock.  

Summerset Group was the only retirement village operator to rise yesterday up +1% after launching a $150 million seven-year bond sale to diversify and lengthen the term of its debt, and to help fund future development. 

New Zealand Refining Company fell -1.5% after S&P Dow Jones Indices announced last week the oil refinery would be relegated out of the NZX 50 on Sept. 21. It will be replaced by Serko which jumped on the announcement. 

3 Things Markets Will be Watching this Week

  1. ​​​​​​​​​​​​​​​COVID-19 related news-flow remains key, with second wave and lockdown headlines, while US Congress debate what an extension of stimulus will look like.
  2. Key data this week includes US CPI, Eurozone Q2 GDP, the latest ECB interest rate review and exports/import data from China.
  3. In NZ, Sky TV, Briscoe Group, and Restaurant Brands will report earnings and Investore Property will host its AGM.
Global markets edged higher overnight (Euro Stoxx 600 index up +1.7%) led by European markets, as the US market was closed for Labour Day holiday

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