Global markets were mixed overnight as global investors remain fixed to the side-lines ahead of a speech by US Federal Reserve chair Janet Yellen at a key annual gathering of central bankers in Jackson Hole, Wyoming over the weekend. The world's top economic minds are set to meet in Wyoming, including Federal Reserve chair Janet Yellen and European Central Bank chief Mario Draghi, and investors are keen for any clues to the future direction of monetary policy.
It frantic pace of earnings announcements across Australia and New Zealand concludes today. Included in companies that reported profits yesterday which are under research coverage were Costa Group, Scales Corporation, NZ Refining, and Ebos Group, which we touch on below.
Stock in Focus: Scales Corporation (SCL.NZ)
Shares in Scales dropped yesterday after it said its first half profit fell 14 percent to $29 million after its apple orchards were hit by heavy rain and winds and needed more expensive care.
Unfortunately, weather risks are largely unavoidable in the agriculture sector. At the same time revenue was still up 3% to $216.7 million and given the circumstances we see the pullback as more of a short-term setback and hence a buying opportunity.
We remain positive on Scales over the medium term as among other things it is able to leverage off the significant and growing appetite for NZ apples in Asia
We are currently BUY rated on Scales and see the share price drop as a Buying opportunity for medium term investors,
Members should look out for our full update on Scales to be released in our next weekly report.
Australia & New Zealand Market Movers
The Australian share market lost ground on Tuesday (ASX 200 index -0.22%) as the ASX overcame a shaky start as miners again propelled the bourse to gains on another day of dramatic reactions to earnings results. Miner South32 didn't disappoint on Thursday, boosting its final dividend and increasing the value of its share buyback program after a return to profitability in the 2017 financial year.
Other standout gainers included travel firm Flight Centre, and Costa Group as the leading grower, packer, and marketer of fresh fruit and vegetables released a strong full year result with net profit up +37%.
The New Zealand market was a touch lower yesterday (NZX 50 index -0.14%) as sharp falls in Trade Me and Metro Performance Glass weighed on the market. Metro Glass released a trading update and said it expects its first half results to be largely flat despite the contribution from recently acquired Australian Glass Group. This disappointed the market as the company appears to be struggling to capitalise on the construction boom (in a similar manner to Fletcher Building & Steel & Tube).
Ebos Group and NZ Refining both announced results which saw a positive shares price reaction, and as with the other stocks above we will provide full updates to be released in our weekly report.
3 Things Markets Will be Watching this Week
1. Corporate profits will be in focus as earnings season continues across Australia and NZ.
2. The geopolitical situation as tensions remain high between the US and North Korea.
3. US politics as investors are concerned around the Trump Administration’s ability to pursue its pro-growth agenda.
Have a Great Day,
Team
