Fed in No Rush | Elders Update

23 May 2019

 

​​​​​​​​​​​​​​​​​Global markets were mostly lower overnight, with the key news-flow being the release of minutes from the latest US Federal Reserve meeting.
 
US policymakers signalled their patient approach to interest rate policy is widely held, denting bets for a rate cut. Most, perhaps all, Fed members seem content to leave rates on hold for some time yet. While Fed members disagree on the distribution of the risks to both growth and inflation, no one is pushing for a near-term shift in policy, in either direction.
 

Stock in Focus: Elders (ELD:ASX)

​​​​​​​​​​​​​Shares in agribusiness Elders have been in recovery mode after falling heavily as the market priced in the difficult drought conditions last year.
 
Clearly it is a challenging period for Elder’s with reduced agriculture activity, particularly in New south Wales where they are overrepresented.  As a result, Elders underlying net profit after tax fell heavily down -34% from last year to $26.4m due to difficult trading conditions with all major business divisions performing poorly and increased investment into Eight-point plan.
 
In saying that, more recently Elders are citing a return to more normalised seasonal weather conditions with April and May trading strongly and ELD see a recovery in the second half – with ELD on track to deliver a full-year net profit aft tax of $61m to $65m, which is in line with 2018 record  net profit after tax of $63.7m. This illustrates the resilience of the company and ability to bounce back with more normalised condition.
We continue to see Elder’s as a key benefactor of our ‘dining boom’ investment thematic (we see multi-year demand for food from a growing Asian middle class) given its diverse agribusiness portfolio and strategic plan to seek further growth both organically and via acquisition.
 
We currently have a BUY recommendation on Elders.

 
Australia & New Zealand Market Movers

​​​​​​​​​​​​​​​The Australian share market extended its gains yesterday (ASX 200 index +0.19%) hitting a fresh 11-year high after the market rebounded from a loss during morning trade for the second time in as many days. Industrial stocks exposed to the residential housing and construction sector such as James Hardie & Boral had a strong day as investors are becoming more positive on the construction & residential market post the recent election. Local rare earths and lithium stocks such as Lynas continued to rally on speculation the US would look to Australia if China halted exports on the back of trade tensions.

 
The New Zealand market was in positive territory on Wednesday (NZX 50 index +0.21%). Infratil traded at $4.34, up 7% after adjusting for a rights offer at $4. The stock was halted for the $100 million institutional component of the $400 million equity raising it is undertaking to help pay for its share of the $3.4 billion Vodafone New Zealand acquisition.
SkyCity Entertainment Group said it plans to launch a Malta-based online gaming platform later this year. Outside the benchmark index, Serko fell as the online travel booking software developer lifted annual revenue 28%, but the expectations bar was set high given its strong run of late.
 

3 Things Markets Will be Watching this Week

  1. ​​Mini reporting season across Australasia sees a number of Aussie & Kiwi stocks make earnings announcements next week.
  2. Trade War headlines between the US & China are likely to remain in focus.
  3. Minutes from the last RBA meeting are released on Tuesday.

Have a Great Day,
 

Team

Global markets were mostly lower overnight, with the key news-flow being the release of minutes from the latest US Federal Reserve meeting.

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