Global markets continued to trend lower overnight, after conflicting headlines on U.S.-China trade relations and a row between the world’s top two economies over the Hong Kong protest added to doubts whether a deal could be reached by the end of this year. Tensions in HK continue to escalate, which saw Asian markets down significantly yesterday.
Stock in Focus: Ryman Healthcare (RYM:NZX)
Ryman Healthcare shares were lower yesterday as the country’s biggest retirement village operator and developer reported an 11.1% increase in profit, bolstered by unrealised gains on the value of its property portfolio. Underlying profit rose 6.2% and it signalled annual earnings would rise by as much as 17%. The result was at the bottom end of analyst expectations.
The company reported NTA (net tangible asset value/the valuation of its property portfolio) of NZ$4.53 (+5.6% vs last period) and an interim dividend of 11.5 cents. Ryman continues to trade at a significant premium to NTA. The company’s 2nd half profit growth is expected to reflect development margin growth over operational improvement. Ryman introduced a medium term ambitious target of adding 1,600 units and beds, and Ryman continues to expand in Australia.
While we are positive on the retirement sector generally (given the tailwind of an ageing population and a stabilisation in the property market), we prefer Summerset and Metlifecare over Ryman, given we believe Ryman is too expensive in terms of relative valuation.
We currently have a HOLD recommendation on Ryman.
Members should look out for our full update on Ryman to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian market continued its sell-off yesterday (-0.7%) as Westpac led the market losses, falling 2% as pressure on the future of its senior management grew in the wake of allegations by AUSTRAC it breached anti-money laundering laws. Prime Minister Scott Morrison weighed into the matter, saying the board should reflect "very deeply" on the future of chief executive Brian Hartzer. NEXTDC shares were under pressure after downgrades from a couple of brokers who noted the increasing competition from rival AirTrunk, which announced a $1 billion plus investment in a new 110-megawatt (MW) hyperscale data centre in North Sydney. On the flipside, Aristocrat shares continued to rally on the back of broker upgrades following its solid result.
The New Zealand market retraced on Thursday (-0.2%) as NZ shares joined the lull across Asia-Pacific markets as investors grow increasingly pessimistic about China-US trade relations. Outside the main benchmark index, Pacific Edge shares were halted at 16.5 cents after the bladder cancer test maker reported a wider first-half loss and said it planned to raise another $20 million to tide it over until it started breaking even on a cash flow basis. Of that, $7 million would be raised in a placement at 15 cents, and the remainder in a renounceable rights issue at 10 cents apiece.
3 Things Markets Will be Watching this Week
- Trade related news-flow will remain important in terms of driving investor sentiment.
- Minutes from the last US Federal Reserve meeting are released on Wednesday.
- Minutes from the last Reserve Bank of Australia meeting are released on Tuesday.
Have a Great Day,