Infratil (IFT.NZX)
Infratil revealed they are looking to raise $850m to acquire full control for One NZ (Vodafone NZ) for $1.8m. The purchase values One NZ at $4.9 billion and at 9.8x operating earnings (EBITDA) which is inline with Spark’s valuation.
The purchase brings Infratil’s gearing to 19%, and leaves them with a bit of $900 in liquidity for future investments.
We encourage shareholders to take part in the capital raise, and over-subscribe as we anticipate strong demand and scaling down for retail applicants.
We remain BUY rated as our top NZX large-cap pick.
Pacific Edge (PEB.NZX)
Pacific Edge shares have plummeted, after resuming trading after telling the market it will no longer receive Medicare funding coverage for its Cxbladder tests in the United States – its major growth market. Pacific Edge told the market it will explore all available legal options, including an appeal, and it will bill and receive reimbursement from other contracted US payers.
We aren’t very hopeful and given the large amount of costs and lack of revenue over the next two years, we see troubling times ahead. We anticipate large cost-cutting in an attempt to preserve cash but we would choose to avoid the stock now and are neutral rated. We want to see cash burn drop significantly and hope the business can survive at least another 3-years without Medicare coverage, but that looks unlikely at the moment. Heads need to roll?
New Zealand
EBOS announced it had lost its contract to supply Australian Chemist Warehouse with Pharmaceutical Benefits Scheme medicines from the 1st July 2024 to Sigma Healthcare. It is a material hit to the business, roughly $60m of operating earnings(EBITDA), stripping that out and looking ahead EBOS again looks fair value in our opinion trading at $35 to $36 per share and would maintain a HOLD rating.
All else being equal, we would be buyers again at $34.00, and take some profit at $38.00. The news was unfortunate, but the share price movement means we would not change our recommendation and continue to hold the stock in our NZ portfolio.
Considering Fisher and Paykel Healthcare is down -12% since its earnings announcement, it is a rough time for NZX Healthcare for these reasons.
| Australia |
| The Australian market (ASX200, +0.2%) was down reversing its gains from the open.Most sectors traded lower, while healthcare was a strong performer. The Australian economy expanded by +0.2% in the first quarter for 2023, reporting its lowest rate of increase in 6-monthsThis also tipped that the RBA has room for 2 more rate hikes with their cash rate increasing to a 4.85% peak – a surprise to the market and added to further tightening. |
The Bank of Canada resumed hiking rates after pausing – 4.75% – a 22 year high. Looking at core CPI (ex food and energy) the story is pretty clear of what happens when central banks take a rates pause – inflation ticks upwards. Clear read-through for RBNZ’s rates pause – we do not believe Orr will pause for long, nor was the RBNZ’s latest hike its last.
Good result for Zara owner Inditex – 54 per cent rise in net profit of €1.2bn in the three months to April, ahead of analyst expectations of €980mn. Sales rose by 13 per cent to €7.6bn. Second generation CEO Marta Ortega has proved herself to be an exceptional manager in the cut-throat world of commerce – sales have grown whilst the fashion giant has actually shut down stores – we note that Zara has embraced an aesthetic closer to that of LVMH than to Swedish rival H&M. No view – we prefer avoiding retail – but speaks to the growing divide between “fast fashion” and “conscious fashion”.
Sheikh Jassim has made a revised 5th bid for Manchester United. It is allegedly his final bid. It’s an all-cash bid, versus INEOS’ Jim Ratcliffe’s equity-and-debt fuelled bid that would be paid out over several years. As we saw with the Saudi’s cash-fuelled merger of the PGA with the LIV, cash is king.
We’re skeptical of Ratcliffe’s bid – overly complicated and doesn’t alleviate the club of its debt (Jassmin’s deal pays off MANU’s debt – fans and shareholders ought to love that).
