Local Earnings – AMP, SkyCity, CBA | Briscoes

9 August 2018

Global markets retraced overnight as a steep fall in crude oil prices hit energy shares, more than offsetting gains in technology and bank stocks. 

As we highlighted on Monday, local earnings season across Australia & NZ gets busier this week, with the likes of AMP, Commonwealth Bank, and SkyCity reporting yesterday. We were particularly pleased with the above expectation result from SkyCity, a stock we have been bullish on as part of our tourism boom investment theme. Both AMP and CBA also jumped on their result, after being hit-hard by negative sentiment from the royal commission into the Australian financial sector.

AMP Share Price:

 

Stock on Focus: Briscoes (BGP:NZ)

We have initiated research coverage on Briscoes. Briscoes is NZ’s largest listed retailer by market capitalisation and operates two major bulk retail chains in New Zealand, Briscoes and Rebel Sports. Briscoes has been a strong performer over the last decade, generating stable revenue growth while widening margins. The company is well run with conservative management who have not taken on any debt and have been focused on growing dividends.

However, the operating backdrop may be about to get a whole lot tougher for Briscoes as the property market cycle has likely peaked in our view. Tailwinds such as strong NZ GDP growth, a growing population, and low interest rates are likely set to reverse, and hence we are cautious on the retail sector. In saying that, Briscoes is our top retail sector pick, and those who are comfortable with a retail sector position may still be comfortable investing in Briscoes which also provides investors with a dividend yield of over 5%. 

Given the economic risks faced from a slowing housing market, as well as competition risks in the retail sector, we initiate coverage on Briscoes with a HOLD.

Australia & New Zealand Market Movers
The Australian share market was higher yesterday (ASX 200 index +0.23%) for just the second time this month as positive reporting season results lifted the index. Investors encouraged by Commonwealth Bank and AMP's results, which were up +3.8% and 2.8% respectively. Commonwealth Bank reported its first cash profit fall since the global financial crisis as regulatory penalties pushed expenses higher. Investors may have been expecting worse and were likely encouraged by the fact that without the one-off expenses, the bank would have recorded a $10.01 billion cash profit. AMP shares lifted despite the company recording a fall in profit. The financial services giant recorded an underlying interim profit of $495 million, beating market expectations of $487 million.

The New Zealand market was a touch lower on Wednesday (NZX 50 index -0.04%) led by Pushpay's continued weakness, while Skycity gained on its strong annual results. SkyCity was up +2.5% as it announced it increased full-year earnings more than forecast as its high-roller business recovered and its flagship Auckland casino improved driven by a solid 4th quarter. SkyCity said it expects "modest growth" in earnings in the current financial year.

 
 
3 Things Markets Will be Watching this Week
1.               US corporate earnings season continues as investors digest quarterly company profit announcements.
2.               Locally, investors in Australia and NZ will have a number of profit announcements to focus on as earnings season gets busier.
3.              The Reserve Bank of Australia makes an interest rate decision on Tuesday, the RBNZ also makes a decision on Thursday.

 

Have a Great Day,

Team

As we highlighted on Monday, local earnings season across Australia & NZ gets busier this week, with the likes of AMP, Commonwealth Bank, and SkyCity reporting yesterday.

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