Global markets were mixed overnight as volatility remains remarkably supressed and it appears investors are awaiting fresh catalysts. Shares on Wall Street were checked by a drop in GE as well as continuing concern about the prospects of Republicans passing tax reforms.
As we have touched on previously, one of the reasons behind the recent strength in markets is that global economic growth is synchronised for the first time since the 2007-2009 financial crisis. However, what is astounding is the lack of any significant pullbacks/market corrections this year.
Stock in Focus: Elders (ELD:AX)
Shares in agribusiness Elders surged +7.9% yesterday after it reported a strong full year profit result as the business continues to turn itself around.
Looking at the key numbers, net profit was $116m (versus $64.4m a year earlier), on sales revenue of $1.6bn. Elders also paid a long-awaited dividend of 7.5 cents per share (the first since 2008), as well as a special dividend of another 7.5 cents. Elders is an example of a company which has turned itself around over the last few years and emerged from the brink of bankruptcy.
Management has had success cutting costs and radically restructuring the business. It has also enjoyed some tailwinds with cattle and sheep prices rebounding, alongside some relatively benign climatic conditions across the agricultural sector. Management is now plotting further growth out to 2020.
We have held a positive view on Elders as a diversified agricultural play, particularly given our dining boom investment theme.
We are currently BUY rated on Elders.
Members should look out for a full update on Elders to be released in our next weekly report.
Australia & New Zealand Market Movers
The Australian share market continued to retraced from recent highs on Monday (ASX 200 index -0.13%) as the market followed offshore leads lower. In any case, the local share market was always going to struggle with two of the ASX's heavyweights, Westpac and ANZ, trading ex-dividend, which pushed the stocks lower. The ASX remains above the 6000 index level.
The New Zealand market was more or less flat yesterday (NZX 50 index +0.03%) with A2 Milk rising on a positive presentation to investors while Xero shares continued to drop. As we touched on last week, many market participants were baffled Xero’s decision to de-list from the NZX, which means the stock will be sold by funds tracking the local index.
3 Things Markets Will be Watching this Week
- We move into the last US corporate profit announcements, with the level of the market making the current earnings season as important as ever.
- US Politics, with Tax Reform taking centre stage.
- Australian employment data is released on Thursday.
Have a Great Day,
Team
