Market Nervousness | Pushpay Investor Day

15 September 2021

Global markets were weaker overnight, with the US market (S&P 500 index-0.6%) slipping after softer than expected inflation data. 

The US consumer price index (inflation) was up by just +0.3% month on month and core inflation up by +0.1% in August – the year-on-year pace of core inflation moderated to 4%. The news causing the US 10-year rate to, and the market uncertainty around the Fed’s tapering decisions and potential rate hikes remains.
Adding to investor concerns were the resurgence of covid-19 cases, both in the US and in China. 

Closer to home, the RBA announcement yesterday stated they’ll hold interest rates at 0.1% (no surprise) but stated that rates won’t change until 2024 – arguing the faster wage growth needed to boost inflation would take time, with local wage and inflation operating differently to rest of the world.

Also a cause of concern, the RBA governor highlighted he is keeping a close watch on the fate of Chinese real estate developer Evergrande Group, which has US$300 billion in debts. The company issued a statement to the Hong Kong stock exchange in which it conceded it was unable to sell assets fast enough to meet its debt servicing obligations, and that its cash flow was under “tremendous pressure”. He also said he is very watchful on various developments in the Chinese economy including slowing of economic activity due to stringent measures to shut down cases of covid, the implications of focusing on “common prosperity” over economic growth and the impact on the steel market as Chinese authorities try to contain emissions by effectively limiting steel production.
In somewhat of an understatement, he said: "There are a lot of moving parts there at the moment. We’re continuing to watch all those moving parts very closely. And how they work out is obviously very important for us and for the globe”.

Pushpay (PPH:NZX / PPH:ASX)

Pushpay shares fell -3.2% after their investor day presentation yesterday, which was surprising as we saw a number of positives in the presentation.

PPH highlighted plans for its new ResiMedia acquisitions and touched base on its pipeline of growth including a push into the Catholic market (indicated to be a surprisingly large $30billion market) and Spanish language, and the upper-mid (500-1000 weekly attendee) market. The product offering expanding from just payments processing to a one-stop-shop ERP software solutions cemented by the CCB acquisitions late 2019. PPH are generated solid free cash flows, which enables them to continue to make sensible bolt-on acquisitions, 

We remain BUY rated on Pushpay as an attractive tech company which is much more reasonably priced than its peers, and generating positive cash flows, with ample funds to reinvest to grow its scale in a fragmented market.


Australia & New Zealand Market Movers

The Australian market was up on Tuesday (ASX 200 index +0.2%), supported by the RBA’s comments regarding interest rates remaining unchanged for longer than the market has anticipated.

This saw another day of blue chip’s trading positively, with Energy stocks leading the charge, further boosted by a +1% increase in oil prices overnight.

Shares in Zip fell -2.7% after announcing a new cryptocurrency offering (that it will accept crypto payments), While Brambles fell hard, down -8.3% after revealing heavy spending on the second day of its investor briefing.

The New Zealand market was down yesterday (NZX 50 index, -0.5%) in a choppy session of trade. 

Market Heavyweight Fisher and Paykel Healthcare fell -3.5%, as COVID cases globally start to slow down and the NZ dollar shows strength. Stride Property slid -0.8% as the market continued to digest its plan to spin out an office property business similar to Precinct Properties.

Synlait was the best performer up +3.2% recovering from its recent low’, while Infratil rose another +1% following its news on Friday to expand its renewable business into Asia. 

Briscoes Shares were a marginally higher (+0.1%) after reporting a strong result for the first half of 2021 financial year (ending 1st August 2021). The muted reaction came as the sales result flagged earlier, with net profit after tax rising +69.6% from last year to $47.5m.

3 Things Markets will be Watching this Week

  1. ​Key events this week include inflation (CPI) prints in the U.S, Eurozone and U.K along with activity data in China including Retail sales and Industrial Production.
  2. ​Australia’s latest employment data and second quarter GDP in NZ are due. Brambles, Telstra, Zip and Pushpay will host Investor Days.
  3. Covid and lockdown updates both sides of the Tasman
Global markets were weaker overnight, with the US market (S&P 500 index-0.6%) slipping after softer than expected inflation data.

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