Markets Await Catalysts | Green Cross Health

15 December 2019

Global markets retraced overnight on a lack of news flow as trading was quiet ahead of a crucial week of data, trade negotiations, elections and central bank meetings.

Stock in Focus: Green Cross Health (GXH:NZX)

​​​​The NZ division of L'Oreal has laid off local sales staff, noting the NZ pharmacy channel is experiencing significant change and disruption from online retailers, specialty stores and the arrival of new mass players to the market ​- namely Chemist Warehouse​, which has been a ​disruptor for GXH (which owns Unichem & Life Pharmacy).

GXH shares managed to make some ground but then slid after delivering an uninspiring first half result for the 2020 financial year – as its net profit after tax fell -3% from last year down to $7.9m. Group revenue fell -2.5% from last year to $275m, due to the closure of two pharmacy’s and exit of two unprofitable community health contracts. 

​While its Medical division ​was the standout, GXH's pharmacy division (its largest division) faces external challenges,​ and​ despite achieving same store sales growth, margins had tightened with increased pricing. We believe the main headwind going forward will be low-cost retail giant Chemist Warehouse’s entry into the NZ market which will only get worse, who now have 12 stores in New Zealand (10 in Auckland) – up from 6 earlier this year.  

​We have a strong positive stance on health care services. Despite GXH’s cheap valuation in an expensive market its share price reflective its negative outlook, for this reason we struggle to see enough upside or catalysts to upgrade our recommendation on GXH and we believe investors can gain similar healthcare exposures with better potential returns elsewhere.

We currently have a​ HOLD rating on ​GXH.


Australia & New Zealand Market Movers

​​The Australian market retraced yesterday (ASX 200 index ​-​0.34%)​ ​following a mixed day of trading punctuated by the market debut of aerial mapper Aerometrex which soared 83 per cent above its $1 offer price. NAB led the declines on the local market on Tuesday after a Morgan Stanley note forecast the bank would cut its dividend by a further 10 per cent in fiscal 2020. WiseTech Global slid after it announced the acquisition of Ready Korea for an upfront payment of $13.2 million. WiseTech said while the acquisition was of strategic value, it was not material to the group.

The New Zealand market was higher on Tuesday (NZX 50 index ​+​0.49%)​ ​as A2 Milk recovered from yesterday's decline on the surprise departure of its chief executive, while blue-chip stocks Ryman Healthcare and F&P Healthcare also booked strong gains.  Outside the benchmark index, Tower was unchanged ​after its chief executive, Richard Harding, said he planned to step down late next year once the insurer bedded in a new digital sales platform.


3 Things Markets Will be Watching this Week

  1. ​​Tariff news, as planned tariffs by the US on Chinese imports kick in on Dec 15.​
  2. The ​US Federal Reserve makes its last interest rate decision for the year Thursday morning (AU/NZ time).
  3. The UK election will be held on the 12th of December. 


Have a Great Day,


Global markets retraced overnight on a lack of news flow as trading was quiet ahead of a crucial week of data, trade negotiations, elections and central bank meetings.

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