Markets Subdue | Costa Capital Rasie

24 June 2021

Global markets were mostly lower overnight, with the US S&P 500 index slightly lower down -0.1%, snapping up a two-day winning streak.

Utilities, Materials and Consumer Staples were the major laggards, leading losses. Energy stocks performed well as the price of brent crude oil topped US$75 a barrel, Occidental Petroleum jumping +3.2% 

Major tech names provided some support for the market Tesla jumping +5.3%, while Netflix rose +0.8% and Facebook was up +0.5%.

European markets (Stoxx 600 index, -0.6%) were also weaker despite strong European PMI data being released.

Costa Group (CGC:ASX)

Costa Group shares were put into a temporary trading halt where it announced the group will acquired 2PH Farms, the largest citrus grower in northern Australia for approximately $219m, as well as acquire an additional property in 2023 for $31m where a new citrus crop is currently being planted by 2PH Farms.

The acquisition will be partly funded by debt with a $190m capital raise required for the bulk of the purchase. New shares will be offered on 1 to 6.33 pro rata entitlement as $3.00 per new share. Costa also provided a trading update which provided no real surprises since its last announcement 2020 first half earnings to be marginally ahead of the previous year.

We encourage existing shareholders to take part in the capital raise as the acquisition is expected to be earnings accretive, with a young citrus orchard yields are expected to increase further till maturity providing solid medium-term growth.


Australia & New Zealand Market Movers

The Australian market fell yesterday (ASX 200 index -0.6%) as covid-19 cases in Sydney start to grow and spooking the market, with new restrictions being imposed.

Selling was broad based with most sectors in the red. Travel stocks were hit hard as new restrictions were imposed onto Sydney, Flight Centre falling -3.5%, Sydney Airport eased-2.2% and Qantas down 0.2%.

Materials and Tech stocks were the only sectors in the green, the former benefiting from buoyant demand for steel keeping iron ore prices lofty.

The New Zealand market (NZX 50 index +0.3%) was higher on Wednesday.

Sky TV was up +1.8% after securing a longer-term relationship with NRL and New Zealand Rugby league until the end of 2027. 

Market heavyweight Fisher and Paykel was up +1.7% doing most of the heavy lifting up on persistence of covid-19. On the flip side Air NZ fell -1.7% as travel restrictions tighten between Australia and New Zealand. 

3 Things Markets will be Watching this Week

  1. Key events this week include Bank of England interest rate decision, US GDP numbers, and Fed Chair Powell testifying to Congress on the Covid-19 response and economy 
  2. In Australia there will be retail sales for the month of May and Westpac Consumer Confidence data.
  3. In NZ, Oceania Healthcare has scheduled its AGM for this week. 
Global markets were mostly lower overnight, with the US S&P 500 index slightly lower down -0.1%, snapping up a two-day winning streak.

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