News

Oil and LNG producer Woodside Energy rose to a fresh 3-year higher after announcing a bumper dividend for the first half of the 2022 financial year. Net profit after tax jumped 5-fold to $1,640m, benefiting from higher oil and gas prices (double the same corresponding period last year) and a +19% increase in production volumes which included one full month of production from merged BHP assets. Woodside paid out an interim dividend of US$1.09 per share and now has a strong balance sheet following strong cash generation over the half.

Sky City shares were down when it released its 2022 full-year result, which came in as expected capping off another challenging year greatly impacted by last year’s lockdown. Normalised operating earnings (EBITDA) came in at $138m, while fourth-quarter gaming data showed strong recovery – with fewer operating restrictions. SKC’s balance sheet remains strong against a quality portfolio of assets, with Sky City guiding 2023 operating earnings (EBITDA) to be inline with pre-covid levels ~$300m.

US markets (S&P 500 Index -1.1%) fell for a third-day in a row as ‘good’ jobs data translated into bad news for stocks – as it gives the Fed added capacity to raise interest rates higher to combat inflation. US Jobs opening data showed 11.2m available vacancies, 800k stronger than expected, while US consumer confidence came in stronger than expected. Markets will also be watching key non-farm payrolls employment data out on Friday, with a strong print meaning more room for the Fed to lift rates and keep them higher for longer. All sectors ended in the session in the red, with energy being hardest hit as the price of oil slipped. European markets (Stoxx 600 Index, -0.7%) closed lower, erasing earlier gains, on deep recession fears induced by a spike in energy prices, coupled with a hawkish outlook from the ECB. Inflation data in Germany was high reaching a 40-year peak, in line with expectations rising +8.8% year on year.

US markets (S&P 500 Index -0.7%) started the week with a negative tone, as investors brace for a more hawkish Fed policy following Friday’s comments. Treasury yields continue to climb with the 2-year rate accelerating to 3.48%, reaching its highest level since 2007, well ahead of the 10-year US interest rate which rose to 3.11%. Most sectors traded lower, with tech and real estate stocks leading losses, while energy and utilities were the only two sectors in the green.

Tourism Holdings (THL) were up after providing upbeat guidance for 2023, as rental demand recovers strongly since the recent reopening of borders and anticipate a major summer rush over the NZ summer. For the 2022 financial year, THL reported a net loss of -$2.1m, a major improvement from the previous year of -$12.4m. Net debt also was healthy at $58.5m, giving the company ~$200m in headroom facility to fund further fleet growth. Tourism Holding guidance net profit after tax for 2023 is expected to be between $17m to $30.2m, and the company did not pay a dividend for the current year and stated a dividend is unlikely for 2023 (Given dividends are conditional on lenders approval) – we anticipate a return in dividend by 2024 to be healthy assuming earnings recover to pre-covid levels.

US markets (S&P 500 Index -3.4%) were sharply lower on Friday, after Fed chair Jerome Powell made it clear that rates will continue to rise to combat inflation – dampening hopes of possible easing in monetary policy. Powell reiterated his tough stance and the Fed’s goal to bring inflation back down to 2%. Not only reiterating that there would be room for further rate hikes over the near-term, but that rates will likely stay higher longer than anticipated. This saw all sectors in the red, with tech shares were hardest hit with the NASDAQ Index down -3.9%, followed by consumer discretionary and communication services. European markets (Stoxx 600 Index, -1.7%) also closed lower, as risk of a deep recession continues to rise in Europe as gas and electricity prices continue to skyrocket. 

Pool Corp (NYSE: POOL) is the largest integrated pool business in the U.S with an additional presence in Europe and Canada. It has ~38% market share; the rest of the pool market in the U.S is fractured and competitors command market share in the single digits. Its business model is simple: people who own a pool pay for its maintenance for life, creating a recurring revenue model which makes most of earnings relatively predictable stable.

We reiterate our BUY rating for The TJX Companies Ltd (NYSE: TJX), though we see little near-term upside. The company continues to act as a solid defensive stock which, like other discount/”off-brand” retailers, tends to perform well in a recessionary environment. We are seeing similar movement in the “private” labels of food retailers (see below). In other words: consumers are disregarding “brand” and buying value-orientated products. TJX is poised to do well from this given their off-price model.