Stock in Focus: NZ King Salmon (NZK.NZX)
Delivered an in-line result for the 2023 financial year operating loss (EBITDA) of -$4.4m, while guiding for 2024 operating earnings (EBITDA) of $21-25m, up significantly its from previous guidance – helped by better-than-expected harvest volumes. Strong pricing offset weaker volumes and higher mortality costs.
While a small step in the right direction, NZ King Salmon have a lot of work to do to recover harvest volumes to a more meaningful level and given key risks of weather, fish health, and cost pressures across the business we are neutral rated and prefer to avoid the stock (who remembers that capital raise @ 15c per share?) Fish and chicken (NZ King Salmon and Tegal) – both best avoided in favour of apples & fruit (Scales – buy)
New Zealand Market Movers
Speaking of Scales, the stock rose +6.2%, after revealing senior managment picked up more shares (~50,000) signalling the stock is oversold. We remain buy-rated on Scales.
The New Zealand market (NZX50, -0.3%) was down as the recent recovery lost steam.
Freightways fell -1.8% after revealing it expects a $3.5m loss attributed to Cyclone Gabrielle and is mindful of softening consumer activity. Metro Performance Glass was touch higher after reaffirming 2023 full year earnings of $11m to $12m, faring much better than the $5.9m in the previous year. We think freight companies look to be at “peak” earnings and think investors should be pricing in meaningful declines over the coming cycle.
Australia Market Movers
The Australian Market (ASX200, +0.2%) was a touch higher as (CPI) inflation data for the month of February came in at 6.8% annual increase.
This figure was below the 7.2% increase that was forecasted and a slight slow-down from the previous month’s annual increase of 7.4% showing hikes are working to some degree; the market toned down the probability of further hikes by the RBA. While inflation now sits at an 8-month low in regard to annual increase, there is still considerable amount of work needed to be done to bring it down to a sustainable level of 2% to 3%. Don’t get too excited.
Australia (CPI) Inflation Data
US Market Movers
The S&P 500 rose +1.47%. Disney (buy) sacked Ike Perlmutter, the chair of Marvel, after he clashed with Disney CEO Bob Iger — regular readers of this newsletter will know that we signalled this a couple of months ago as the Disney proxy fight was starting. Perlmutter’s wagon was basically hitched to that of investor-activist Nelson Peltz; now Peltz doesn’t have a “man on the inside” (though we note Perlmutter still holds a sizeable holding in Disney). Iger released his timeline for sacking ~7,000 Disney employees; the stock climbed +2.16% in response. There still is this overhang at Disney, though: it’s the streaming business and it’s the feeling of “what next”? Cost cuts are good, as are job cuts, but what propels Disney forward forward for the next decade? We still remain buy-rated – we think Netflix’s recent rally is basically a case of too-much-hype-not-enough “show me the money”; and we prefer buying DIS with a little bit of WarnerBrothersDiscovery on the side – WBD is higher risk but trades cheaply, while DIS is your “bread and butter” media stock.
What we’re watching for the week ahead
Monday
Australia:
Premier Investments 1H Earnings;
NZ:
Synlait Milk 1H Earnings
Tuesday
US:
Conference Board Consumer Confidence, Richmond Fed;
Australia:
Retail Sales, AUB Group EGM.
Wednesday
US:
Pending Home Sales;
Australia:
CPI;
NZ:
NZ King Salmon FY Earnings, Property for Industry AGM.
Thursday
US:
Initial Jobless Claims, Q4 GDP; Eurozone:
Consumer Confidence; Japan:
Tokyo CPI; NZ:
Building Permits, ANZ Business Confidence.
Friday
US:
Personal Income/Spending, PCE Deflator, Chicago PMI; Eurozone:
CPI, Unemployment Rate; UK:
Q4 GDP; China: Composite PMI; Australia:
Private Sector Credit, AMP AGM; NZ:
ANZ Consumer Confidence.