Global markets were higher overnight as shares on Wall Street rallied on better-than-expected domestic and Chinese data as well as a firming yuan offering some relief to investors alarmed by a week of blow and counterblow between Beijing and Washington over trade.
The latest stock market movers podcast discusses valuing and how to think about Intangible Assets. Interview with Paul Adams, CEO of EverEdge – to listen to the episode CLICK HERE.
Stock in Focus: Kathmandu (KMD:NZX / KMD:ASX)
Kathmandu shares jumped +16% after a well-received trading update for the 2019 financial year, providing profit guidance well ahead of last year’s and market expectations.
For the year ending 31 July 2019, Kathmandu is expecting total sales to be $545m, up +9.6% from last year. Operating earnings (EBIT) and net profit after tax (NPAT) are both expected to increase by +11.2% and +11.4% respectively on last year. The better than expected result was driven by a strong second half performance in Australia, which was surprising given they were cycling off an impressive second half in the previous year, while trading conditions in NZ were challenging as expected.
We have had a negative view on the retail industry for some time, largely due to expectations of slowing economic growth at the end of an impressive decade long run and competition intensifying. However, given heavy interest rate cuts by the RBNZ & RBA this year, we have changed our outlook on retail and consumer sentiment from negative to neutral. Kathmandu have bucked the trend against intense retail competition and continued to deliver growth in the past due to their unique product offering. In saying that, we are wary there is a risk consumer spending particularly on discretionary items (such as the products Kathmandu sells) could be pressure over the medium-term if economic growth starts to slow.
We believe the share price fairly reflects a neutral outlook.
We currently have a HOLD rating on Kathmandu.
Australia & New Zealand Market Movers
The Australian market was higher on Thursday (ASX 200 index +0.75%) as BHP led the market higher through the day after opening the session lower as it announced it would spend $US283 million to extend its oil and gas business in the Caribbean. Lithium miners were the market's best performers after US lithium producer Livent noted it was receiving stronger than expected demand from customers. AMP shares have entered a trading halt until Monday after announcing a $650m capital raise.
The New Zealand market continued to rebound yesterday (NZX 50 index +0.82%).
In stock news, Napier Port was priced at the top of its indicative range in a bookbuild at $2.60 a share. It is set to list on the NZX on Aug 20. Infratil rose after selling its 80 percent stake in Perth Energy to Australia's AGL Energy for A$55 million upfront and a potential earn-out of A$14.9 million. The infrastructure investor said it might post a $33 million loss on the sale.
3 Things Markets Will be Watching this Week
- US Corporate earnings season continues this week, with some Australian companies also set to make earnings announcements.
- The Reserve Bank of Australia makes an interest rate decision on Tuesday.
- The Reserve Bank of New Zealand makes its latest interest rate announcement on Wednesday.
Have a Great Day,