Global markets sold off sharply overnight as investors dumped shares of technology companies as well as businesses in cyclical sectors on fears that the escalating trade war between US and China would stymie global economic growth. Oil prices also tumbled, experiencing its worst week of the year.
In this week’s podcast, Jeremy talks about the acquisition of Vodafone New Zealand by Infratil and Brookfield Asset Management, Kiwi Property Group, as well as a recent trading update from Steel & Tube.
To listen to the full episode CLICK HERE.
Stock in Focus: Metro Performance Glass (MPG:NZX / MPP:ASX)
The bar was set low for MPG, as shares in the glass business jumped +12.5% even as it reported a 69% slide in annual profit.
The result was within previously downgraded earnings guidance, and investors appear to be encouraged by the new management team's plans to turn it around. Within the year good progress has been made in New Zealand however this has been overshadowed by significant challenges in Australia – both due to poor internal operations and tough market conditions. Reported net profit after tax was $5m for the year, down -69% from last year, largely due to a $9.6m impairment charge against its Australian Glass Group (AGG) business.
It was pleasing to see an $11m reduction in debt as MPG priorities debt reduction over dividend payments. Management mentioned the market may have overreacted to the announcement of the entrant of a new competitor with the share price incorporating an overly pessimistic view of MPG’s future.
While MPG are facing a number of challenges and risks, yesterday's move does illustrate how much negativity is being reflected in the share price at current levels.
We currently have a BUY (high-risk) recommendation on MPG.
Members should look out for a full update on MPG to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian share market retraced yesterday (ASX 200 index -0.29%) with the ASX experiencing its first loss since the election
Aristocrat Leisure jumped +7% after it posted a 17% jump in its first-half profit on the back of record profit from its American division and solid growth from its social and online casino games. On the flipside, Kogan slipped after the Australian Competition and Consumer Commission alleged the online retailer had misled consumers over 'tax-time' discounts.
The New Zealand market continued to trend higher on Wednesday (NZX 50 index +0.25%) with the index led higher by Fletcher Building as the construction company extended a recent rally. Spark received a warning from the Commerce Commission over the way it raised broadband prices on copper-based broadband last year, without telling customers they could cancel their agreements. Fonterra cut its earnings guidance again and narrowed its forecast range for the farmgate payout. Fonterra also said it may sell other assets as it continues to reshape itself under the new leadership team.
3 Things Markets Will be Watching this Week
- Mini reporting season across Australasia sees a number of Aussie & Kiwi stocks make earnings announcements next week.
- Trade War headlines between the US & China are likely to remain in focus.
- Minutes from the last RBA meeting are released on Tuesday.
Have a Great Day,