Global markets were lower overnight as shares on Wall Street fell for the fourth straight session. Investors were spooked after the European Central Bank became the latest central bank to voice concern about growth. "The risks surrounding the euro area growth outlook are still tilted to the downside, on account of the persistence of uncertainties related to geopolitical factors, the threat of protectionism and vulnerabilities in emerging markets" ECB boss Mario Draghi said.
Some of our subscribers may already know that Jeremy from runs a stock market podcast. In his latest episode is a discussion of some of the small companies on the NZX market. Jeremy talks about Finzsoft (FIN), Wellington Drive Technologies (WDT), Orion Healthcare (OHE) and Truscreen (TRU). He also finds some time to provide some tips and advice for people that want to learn more about how to approach and how to invest in smaller companies.
Listen in to his podcast by clicking the following the link:
Stock in Focus: NZ King Salmon (NZK:NZX / NZK:ASX)
NZK shares rebounded on its 2019 first half result. While the -21% decline in net profit after tax came as no surprise – as it was outlined earlier, the market was pleased management maintained their previous earnings guidance and that harvest volumes would remain flat for the 2019 financial year, and growth would recommence its healthy growth trajectory from 2020.
Part of the weak result was that higher water temperatures have acted as a headwind, increasing Salmon mortality rates. The government is not making it easy NZK move into deep water farms, so there is an element of regulatory and climate risk to consider.
Despite a -13% decrease in sales volume NZK managed to keep revenue for the half flat from last year at $87.7m, this was underpinned by increasing demand, improved pricing mix, strong export market expansion particularly King Ora and a favourable exchange rate.
While we like the NZK business and how it fits our dining boom investment theme, concerns around its premium valuation continue to hold us back in terms of becoming more positive, especially given the government driven uncertainty.
We currently have a HOLD rating on NZK.
Australia & New Zealand Market Movers
The Australian share market was in positive territory again on Thursday (ASX 200 index +0.29%) with the ASX at a new 6-month high despite falls from major miners trading ex-dividend and disappointing retail sales figures. Telstra shares closed higher at $3.23 as research from JPMorgan showed the telco increased its market share in the first half of the 2019 financial year, taking its share of the postpaid mobile market to nearly 50 per cent. The company's low-cost mobile brand Belong accounted for half of the telco's new accounts.
The New Zealand market continued to trend higher yesterday (NZX 50 index +0.24%) with gains by utility and real estate yield stocks offsetting a clutch of companies shedding rights to dividends. In stock news, Restaurant Brands rose after reporting continuing annual sales growth from its Hawaiian and Australian expansions. The fast-food operator is currently under a partial takeover offer by Mexico's Finaccess, which will pay $9.45 a share for up to 75 percent of the company. The offer closes next week.
3 Things Markets Will be Watching this Week
- The Reserve Bank of Australia makes an interest rate decision on Tuesday.
- The final few local companies report earnings this week, wrapping up the current earnings season.
- Important monthly US employment data is released at the end of the week.
Have a Great Day,