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.
Looking ahead, markets will watch US non-farm payroll data end of the week, as well as latest CPI (inflation) data from Eurozone, while corporate earnings season continues locally.
Tourism Holdings (THL:NZX)
Tourism Holdings (THL) rose +1.9% on Friday, after providing upbeat guidance for 2023, as rental demand recovers strong since the recent reopening of borders and anticipate a major summer rush. 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 to be between $17m to $30m, and did not pay a dividend for the current year and stated a dividend is unlikely for 2023 – we anticipate a return in dividend by 2024 to be healthy.
We are Buy (High Risk) rated on Tourism Holdings as one of our preferred local tourism plays.
Sky City (SKC:NZX)
Sky City shares were down when its released its 2022 full year result on Thursday 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 quality portfolio of assets, with Sky City guiding 2023 operating earnings (EBITDA) to be inline with pre-covid levels.
At current levels we are buy rated on Sky City, we believe it is still attractively priced considering the upcoming recovery in tourism.
Australia & New Zealand Market Movers
The Australian market (ASX 200 Index, +0.8%) was up on Friday, to end the week flat.
Wesfarmers managed to buck the trend amongst its retail peers, rising +0.7% as its result held up better than expected with the group expecting further growth from Kmart.
Costa group shares rose +1.8% on a mixed result, as strong berry performance both locally and overseas were offset by an impairment against its avocado business due to challenging weather and lack of export access.
The New Zealand market (NZX 50 Index, -0.2%) was down again on Friday amidst a mixed day of earnings results.
Winemaker Delegat group fell -1.6%, after posting a weak result which was flagged earlier due to supply chain delays and economic headwinds causing operating profits to slip -11% from the previous year.
Port of Tauranga rose +2.2%, on their earnings beat, but flagged headwinds would restrict growth going forward.
Fonterra shares were flat when they announced they had trimmed 25 cents off their forecast farmgate milk price as inflationary pressure in Europe soften demand.
Things Markets will be Watching this Week
Monday
Australia: Earnings from Next DC, Fortescue and Minerals Resources
New Zealand: Earnings from A2 Milk and Restaurant Brands
Tuesday
Australia: Earnings from Woodside Energy, Harvey Norman
Wednesday
Global: Eurozone CPI (inflation data), and China Manufacturing data (PMI)
Australia: Earnings from DGL Group and Atlas
New Zealand: Earnings from Harmony
Thursday
Global: US initial jobs claim data.
Friday
Global: US non-farm Payroll data
