Global markets were little changed overnight, with Technology stocks dragging on Wall Street even as a report indicated China was ready to buy more US agricultural products.
US Treasury bond yields surged overnight, and so far in September interest rates have moved higher (after a large fall for most of the year) which reduces the appeal of “bond proxy” stocks such as utilities and real estate, as well as lowering the valuations on highly priced stocks such as the tech sector. Across Australia and New Zealand we have seen some profit taking across companies such as Transurban, Sydney Airport, and the power gen-tailers after a very strong run.
Stock in Focus: Sky TV (SKT:NZX / SKT:ASX)
Sky TV shares continue to trade around all-time lows after the Pay-TV operator axed its dividend at its 2019 full year result.
Sky reported a full-year net loss of $607.8 million on revenue that fell 6.8% to $795 million. While total subscriber numbers increased as streaming gains outweighed satellite customer losses, profits were down with the company making less money per subscriber. The net loss included a non-cash $670m impairment on goodwill assets.
We have been negative on Sky TV for some time now as they struggle against increased competition. Sky has said it will pay up to US$40 million in cash and shares for online rugby platform RugbyPass. It is also worth watching Disney, who will launch Disney+ in NZ from 19 Nov at $9.99/month but remain a key partner for SKT with box office window access on a pay-per view basis remaining open to SKT for Disney movies post theatrical release. However, SKT will lose access to core Disney content in the pay-tv window and lose content that underpins a lot of SKT’s children’s programming. While SKT will reduce its programming costs with the loss of exclusive rights it further undermines the positioning of SKT’s high margin premium pay-tv bundle.
We currently have a SELL recommendation on Sky TV.
Members should look out for a full update on Sky TV to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian market sold-off yesterday (ASX 200 Index -0.51%) as an uptick in bond yields boosted banks, with the ASX 200 financials sector climbing while bond proxy stocks such as real estate and utilities suffered. Energy was the biggest gainer over the session, as oil prices rose as expectations mounted that Saudi Arabia’s new oil minister, Prince Abdulaziz bin Salman, will remain committed to the policy of OPEC+ to constrain supply. In stock news, medical company Mesoblast jumped =22% after the company entered into $150 million partnership with German company Grünenthal to develop and commercialise stem cell technology to treat chronic lower back pain.
The New Zealand market retraced on Tuesday (NZX 50 Index -0.48%) with the major electricity generator-retailers giving up some of their recent gains. Not only has the sector had an amazing run, but a move higher in bond yields over the last few days has seen profit taking on the back of relatively higher interest rates. Air New Zealand led the market lower, while Tourism Holdings led gains.
3 Things Markets Will be Watching this Week
- Trade War related news-flow is likely to continue to feature in headlines.
- US inflation data is published on Thursday.
- Thursday's policy meeting at the European Central Bank will be watched closely
Have a Great Day,