Promising Data | Delegat’s Upgrade

26 June 2020

Global markets were up overnight (US market S&P 500 +0.4%) as improving economic data and the prospect of more stimulus bolstered hopes of a swift recovery.
Data showed that the pace of contraction in the US manufacturing and services sectors slowed in June as businesses reopened after lockdowns that started in mid-March and new home sales jumped 16.6% in May, blowing past estimates of a 2.9% There was also a run of positive manufacturing data out of the Euro area beginning with France, then Germany, then the UK which encouraged a rally in risk assets. 

Despite rising coronavirus cases, there is a lack of appetite for further economic lockdowns among US Federal and state officials which likely cheering investor sentiment. However the rise in unemployment and risks associated with the virus will see some sectors recover a lot slower, particularly travel, leisure and entertainment industries.

Delegat Group Limited (DGL:NZ)

Shares in wine maker Delegats (DGL) were up +4% yesterday after providing its operating net profit after tax guidance for the 2020 financial year (ending 30 June 2020). Profit is expected to be $59m, up +16% from the previous year, and higher than its previous guidance of $52.4m.

This is on the back of +9% increase in case sales volume for the year, better price realisation and lower marketing and financing costs.

Being able to operate as an essential service during lockdown helped as well as stable demand with higher exposure to off premise consumption. Given the double digit profit growth ahead of expectations, Delegats appears to have come out relatively unscathed (from covid-19) justifying its valuation.

We maintain our BUY rating on DGL for medium-term investors  


Australia & New Zealand Market Movers

The Australian market (ASX 200 +0.2%) was up marginally yesterday after a volatile sessions due to concerns around the US China trade deal, however comments from President Donald Trump soothed initial market fears, claiming "The China Trade Deal is fully intact". 

Woolworths shares dipped (-0.8%) after announcing it expected earnings to fall between 1.2% to 2.7% this year, and flagged one-off costs of $591m million to restructure its supply chain and drinks business. The earnings hit stems largely from the company's Endeavour Group business suffering a -55% drop in profit due to the closure of hotels, offsetting the +8.6% sales growth from its Australian food business.

Crown shares were up +1.8% after announcing its Perth casino can recommence operations with temporary capacity and social distancing restrictions. 

The New Zealand market was marginally lower on Tuesday (NZX 50 Index -0.2%) after EBOS's biggest shareholder sold a 9.2% (15m shares) stake in the company at $21.52 a shares in a $323m block trade, which meant many investors had to sell other positions to participate, causing broad based selling. 

Threats of  second wave also impacted the recovery on many companies most affected by the virus, while Fisher and Paykel healthcare a direct benefactor saw its shares rise +3.1% to be the best performer of the day. 


3 Things Markets Will be Watching this Week

  1. ​​​Covid-19 related news flow remains top of mind. 
  2. The Reserve Bank of New Zealand June OCR Review takes place on Wednesday, with the market not expecting too many surprises. 
  3. In the US there will be a release of Q1 GDP figures and the Fed is scheduled to release results of its annual stress tests on the largest US banks. 

Have a Great Day,


Global markets were up overnight (US market S&P 500 +0.4%) as improving economic data and the prospect of more stimulus bolstered hopes of a swift recovery.

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