Global markets rallied overnight with the major US benchmark market indices hitting all-time highs, lifted by news that the US and Mexico have resolved their trade dispute, a key step in renewing the North American Free Trade Agreement which also includes Canada. The news comes as a relief for investor concerns around a global trade war, lifting hopes that the current record bull-market has more room to run.
Local AU/NZ reporting season continues as investors focus on company profit announcements. According to a major broker, of the 140 members of the ASX 200 that have reported earnings so far, there have been more beats than misses. It was a mixed bag for stocks under our coverage yesterday, with our favoured NZ retirement sector stock Metlifecare rallying on a solid result, while shares in G8 Education were hit hard.
Stock on Focus: G8 Education (GEM:AX)
Early childhood education provider G8 Education saw its shares tumble yesterday after its half-year result came in below analyst expectations. The result was disappointing, and the news comes shortly after a relief rally in July on rumours G8 may be a takeover target for any number of players in the Australian private equity industry.
Looking at the details, G8 reported a -22% fall in first half net profit to $23.7 million, adding that it didn't expect to see material improvement in market conditions until mid to late 2019. The real hit came as occupancy dropped sharply from last year, as competition intensifies and at the same time staff costs are rising. This saw G8 also cut its dividend to 4.5 cents. While this was no doubt a weak result, our initial thoughts are that the share price reaction looks overdone.
We are currently reviewing our recommendation on G8.
Members should look out for a full update on G8 to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian share market was higher on Monday (ASX 200 index +0.35%) as investors looked beyond the political uncertainty that plagued the market last week. The mining sector did the heavy lifting for the market as commodity prices rose, with BHP Billiton leading gains. The Banks stabilised after being under pressure given the uncertain political back-drop.
The New Zealand market started the week off with gains (NZX 50 index +0.51%) as the NZ market hit a new record high.
The NZX was led higher by Synlait Milk and A2 Milk while Sky Network Television continued Friday's decline. In stock news, Metlifecare rose as NZ’s second-largest listed retirement village operator reported a stronger underlying profit of 87.5m (compared with $82.1m last year) on improved revenue in 2018. Its headline profit weakened because of the smaller revaluation gains it made on its property portfolio as the housing market moderated. Chorus shares were unchanged as the telecommunications network operator's annual profit fell -24% in an increasingly competitive market.