Global markets rallied overnight (S&P 500 Index +1.7%) as US stocks jumped, clawing back the decline triggered by Donald Trump’s suspension of stimulus talks, after the US president backed a piecemeal approach to aid and investors took a longer-term view on a spending program.
Trump said he would support individual stimulus measures for airlines and small businesses. Speaker Nancy Pelosi signalled openness to a standalone airline relief bill in a conversation with Treasury Secretary Steven Mnuchin on Wednesday. Some investors are also coming to the view that Joe Biden’s lead in the polls in recent days and victory by him would bring an increase of federal spending to boost the economy.
Major tech companies have had a volatile week as the House Judiciary Committee released a report on its antitrust investigation into Alphabet, Amazon, Apple and Facebook, calling for tougher rules to encourage fair competition with these platforms.
In Europe, France downgraded its official growth forecast to zero. The pound weakened after a report that the European Union has no plans to offer concessions to Boris Johnson before next week’s Brexit deadline.
Select Harvests (SHV:ASX)
SHV shares have jumped in recent days as it emerged from a trading halt – after the almond producer completed its institutional Placement to raise nearly A$81.7m to fund the acquisition of Piangil Almond Orchard in north-west Victoria.
The acquisition is anticipated to be increase earnings per share by low-mid single-digits in the financial year 2022, being the first full year of operation. The Company stated that the acquisition is anticipated to complete by 31 December 2020. Notably, the Piangil Almond Orchard is projected to deliver volume growth of nearly 20% to SHV in the 2021 financial year.
In terms of an outlook update it was sound, as SHV said that 91% of hulling and shelling of 2020 crop is completed, with the rest forecast to be complete by mid-October 2020. Crop volume during 2020 has increased to greater than 23,250MT, up on the crop of 22,690MT during 2019. 2020 crop pricing shall remain as previously advised in the range of A$7.25 – A$7.75/kg.
We currently have a BUY rating on SHV at its current valuation as it will continue to benefit from the growth in demand for plant-based health products (particularly in China). However, with a high-risk caveat given weather related risks as well as price volatility that can arise from a surge in supply from California.
A retail share offer is also underway to raise an additional $38m (1 New Share for every 6.3 existing ordinary shares held, at the same offer price of $5.20) and we encourage existing shareholders to take up the offer.
Australia & New Zealand Market Movers
The Australian market rallied on Wednesday (ASX 200 Index +1.3%) bolstered by the Budget's tens of billions of dollars' worth of incentives for business and tax cuts for workers.
The big banks including Westpac and CBA contributed most of the day's gains, with the budget measures seen boosting business investment and loan growth.
The Morrison Government is giving business a $98bn boost from a combination of accelerated personal tax cuts, generous short term investment allowances, temporary tax concessions and a $14bn in infrastructure spending to cushion the impact of the Covid induced recession and “kick start investment”. Key measures include; 1) additional $14bn in new and accelerated infrastructure projects, 2) businesses with turnover up to $5bn will be able to deduct the full cost of eligible depreciable assets of any value in the year they are installed; 3) for next two years companies with turnover up to $5bn to offset losses against previous profits on which tax has been paid, to generate a refund.
Retailers such as Harvey Norman, JB Hi-Fi, are set to benefit from personal tax cuts due to take place in 2022 backdated to 1 July this year which will put extra cash in the pockets of more than 11m taxpayers.
The New Zealand market was in positive territory yesterday (NZX 50 Index +0.3%) as Meridian Energy led blue chip stocks higher. Greater certainty around the future of the Tiwai smelter and expectations for lower interest rates had helped the electricity sector. There is potential upside for whole sector if the Tiwai Aluminium smelter remains open for longer on basis of higher & de-risked dividends. Genesis Energy & Contact have greatest upside & our preferred plays in sector.
Vital Healthcare Property (VHP) has announced a capital raise of NZ$150m at an offer price of NZ$2.80 per share, representing a 6% discount to the previous closing price. The raise is being completed to fund circa $100m of developments and provide capacity for a potential acquisition.
3 Things Markets Will be Watching this Week
- COVID-19 related-flow remains key, with second wave and lockdown headlines, while US Congress debate what an extension of stimulus will look like.
- US election developments will be followed closely by markets as we move closer to elections both in the US and NZ.
- On the central bank front, in Australia the RBA makes a cash rate decision and the US Federal Reserve released minutes from its last meeting.