Global markets were up overnight as US stocks continued to charge to new record highs, as optimism grew that the global economy can recover from the impacts of the coronavirus, as the rate of the spread has slowed down thanks to containment action.
Closer to home, the Reserve Bank of New Zealand kept the official cash rate unchanged at 1.00%, which was expected. However, removed the chances of any near-term rate cuts playing down the impacts of the Coronavirus. Adrian Orr said the bank expects the impact is more likely to be short-lived, adding i“monetary policy has time to adjust if needed".
Stock in Focus: Sky TV (SKT:NZX / SKT:ASX)
Shares in Sky TV continue to slump down to new all-time lows after the pay-TV operator reported a first half profit of $11.9m, down -78% from last year, as they enter into a transitional phase from satellite to streaming.
Despite lifting subscriber numbers up +6% from last year up to 795,000, group revenue fell -6.8% as high value satellite customers were replaced by more streaming subscribers. Costs also continue to mount up largely due to one-offs but as well as increased costs associated with increased marketing activity to grow subscribers and increased programming rights and other investments to help turn things around.
SKY TV appear optimistic on their turnaround, as they expand their streaming services, helped by the recent Lightbox and RugbyPass acquisition and securing key sporting rights over new rival Spark Sport. However given the nature of their business with costs escalating, and revenue likely to fall (despite subscriber growth) in an intensely competitive market creating more earnings uncertainty the outlook continues to remain bleak.
Members should look out for a full update on SKT to be released in our weekly report.
We currently have a SELL rating on SKT.
Australia & New Zealand Market Movers
The Australian market was higher yesterday (ASX 200 Index +0.47%) for a second day in a row. This was lead by CommonwealthBank who delivered a stronger than expected first half result, boosting confidence across the major banks including Macquaire. CSL continued to hit new record highs, after reporting another solid interim result, and lifted their full year profit guidance another +3% to be between US$2.11 billion and US$2.17 billion for the 2020 financial year.
The New Zealand edged higher (NZX50 Index +0.5%) on Wednesday, due to the RBNZ's optimism regarding recovery of New Zealand's economy from the coronavirus.
The market was led higher by retirement village operator Ryman Healthcare, which was up +2.9% as well as the power generators moving upwards. Tourism Holdinga was also up +1.1% as investors saw the current share price representing attractive value.
3 Things Markets Will be Watching this Week
- Local earnings season starts across Australia & New Zealand this week.
- The Reserve Bank of New Zealand makes an interest rate decision on Wednesday.
- US corporate earnings season gets into its latter stages.
Have a Great Day,
