The New Zealand market (NZX 50 Index, -1.1%) was down yesterday as investors look to take some profit off the table following a strong rebound the last 2-weeks.
Infratil reported an inline result for the first half of 2024 financial year, one of few that had upgraded earnings outlook. Revenue and earnings growing due to full takeover of One NZ (Vodafone NZ), and reliable growth from CDC. One of our top performers and favored NZ pick remain BUY — fully valued but you pay for quality…
Noticing a few upgrades on A2 Milk from the big boys following the ASM and a beaten down share price. We think the previous market darling has lost its shine, still prefer to avoid the stock as it trades as a growth stock (about 20x forward PE — 12x if you strip out losses from the US, etc, but losses are losses). Plus headwinds of slowing China birth rate, and cost inflation offset any revenue growth they can achieve. It feels insane to be buying a commodity stock at 20x earnings…it’s not tech or our beloved Infratil! Sell rated. Sell rated on Synlait too.
My Food Bag — Its bags are looking pretty empty after competitor HelloFresh traded down 22% overnight after a revenue downgrade. We’re so sell-rated on this thing it isn’t even funny. More like “my bagholders”, etc.
Rakon — earnings later this month. 7x earnings. Looks cheap as (micro)chips and we remain buy rated at this price. It’s a little waiting for Godot — we are waiting for a catalyst where the value is recognised by the broader market.
NZX — sitting pretty at $1.06 — we are advocates of the stock, and think the wealth management biz is worth far more than what the market is pricing it at. Good piece here on the LSE — where equities trading now represents ~6% of the company’s revenue, the rest coming from data. Think it’s an interesting comparison to the NZX. Link.
The Australian market (ASX200 Index, -0.7%), was down led by sell off in oil prices, as Aussie investors shrugged off positive lead from Wall Street and locally a stronger than expected labour force numbers – Australia adding 55,000 jobs in October.
Energy was the worst-performing sector, Woodside Energy down -0.8% to $32.13 and its starting to look interesting again, since its now down -15% after we took some profit this time last year.
Froggies look to the land downunder — French infra giant Vinci is gunning hard for Queensland Airports Limited, which is guiding to $140 million EBITDA this financial year and has a 74% stake up for grabs via Barrenjoey and Macquarie Capital. It’s another shot at an airport, after the French giant came out as an underbidder for Hobart Airport. Again — with the new Nat govt here in NZ, we see owning infrastructure as a clear way to profit from overseas investment…Port of Tauranga, etc.
The US Market (S&P 500 Index, +0.1%) was almost flat overnight as the early Santa rally took a breather, with mixed earnings result.
Cisco Systems fell -10% after announcing weak guidance for the current quarter – a common theme in the recent earnings season, with third-quarter earnings holding up. Walmart edged up after its third-quarter beat, but concerns over the consumer meant they also guided a weak fourth quarter. See below — deflation is the new inflation…
We feel fourth-quarter earnings across the board will be challenging, but are also concerned about what 2024 first-quarter earnings will look like and for that reason we still remain defensive as the current juncture, as consumers become squeezed and COVID related savings are depleted. Tend to be long quality and also advocate holding cash…