Global markets experienced small losses overnight as the US-North Korea summit ended abruptly without an agreement.
In contrast to the overnight moves, it has been another strong month for share markets with US markets gaining about +3% for the month. Australian shares recorded their biggest monthly percentage gain since July 2016 in February, as positive earnings and a better-than-anticipated royal commission report boosted the Aussie share market with the ASX 200 adding +5.2%. The NZ market is pretty much back at all-time highs, with the NZX 50 adding +3.7% in Feb.
Stock in Focus: Sky TV (SKT:NZX / SKT:ASX)
Sky TV shares have fallen to new all-time lows after delivering their 2019 interim result, with the pay TV operator reporting a net profit after tax of $53.6m, which was down -19.6% from last year.
The result was driven by continuous subscriber loss and falling revenues as they struggle against increased competition. While Sky TV’s attempts to stem the bleeding by cutting prices did result in fewer subscribers leaving their service, it did little to help their cause. Operating earnings were down only -16.4% as cost cutting efforts partially offset the reduction in revenue, however their major fixed cost programming rights remained flat and are likely set to increase as competition for quality content intensifies from other distributors..
We believe Sky TV can only cut costs so far and if subscribers keep falling revenues and earnings will continue to trend lower. With Spark Sport coming around the corner in time for the Rugby World Cup, SKT are now entering into new territory where it could lose its monopoly power over sport broadcasting as the battle for content heats up.
We remain SELL rated on Sky TV,
Australia & New Zealand Market Movers
The Australian share market continued to rally on Thursday (ASX 200 index +0.30%), ending a strong month on a positive note. In stock news, mining giant Rio Tinto has reported its highest annual underlying earnings since 2014 beating market expectations on robust commodity prices, and announced a bumper dividend on divestments and an upbeat iron ore outlook. Suncorp is considering paying a one-off fully franked dividend to shareholders from the proceeds of the sale of its life business to Tal Dai-ichi Life, which completed on Thursday. Australia's largest cement company, Adelaide Brighton, expects demand from the residential housing market to drop in 2019 although the slide is likely to be offset by solid demand from infrastructure projects.
The New Zealand market was higher yesterday (NZX 50 index +0.47%) as the official local earnings season ended on a sour note, with Air New Zealand confirming a lacklustre result. Fonterra Shareholders' Fund units sank to a record low close of $4.17. Fonterra said it won't pay an interim dividend after downgrading its forecast earnings, while raising the farmgate milk price it expects to pay suppliers. The announcement was disappointing and once again showed Fonterra has an interest to protect farmers over outside shareholders.
3 Things Markets Will be Watching this Week
- US-China trade deal related new-flow remains a focus for investors.
- Local earnings season continues across NZ and Australia this week.
- US Federal Reserve chairman Jerome Powell will give two days of testimony to US lawmakers on Wednesday.
Have a Great Day,
