Supie wasn’t so super | AUD recovery? | McDonald’s sold a lot of cheeseburgers

31 October 2023

NZ

Supie > Noting supermarket competitor start-up Supie has gone into administration, owing ~$3mn to creditors. It’s another demise in the NZ market’s search for a “third” player (The Warehouse’s foray into groceries has yet to prove successful). It seems we remain under the thumb of the “big two”.

Jarden Kiwisaver? > The Australian is reporting that NAB is considering offloading its BNZ Kiwisaver product to Jarden. Jarden’s had a tough time in Australia; we think it would make sense for Jarden to buy a Kiwisaver provider…though we doubt anyone will be wanting to pay the multiples Fisher Funds paid for Kiwi Wealth.

Rakon > The chipmaker has released its newest product, Niku, which is designed for “AI”. We have no idea what the chip does but we can tell you that Rakon is trading at ~67 cents per share, trading at 6x earnings. We said this to the co’s mgmt sometime ago — Rakon is a great Kiwi success story and should be marketed as such — so far it isn’t.

Stress test > The RBNZ says the country’s financial system “appears robust and in a good position to face potentially looming challenges”, though noting that Kiwis have $170 of debt per $100 of equity. We think that should give anyone pause — it’s not as bad as across the ditch ($200 of debt per $100 in equity), but it’s still well above the US and UK ($130 of debt). Our question is what happens when unemployment ticks up.

Finding the bottom > Mainfreight, Port of Tauranga, EBOS all trading like they’re smalls caps. Worth picking up a few here perhaps. We keep saying this but will repeat it — there’s quality here in holding these names, if you can hold on during this market cycle. MFT 14x earnings, POT 28x, EBOS 23x.


Aus

Aussie Aussie Aussie, Oi Oi Oi

The Aussie Dollar has shown signs of a recovery against the US Dollar, amid recent losses, approaching and aiming to breach the 64 cent mark, as the 10-year US yield jumped to 4.8%, reflecting the confidence of investors in US economic strength. The AUD/USD has recently pushed above the 20 Day SMA and the 55 Day SMA, which is a typical bullish sign, as the two MA’s begin to cross-over. If the pair breaks above and closes above the dynamic high of 0.6397, we could see doors open for a short term bull run on the Aussie, as the RSI also supports potential further gains. On the data front, Retail sales from Australia did suprise investors to the upside for September with a 0.9% increase, exceeding the 0.3% expectation. The data supports the view that the RBA will continue with their hiking plan by 25 basis points at next week’s meeting.

Origin > AussieSuper will reject Brookfield’s $18.7bn bid for the energy company. Brookfield’s bid sits around the $8.00 mark — AussieSuper thinks it is worth more in the low double digits range. Macquaire’s valued it at around $10.00 per share. Now the question is whether Brookfield will step up, or whether they will leave the offer behind…

Endeavour > AGM today, and the chair Peter Hearl is playing a game of diplomacy trying to please activist shareholder Bruce Matheison and the rest of the troubled group’s shareholders, saying “While we continue to seek a constructive solution to the current shareholder campaign, we are focused on delivering value for all shareholders” — a quote from Succession comes to mind — “complicated airflow” [without saying anything]. The group reported weak retailing revenues that grew +1.9% to $2.54bn while hotel revenues grew 2.8% to $553mn. Like our teachers used to say, “must do better”.

Vinters and their wine > Treasury Wine Estates is set to pay $900mn for US-based DAOU Vineyards as it attempts to expand out of its core APAC market. The co. will fund the purchase by engaging at a cap raise at a 10.7% discount to its current stk price. We don’t like the deal. Global wine consumption is easing while spirit consumption is growing. No view.


US

The US Market (S&P 500 Index, +1.2%) was up overnight, to start the week on a positive note, following a fall down to correction territory (a fall of -10%). Gains were seen across most of the market, particularly tech shares which have been hit hard recently

McDonalds shares rose +2.3% after their revenue and earnings both beat market expectations, coming in at $6.69bn (up +14%) and $2.32bn (up +17%) respectively. The growth is attributed to strategic price increases and improved market share with middle and high-income consumers as diners trade down from more expensive options. Mgmt. did note less foot traffic, though — especially from lower-income earners — most income growth was from increased ticket price.

To note — over the GFC, McDonald’s share price and earnings did hold up well as a cheap trade-down option for consumers in recessionary times. Not a bad defensive holding.

Fashion > After five years, Phoebe Philo has released a new collection. Why is that important? Philo’s work arguably influenced the last five years of fashion more than anybody – her work at Celine was seminal, but more important was her influence on everything from quiet luxury to more louche, sleek silhouettes. Her label is backed by LVMH, so it’s a win for the Arnault family as competitor Kering tries to recalibrate after weak Gucci sales.

Pinterest > EPS of 0.28c and revs of $763.2mn — takeaway here — advertising spending continues to be strong. Preference is GOOG and AMZN — “only the best or go without,

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