Global markets were a touch higher overnight (S&P 500 index +0.1%) after initially opening sharply lower amid fears of higher bond yields, as investors sold out of mega-cap growth stocks such as Tesla and “stay-at-home” stocks, but the sell-off eased following reassurances from US Federal Reserve Chairman Jerome Powell.
Powell eased concerns that the central bank’s economic support increased the risk of an inflating asset bubble, and insisted that the central bank’s accommodative monetary policy would remain in place for “some time.” Adding that “The economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved".
Summerset (SUM:NZX)
Retirement village operator Summerset shares were up +1.8% yesterday after reporting net profit after tax rose +32% from last year to $230.8m for the 2020 financial year as the residential property market continues to boom. Underlying net profit after tax (which excludes property revaluations) fell -7% to $98.3m due to increased expenditure on measures to keep residents safe from covid-19 and increased employee wages.
Operationally, 356 new development units were built which was above guidance of 300-350. The key weakness in the result was the development margin of 20% which was at the bottom of the 20-25% target range. No formal guidance has been provided, albeit, the company expects a return to double digit earnings growth and development guidance was set at 500-550 units. Asset value growth was strong, with NTA per share of NZ$5.94 up +21% on the prior year.
SUM has rallied but is still our top pick in the retirement village sector, providing better value than Ryman
Australia & New Zealand Market Movers
The Australian market ended Tuesday higher (ASX 200 index +0.9%), as earnings season continues with energy being the top sector as oil prices continue rise followed by miners. The tech sector continues to take a hit as rising bond yields made the growth darlings’ high valuations and lack of profits an increasingly unpalatable proposition, with Afterpay leading the fall down -7.2%.
Macquarie was higher after its Infrastructure and Real Assets Management (MIRA) formed a consortium with Aware Super (No. 2 superannuation fund provider) for its $3.4 billion takeover bid for telco Vocus Group.
Travel stocks managed to trend higher as investors cycle back to "reopening stocks", with Sydney Airport up +6.5% as COVID vaccines were delivered, while Qantas was up+4% after rival Regional Express Holdings Ltd announced that it was withdrawing from 5 routes that it previously held a monopoly on.
The New Zealand markets fell again (NZX 50 index -0.3%) yesterday as investors start to price in the possibility of the Reserve Bank hiking the official cash rate as early as May next year.
PGW shares were up +6% after delivering a strong result for the first half of 2021 financial year which saw operating earnings(EBITDA) grow +21% from last year to $42.1m
Sky Network Television dropped 4.4%, despite tripling its half-year profit on reduced expenses (largely due to lower production of sports due to the pandemic) with revenue falling -7.3%.
Mercury NZ fell -3.6% to $6.15, after it cut $15 million from its full-year earnings guidance down to $520m due to a lack of rain in its Taupō catchment
3 Things Markets will be Watching this Week
- Once again, corporate earnings dominate the week ahead on both side of the Tasman.
Key results include Bluescope Steel, Chorus, Freightways, Mercury NZ, Summerset, Woolworths, Vocus, Sydney Airports, Scentre Group, Meridian Energy, Spark NZ, Flight Centre, Qantas, Zip Co, Stockland, Afterpay, Ramsay Health Care, Air NZ, a2 Milk, Precinct Properties, and Genesis Energy. - The RBNZ’s official cash rate call on Wednesday will be a focus.
- From a macroeconomic point of view, investors will be keeping a nervous eye on bond markets as the growing chances of normalization on a global acceleration of vaccinations and rising commodity prices leads to a rise in bond yields amidst inflationary concerns. Vaccine & COVID news flow also continues to dominate headlines.
Team