Wall Street Hovers at Highs | PGG Wrightson

20 November 2019

Global markets were mixed overnight as shares on Wall Street hovered around record levels after Washington’s move to grant an extension for US companies to do business with China’s Huawei helped ease some concerns around US-China trade relations. On the flipside, the mood in Beijing​ later became pessimistic due to President Donald Trump's reluctance to roll back tariffs, CNBC reported, citing a government source.
 

Stock in Focus: PGG Wrightson (PGW:NZX)

Diversified agri-business PGW shares edged higher after a well-received AGM, recovering after delivering a weak full year result for the 2019 financial year. PGW reaffirmed its guidance for the 2020 financial year would be above $30m and guided to pay an interim dividend of no less than 8 cents per share.

The meeting highlighted the challenges faced in the previous year, largely from the livestock and dairy industry, with the silver lining that growth appears promising across the horticulture industry ,which could offset these headwinds – highlighting the benefits of their diversified business. For the 2019 financial year PGW reported a net profit after tax of $131.8m, boosted by the sales of its Seeds and Grain business resulting in a $134.3m gain on disposal. Unfortunately operating earnings from continuing operations (which excludes any contribution from the Seeds and Grain business) came in at $24.4m, which was down significantly from last year’s result of $34.5m and missed guidance of $25m to $34.5m, largely due to weak farmer confidence lowering spending and weakness in PGW’s agency business due to unfavourable market conditions – heavily weighted towards the livestock industry. Once again, we believe the business fundamentals are still sound, and the share price is not as attractively priced as anticipated – but an attractive ~6% dividend should provide share price support.

PGW is now a smaller, more concentrated business which is more heavily impacted by any adverse NZ specific events, and given the near-term headwinds impacting the livestock industry we maintain our BUY rating with a High-risk caveat.

We currently have a BUY (High-Risk) rating on PGW.

 

   
Australia & New Zealand Market Movers

​The Australian market​ sold off on Monday​ (​-​0.​40​%) as investors opted to take profits and wait for clarity on the details of a touted "phase one" trade deal between the United States and China. There was a lack of catalysts to drive the market, following the reporting announcements by the banks last week.
Shares in Tech  darling Appen soared 13% after upgrading its full-year earnings guidance. The company had previously guided for underlying earnings before interest, tax, depreciation and amortisation to hit the upper end of $85 million to $90 million, but on Monday said it expected earnings to be in the range of $96 million to $99 million. The major miners were slightly firmer on Monday as the price of iron ore rose, although doubts over China's growth prospects capped those gains. Qantas and Coca-Cola Amatil shares had a strong session following recommendation upgrades from major brokers.  

The New Zealand market started the week in the red (-0.20%) as investor confidence was dented by profit warnings from Sky Network Television and Steel & Tube Holdings. 
Sky TV led the market lower, sliding 6% as the pay-TV operator forecast earnings and revenue to fall in the 2020 financial year due to accounting rule changes and its investment in streaming and sports content. Steel & Tube also weighed on investor sentiment after it lowered its earnings guidance due to competitive pressures and a tough winter. Kiwi Property Group fell as the property investor reported a 24% fall in first-half profit, due largely to an unrealised decline in the value of its hedging instruments. Underlying earnings were slightly weaker.

 

3 Things Markets Will be Watching this Week

  1. ​Trade related news-flow will remain important in terms of driving investor sentiment.
  2. Minutes from the last US Federal Reserve meeting are released on Wednesday.
  3. Minutes from the last Reserve Bank of Australia meeting are released on Tuesday.

 

Have a Great Day,
 

Team

Global markets were mixed overnight as shares on Wall Street hovered around record levels after Washington’s move to grant an extension for US companies to do business with China’s Huawei helped ease some concerns around US-China trade relations.

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