Weak US Data | ooh Media Cap Raise

16 April 2020

Global markets were down overnight with the US market (S&P 500 -2.2%) falling after the release of weak retail, manufacturing and homebuilding data, which added to concerns over a global recession.
The Energy sector was heavily hit due to a fall in oil prices, while the banking sector continued to slip after weak results from Bank of America and Citigroup, as major banks begin set aside cash to prepare for loan losses over the near-term. 

This may be the start of a short-term pull back as the market is at relatively elevated levels given the weak near-term outlook for the global economy.  We would continue to hold fire at the interim and wait for either more certainty or wait for a dip at to buy at more attractive valuations on most companies. We still expect near-term volatility. 
 

Ooh! Media (OML:ASX)

Out of home advertising company Ooh Media (OML), shares have bounced since announcing their plans to raise $167m in capital during this challenging period to pay down debt and strengthen their balance sheet, with new shares on offer at 53 cents per share for eligible shareholders.The recent  rally has been spurred by speculation rival advertising company Here There and Everywhere snapped up 11m shares representing a 4.2% holding in the company commenting "it looks forward to supporting oOh!media as a constructive significant shareholder". 

Initially we were hesitant on the capital raise due to OML's sensitivity to economic conditions. However, the current rally and given rumours around a potential takeover bid we would advise current shareholders to partially or fully take up the offer (which is closing today) based on individual risk appetite and discount to the current share price. 

We previously had a High-Risk BUY rating on OML, however we would not be buyers at current levels given the high level uncertainty on near-term economic conditions 

 

   
Australia & New Zealand Market Movers

The Australian market was a touch lower (ASX 200 -0.4%) yesterday, largely due to the strong run in recent weeks, and nervousness around earnings season and the state of the greater economy. The energy sector was the worst performing as investors continue to fret about the future of oil prices as there is no clarity on when demand will return to more normalised levels. QBE shares were also lower after completing a US$750m placement issuing 14.5m new shares at $8.25 each.

The NZ market climbed higher (NZX 50 +2.5%) on Tuesday, as confidence continues to build as investors believe in easing lockdown conditions by next Wednesday as New Zealand has dramatically slowed down the pace of new covid-19 cases. The NZ market is just -14% off its record high, despite the economy being in a materially weaker state, with no certainty on when the economy can begin its road to recovery.

A2 Milk shares rose +4% to all-time highs as it has done well to weather the covid-19 storm and continues to benefit from a weakening kiwi dollar and unencumbered growth in demand. Refining NZ climbed 15.1%  percent,  following a strategic review to ensure its long-term viability, whether to break up its operations or move to a fuel import model. Mainly heavily beaten down shares staged a recovery like Air NZ, even as they have indicated that there would be no material change if lockdowns were brought down to level 3 as non-essential travel is still banned.  
 

3 Things Markets Will be Watching this Week

  1. Coronavirus related news-flow remains key in terms of market moves.
  2. US corporate earnings season kicks off this week.
  3. Capital raising announcements by companies are growing as companies ask for cash from investors in this uncertain period.

Have a Great Day,
 

Team

Global markets were down overnight with the US market (S&P 500 -2.2%) falling after the release of weak retail, manufacturing and homebuilding data, which added to concerns over a global recession.

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