Global markets were mixed last Thursday, ahead of the long weekend break. The US market was open overnight and stocks on Wall Street were little changed as investors awaited a barrage of major earnings reports this week, the busiest this earnings season, while a jump in energy stocks kept losses in check.
In a shortened week of trading locally, investor sentiment is likely going to be driven by offshore earnings season. As we touched on last week, during quarterly earnings season the focus of investors usually shifts away from broader macroeconomic issues and back towards company profitability. The current earnings season is highly anticipated by markets, given expectations are for a fall in earnings generally.
Stock in Focus: PGG Wrightson (PGW:NZX)
Shares in agribusiness PGG Wrightson (PGW) were up almost +10% on Thursday as it cleared the final hurdle to sell its seeds division to DLF Seeds for $434 million after securing Overseas Investment Office approval.
The Danish cooperative will pay $413 million for the Wrightson unit and take on $21 million of net debt, leaving the firm with a cash surplus of about $210 million. The PGW Board has not decided how to return funds to shareholders,
Once the deal is done, Wrighton's slimmed-down business will consist of stock agency, retail and water rural services based entirely in New Zealand.
We are pleased with the share price move as we had remained positive on PGW given we see it as trading at an attractive single digit price to earnings multiple when taking into account the remaining businesses and distribution for shareholders from the proceeds of the sale.
We currently have a BUY recommendation on PGW.
Members should look out for a full update on PGW to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian share market was a touch higher on Thursday (ASX 200 index +0.05%) as broad market optimism outweighed heavy losses in the healthcare sector following moves on Wall Street.
Resource stocks rose on Thursday as positive Chinese economic data gave investors hope that the country would increase its consumption. Galaxy Resources slid after announcing it had officially ended its search for a joint-venture partner for its Sal de Vida project. The company had been on the search for a partner for its flagship lithium project in Argentina since the end of last year, however it announced it had not been able to find an appropriate partner.
The New Zealand market slipped on Thursday (NZX 50 index -0.23%) as the NZX drifted off its high heading into the Easter holiday, but still managed a 1.8 percent gain this week as weak inflation spurred on expectations for an interest rate cut. Mercury NZ and Genesis Energy gave up some of their recent gains on Thursday when they both warned annual earnings may be weaker due to the dry spell in the North Island and limited gas supplies driving up wholesale power costs.
Tourism Holdings led the market lower on Thursday, at one stage near a two-year low, when it downgraded earnings guidance for a second time in as many months, blaming a slowdown in US vehicle sales for the latest warning.
3 Things Markets Will be Watching this Week
- The US first-quarter reporting season continues this week.
- US economic growth (GDP) data is released at the end of the week.
- Aussie inflation figures are published on Wednesday.
Have a Great Day,