Week Ahead, Second Wave | Kiwi Property Group, THL Jumps

30 June 2020

Global markets sold off on Friday (S&P 500 Index -2.4%) as covid-19 cases continue to surge weighing on sentiment, Florida remains the problem state with 10k cases a day. Banks lead the US lower Friday night as Fed capped shareholder payouts & Facebook took a hit as more companies joined ad spending boycott on the platform due to hate speech concerns. 

Elsewhere, ECB President Christine Lagarde said the recovery from the coronavirus pandemic will be “restrained” and will change parts of the economy permanently. Closer to home, thoughts of a Trans-Tasman bubble this side of Xmas appear to be slipping with Victoria reporting a further 41 new cases of COVID-19 and 8 re-classified cases yesterday while NSW reported 3 new cases. In NZ, 4 new cases were reported taking the total active cases up to 20.
 

Kiwi Property Group (KPG:AX)

KPG has moved to $1.20 since we last recommended a BUY at $0.90 in April and then again in May at $1.02. The company has announced that since the return of Level 1 the foot traffic to its property portfolio has increased by 1% on the same period last year.

Many of KPG's centres have recovered strongly in Auckland and Palmerston North and we like KPG's high-quality asset portfolio. The company has also mentioned in the latest announcement that it intends to resume dividend for the year ending 31 March 2021, which is a big surprise.
While there is uncertainty as to the pace of economic recovery, these are positive signs that at least the near term impact on retail may not be as bad as initially feared. In our view, we think that the 4th quarter of the year will be key as government support packages will have rolled off. KPG is still well below its NTA value of $1.26.

 

   
Australia & New Zealand Market Movers

The Australian market rallied on Friday (ASX 200 +1.5%) with banks leading the rally following strong gains for financial stocks on Wall Street overnight.
The rise in Westpac shares came as the Federal Court dismissed an appeal by the corporate regulator ASIC, finding that Westpac did not breach responsible lending laws in making around 262,000 home loans between 2011 and 2015.
Qantas shares returned to trade after completing a $1.36 billion share placement to institutional investors. The airline's shares slumped, down 9% to $3.81, after raising the capital as part of its plan to deal with the coronavirus fallout, which included slashing 6,000 jobs. However, the airline's share price remained above the discounted price of the new shares, which was set at $3.65.
Elsewhere in the airline sector, Virgin Australia's administrators have entered a sale agreement with Bain Capital, after rival bidder Cyrus Capital Partners withdrew its offer.

The New Zealand market was more or less flat on Friday (NZX 50 Index +0.04%) with Fisher & Paykel Healthcare among the day’s leaders as investors look forward to a much anticipated result on Monday.
Tourism Holdings led the market higher, up 8% after the company said it didn’t need to raise new equity after reaching an agreement with its lenders for debt funding of up to $225 million. It expects to report an underlying profit of between $17.5 million and $19 million, excluding impairments of its Togo unit, in the year ending June 30. 
Mercury NZ declined after it trimmed $10 million from its annual earnings guidance and lowered its hydro-generation outlook.
Retailer Kathmandu​ was a touch higher​ after a survey showed consumer confidence improved this month, with a net 5​% ​of respondents saying now’s a good time to buy a big-ticket item.

 

3 Things Markets Will be Watching this Week

  1. ​​​​Covid-19 newsflow around a second wave and re-opening of economies remains front of mind.
  2. ​​Key US data including monthly employment numbers are released at the end of the week
  3. Minutes from the last US Federal Reserve meeting ​will also be released this week. 

Have a Great Day,
 

Team

Global markets sold off on Friday (S&P 500 Index -2.4%) as covid-19 cases continue to surge weighing on sentiment.

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