Weekly, EBOS Game Changer |SHV|KMD|NZR|Nike

5 July 2018

Weekly Report

Here’s your weekly update of news, analysis and research from . The full reports can be read on the
stock pages.

New Stock Reports
EBOS GROUP (EBO:NZ / EBO:AX) BUY: Game Changer
EBO shares have been rangebound over the last 2-years until a recent surge saw it break
into new highs. The jump came as EBO announced it won a bid for a distribution deal with
Australia’s Chemist Warehouse which it said could bring in A$1 billion of revenue in its first
year. To put this into context, EBO’s group revenue for the first half of their 2018 financial
year was NZ$3.8Bn. The deal was made possible with prior capital investment and will make
them the dominate scale player in the Australian wholesale pharmacy industry, giving it a
sustainable cost advantage over the competition. We remain positive on EBO’s ability to
deliver further value to shareholders over the medium term given our healthcare investment
thematic and the EBO’s track record of delivering earnings growth year on year.

SELECT HARVESTS (SHV:AX) BUY (High-Risk): 2018 Turnaround
Almond producer SHV has been in recovery mode this year, with its shares up +48% since
the start of the year. SHV’s run has been fuelled by their recent trading update, announcing
the 2018 crop harvest will be at the top end of guidance. At the same time, the USD has been
strengthening against the AUD which is trading at a around 0.73 AUD/USD. As we have
highlighted in the past SHV benefits from a weaker Australian dollar as its exports are sold in
US Dollar terms. While SHV did have a difficult 2017, with everything possible going against
them – fortunes are starting to turn for the almond producer. We believe SHV are still well
positioned to capture continual growth in health foods, further gains from potential
strengthening of the USD, and any almond price appreciation

KATHMANDU (KMD:NZ / KMD:AX) HOLD: Temperature Down, Price Up
Shares in KMD surged higher as the outdoor equipment retailer announced it is expecting a
better 2018 financial year due to solid trading and better margins. Same store sales growth
for the whole group covering the 47 weeks of this financial year was up +4.8%, with better
performance in the second half due to autumn and early winter sales. The colder than usual
winter in New Zealand and successful launch of innovative new products and enhanced in store customer experienced are factors which appear to have contributed to the strong performance. It was no doubt a solid update, however we believe the share price jump has now reflected the positive news. As a backdrop, we still see a challenging retail climate across Australia & NZ (particularly with Amazon and other major retail players arriving into Australia).

NEW ZEALAND REFINING (NZR:NZ) BUY (High-Risk): USD Strengthening Outlook
NZR shares are down slightly after announcing delays around a scheduled refinery
maintenance shutdown will be longer than expected due to two minor leaks being found in
the hydrocracker unit. The shutdown will cut $40m off the 2018 profit and while this look high,
it was partially planned for and the expense is one-off in nature, which the market can usually
look through. In other news, the US dollar is trading at a two year high of around 0.67
US/NZD, after trading at an average of 0.71 US/NZD for 2017. This should provide and uplift
in NZR’s processing income if the USD continues to hold at these levels or the NZD falls
further over the remainder of the year.

Nike (NKE:NYSE) BUY: US Back in the Black
The latest quarterly update from Nike was exceptional, with the stock surging on the
announcement. Fourth quarter revenue increased 13% to $9.8 billion driven by strong
double-digit revenue growth in international markets and NIKE Direct globally, and a return
to growth in North America. The US turnaround was the story of the quarter after it had
disappointed in recent updates. On the bottom line, earnings per share also increased by
+15% and Nike unveiled a massive $15 billion share buyback plan. Finally, we are also
pleased to see traction in China also remains solid, an area where other large international
companies have failed.

Weekly 5 July 18

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