INSIGHTS BLOG

WEEK IN REVIEW: 26 - 30 AUGUST

Craigs Investment Partners Research Team, 30 August 2019

It was another roller-coaster ride for investors this week as US-China trade tensions escalated and a US Treasury yield curve inversion raised recession fears. The price of gold hit record highs of US$1,550 an ounce on Monday amid a combination of elevated geopolitical uncertainty and falling bond yields. Back home, it was another busy week of corporate results.

Port of Tauranga announced record cargo volumes and increased a record profit for the year. Transhipped containers, where containers are transferred from one service to another, now make up 32.1% of the containers handled at Tauranga. Group net profit after tax passed $100m for the first time, increasing 6.7%. A special dividend of 5 cents per share will also be paid, and the company announced that these special dividends will be extended for another four years. Shares of the country's biggest port are up 26% year-to-date.

Meridian Energy also reported record earnings and net profit on the back of favourable hydro conditions, trans-Tasman customer growth and higher wholesale market prices. The country’s biggest electricity generator said operating earnings rose 26%. The performance enabled the company to lift total dividends by 11%.

Metlifecare saw net profit fall 68% due to lower unrealised fair value gains in a slower real estate market. Metlifecare’s total assets grew by 7% over the year to $3.5bn, while underlying operating cash flows increased slightly. Occupancy remained strong at 97% and average prices lifted by 6%.

Tourism Holdings said underlying net profit fell 25%, primarily due to a weaker performance from the company’s US business. Chairman Rob Campbell said the Board was not satisfied with the result. “We remain very confident in the future of the business and our competitive position within the market” he said. However, its New Zealand and Australia businesses remained strong.

Scales’ half year result was in-line with market expectations with all divisions trading well. The company said apple volumes are ahead of estimates with strong sales in Asia with premium varieties. The apple grower provided unchanged guidance.

Freightways reported a lift in earnings despite the backdrop of a slowing economy. The company reported a 2% lift in net profit, while operating earnings were up 3% on the prior year. The company provided no specific earnings guidance for the year ahead but said it is targeting year-on-year growth.

Chorus reported operating earnings of $636m, in-line with guidance of $625 - $645m. Net profit after tax declined 38%, reflecting reduced revenue and the increased interest costs of borrowing to fund the UFB rollout. Chorus also announced its highly regarded CEO and Managing Director, Kate McKenzie, is to step down at the end of the year.

Vista Group reported a 12% increase in revenue for the first half of 2019, though a drop in operating earnings. The company has provided guidance for revenue to increase by 10-12%, below prior expectations. Shares traded down as much as 27% on the day.

In other corporate news, Fisher & Paykel Healthcare upgraded its earnings guidance for the current financial year on the back of a weaker New Zealand dollar. The company now expects net profit after tax of $245 - $255, up $5m from prior guidance. Chief Executive Lewis Gradon said "During the first quarter, we have seen strong growth in our Hospital product group, which continues to be supported by uptake in both our Optiflow nasal high flow therapy and non-invasive ventilation products." Shares traded 6.1% higher on the day.