New Zealand Stock Markets
Brokers have picked a diverse mix of stocks for 2018, in many cases
opting for those that have underperformed in the last year or so.
It is interesting to see the way participants opt for different ends of that spectrum in an attempt to capture a market beating annual result.
Hamilton Hindin Greene has leaned most heavily towards value investing picking well established stocks that have been out of favour and could present a bargain
The two most obvious examples in their selection are Fletcher Building and Comvita – both strong companies that were punished by investors in 2017.
Comvita had a tough year, its share price falling 37 per cent at one point before almost recovering back almost to break even by December.
Hamilton Hindin Green also picks both SkyCity and Sky TV.
SkyCity's share price has gone sideways for several years as the company continues to invest heavily into the expansion of its Auckland and Adelaide operations. Sky TV seems a more curious play given the widespread view that the life span of its satellite transmission business model is limited.
Sky TV's share price has been in a steady decline since 2014, and accelerated to the down side in 2017 to touch an all-time lows in December, Smalley notes.
That presents a potential short term upside – around the rights context for All Black rugby.
We feel that given the complexity of the contracts with Sanzaar, and the wider rugby content distribution obligations, Sky is still the likely candidate. Negotiations are expected to begin in April 2018, with a renewal likely to ease investor concerns. The company has relatively low gearing, with total debt representing just over 20 months 2017 free cash flow. This free cash flow should also underpin a dividend that would be in the double digits at current prices.
Craigs Investment Partners takes a similar approach with established stocks but leans towards those that have performed well in 2017 and could continue their run.
Craigs head of Research Mark Lister notes it would have been nice to have had a2 milk in the mix for 2017 (it returned 274 per cent).
While the a2 chart might look a bit shocking to some "the fact is that a fair chunk of the gains have been driven by fundamental improvements in the business". In 2014 a2 generated EBITDA of just $3.6m, and in 2017 this increased to $141m. This is expected to growth even further, with EBITDA of more than $250m expected in the coming year.
Forsyth Barr also has a2 in its picks for 2018.
Tourism Holdings is another strong performer which Craigs is picking to continue its run in 2018. It delivered nearly 70 per cent return for 2017.
THL is also a vastly different company than it was ten years ago, with management having made a lot of progress in reshaping the business and positioning it for growth.
More than half the company's revenue comes from outside New Zealand, so it also fits the bill for us in terms of global growth options and some international diversification.
The only stock to get picked by three brokers this is year is Restaurant Brands – another strong performer through 2017.
Craigs, Hobson Wealth and Vulcan Capital all have it in the mix.
Green Cross Health is a diversified healthcare business (owning or supporting 330 Pharmacies under the Life Pharmacy and Unichem Brands, 23,000 Community Nursing clients and 46 Medical Centres).
Plexure is a digital advertising company (originally known as V-Mob). It moved into profitability in 2017, notes McDouall, and is selling now on a revenue multiple of less than 1 times.
First NZ Capital also picks some outsiders this year including EROAD – a tech company specialising in road transport payment solutions. And Tilt Renewables a solar and wind generation player formed from the de-merger of Trustpower.
Hamilton Hindin Green also picks both SkyCity and Sky TV.
SkyCity's share price has gone sideways for several years as the company continues to invest heavily into the expansion of its Auckland and Adelaide operations. Sky TV seems a more curious play given the widespread view that the life span of its satellite transmission business model is limited.
Sky TV's share price has been in a steady decline since 2014, and accelerated to the down side in 2017 to touch an all-time lows in December, Smalley notes.
That presents a potential short term upside – around the rights context for All Black rugby.
We feel that given the complexity of the contracts with Sanzaar, and the wider rugby content distribution obligations, Sky is still the likely candidate. Negotiations are expected to begin in April 2018, with a renewal likely to ease investor concerns. The company has relatively low gearing, with total debt representing just over 20 months 2017 free cash flow. This free cash flow should also underpin a dividend that would be in the double digits at current prices.
Craigs Investment Partners takes a similar approach with established stocks but leans towards those that have performed well in 2017 and could continue their run.
Craigs head of Research Mark Lister notes it would have been nice to have had a2 milk in the mix for 2017 (it returned 274 per cent).
While the a2 chart might look a bit shocking to some "the fact is that a fair chunk of the gains have been driven by fundamental improvements in the business". In 2014 a2 generated EBITDA of just $3.6m, and in 2017 this increased to $141m. This is expected to growth even further, with EBITDA of more than $250m expected in the coming year.
Forsyth Barr also has a2 in its picks for 2018.
Tourism Holdings is another strong performer which Craigs is picking to continue its run in 2018. It delivered nearly 70 per cent return for 2017.
THL is also a vastly different company than it was ten years ago, with management having made a lot of progress in reshaping the business and positioning it for growth.
More than half the company's revenue comes from outside New Zealand, so it also fits the bill for us in terms of global growth options and some international diversification.
The only stock to get picked by three brokers this is year is Restaurant Brands – another strong performer through 2017.
Craigs, Hobson Wealth and Vulcan Capital all have it in the mix.
Green Cross Health is a diversified healthcare business (owning or supporting 330 Pharmacies under the Life Pharmacy and Unichem Brands, 23,000 Community Nursing clients and 46 Medical Centres).
Plexure is a digital advertising company (originally known as V-Mob). It moved into profitability in 2017, notes McDouall, and is selling now on a revenue multiple of less than 1 times.
First NZ Capital also picks some outsiders this year including EROAD – a tech company specialising in road transport payment solutions. And Tilt Renewables a solar and wind generation player formed from the de-merger of Trustpower.
The ultimate speculative play this year comes from Vulcan's Brett Wilkinson who's included a company called QEX logistics – which is expected to list in January.
Wilkinson notes that the QEX, whose directors include former Federated Farmers chairman
Connor English (Bill's brother) and local rich Lister Danny Chan has completed capital raising and is ready to roll.
Wilkinson notes that the QEX, whose directors include former Federated Farmers chairman
Connor English (Bill's brother) and local rich Lister Danny Chan has completed capital raising and is ready to roll.
However, the NZX notes that (at time of writing) QEX Logistics have not yet released a listing and quotation notice.
No comments:
Post a Comment