Australia (ASX) & New Zealand (NZX) Market Movers – 10th May – Stock in Focus: Summerset (SUM:NZ / SNZ:AX)

Australia and New Zealand Market Movers is provided by: Australasian Trading Management.

The Australian share market continued its rally on Wednesday (ASX 200 index +0.26%) as the Australian market hit a 3-month high. The market was higher despite a fall in index heavyweight Commonwealth Bank of Australia which announced a trading update that missed expectations and revealed a reduction in interest-only lending had crimped profit margins. BHP Billiton was one of many energy and material companies that helped the index climb as metal and oil prices rose. Energy stocks Woodside Petroleum and Santos also had a strong session.

The New Zealand market continued to move higher yesterday (NZX 50 index +0.29%) in light trading with gains led by the retirement sector and A2 Milk, while Heartland Bank and Fletcher Building dropped. After the market close, Scales announced it has agreed to sell its cold storage businesses for $151.4 million to Emergent Cold, a global cold chain company that recently acquired the Swire cold storage assets in Australia and Vietnam. The transaction is subject to Overseas Investment Office approval.

As we touched on yesterday, an ageing population across Australia & NZ has been one of our key medium-term investment themes and we believe this will clearly provide a multi-year tailwind for retirement village businesses. We have launched research coverage of Summerset which we discuss below.

Stock in Focus: Summerset (SUM:NZ / SNZ:AX)

SUM is one of New Zealand’s largest retirement villages and aged care providers, its portfolio consists of 3,278 retirement units ranging from villas, townhouses, self-service apartments and 806 care beds, which combined serve over 4700 residents.

Summerset’s share price has been on a strong run since becoming public in 2011 and SUM has benefited from two major tailwinds; 1) the ageing population and 2) strong property price inflation, which saw underlying profit increase at an annual compound rate of 47% per annum to $81.7m for the 2017 financial year.

While achieving substantial growth, we believe the share price has gotten ahead of itself to an extent and overvalues SUM’s growth potential over the near term. We expect demand for retirement villages to remain strong, although on the flipside a weakening in the property market will likely slow down profit growth.

Global Market Digest

The price of oil hit its highest level in 3-1/2 years as investors worried that Trump’s decision to withdraw the United States from the international agreement aimed at preventing Iran from obtaining a nuclear bomb would increase risks of conflict in the Middle East and curtail global oil supplies. Bank shares also rallied as the US 10-year yield spiked, which also helped fuel the US dollar’s rally, with the greenback trading at a fresh high for 2018.

3 Things Markets Will be Watching this Week
1.    Corporate earnings season enters its final stages in the US this week, with around 80% of stocks having released profit results.
2.    The Reserve Bank of New Zealand is widely expected to keep interest rates on hold at 1.75% on Thursday.
3.     This week sees the release of the Australian Federal Budget on Tuesday.

Australia and New Zealand Market Movers is provided by Australasian Trading Management. ATM is an independent research house covering stock analysis across major markets including the ASX, NZX and US markets. We make our research easy to understand and concise, taking complex issues and simplifying them so that you can make informed and accurate decisions. We have no conflicts of interest and our only goal is to generate positive returns for our members. We run transparent model portfolios to track performance and invest where we see the most value, in companies of all sizes across all industries, and often in smaller companies.

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Categories: Australian Stocks, International Stocks & Other, New Zealand Stocks

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