Australia (ASX) & New Zealand (NZX) Market Movers – 30th May – Stock in Focus: Tegel

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

The Australian share market was in positive territory on Tuesday (ASX 200 index +0.16%) led by modest gains from index heavyweights such as the big Banks in a fairly muted day of trading. In stock news, Galaxy Resources was the index’s best performer as it jumped 14.4%. The lithium miner entered into a non-binding agreement to sell tenements in Argentina to South Korean steelmaker POSCO for $371 million. Galaxy said that the sale will allow it to progress the development of its Sal de Vida project.

The New Zealand market was a touch lower yesterday (NZX 50 index -0.11%) as A2 Milk extended its decline.  Fisher & Paykel Healthcare and Scales also dropped, while Synlait Milk and Mainfreight rose. Mainfreight gained as it posted a 6.3% gain in full-year profit on a record result in New Zealand and growth in Australia and said the strong performance meant it would pay record bonuses to its managers. Retirement village operator Arvida Group also released a solid result – increasing annual profit 7% after expanding its business and lifting margins. Arvida shares hit a 10-month high.

Global markets sold off overnight on the back of downbeat guidance on trading from banking giant JP Morgan and as worries over Italian political drama dominated headlines.

As we touched on yesterday, Italy is back in the headlines and European shares fell for a second day on fears a new election in Italy, which could become a proxy referendum on its euro membership, might renew the risk of a euro zone break-up.  Investors are concerned that new elections could see anti-establishment parties win more support, which saw European markets continue to move lower while the Euro fell to its lowest against the US dollar in almost a year.

Stock in Focus: Tegel (TGH:NZ / TGH:AX)

Shares in NZ’s largest chicken producer Tegel were higher yesterday (+3.5%) as the share price traded closer to the takeover offer of $1.23 per share from Bounty Fresh Foods.

Yesterday saw Philippines-based poultry group Bounty Fresh Foods send its offer document for a $437.8 million takeover bid for Tegel to all shareholders and Bounty said it believes the minimum acceptance condition will be satisfied. This saw the share price move higher as the market believes the probability of the takeover being successful has increased. We would note that the offer is conditional – among other things – on gaining any consents required by the Overseas Investment Act and on Tegel meeting certain earnings thresholds.

As we have highlighted in our last Tegel report, regardless of the takeover going through we believe that Bounty is a much better cornerstone shareholder than Affinity Equity Partners (Private Equity) and even a partial takeover is most likely a win-win for current shareholders. In our view, Bounty will likely provide synergies and a partnership could add value over the medium term with an opportunity for Tegel to execute growth in the Asian market.

3 Things Markets Will be Watching this Week
1. Geopolitics will likely remain a focus for investors – with trade talks between the US & China, and the between the US, Canada, and Mexico continuing.

2. The Reserve Bank of New Zealand releases its latest financial stability report on Wednesday.

3. Important US inflation data and monthly employment figures are published at the end of the week.

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, New Zealand Stocks

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