Australia (ASX) & New Zealand (NZX) Market Movers – 14th May – Focus on Scales Corp (NZX:SCL)

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

The Australian share market was marginally lower on Friday (ASX 200 index -0.04%) although was in positive territory for the week. AMP shares continue to face heavy selling, as its share price suffered another -10% fall last week. As well as the royal commission into AMP, it reported a large loss on Friday, which hit any sign of shareholder optimism that had followed its AGM on Thursday. Higher energy prices continued to support resource giant BHP Billiton on Friday.

The New Zealand market was higher on Friday (NZX 50 index +0.45%) as the NZX 50 (market index) reached a new record high, led by retirement village operator Ryman Healthcare and Fisher & Paykel Healthcare. In stock news, insurance company CBL Corp remains suspended from trading. CBL’s voluntary administrators have recommended the company be placed into liquidation, enabling the liquidator to further investigations into the events leading up to the group’s various insolvency procedures. A creditors’ watershed meeting will be held next week.

Global markets were little changed on Friday although it was a strong week for most major markets including seven consecutive weeks of gains for the European market.

Closer to home investor sentiment is also buoyant, which saw the NZ market (measured by the NZX 50 market index) touch a new record high on Friday. The Australian market has also staged a comeback following volatility earlier this year, with the ASX 200 market index close to its highest level in 10 years.

Looking ahead this week, corporate earnings season is almost over in the US but Walmart, the world’s biggest retailer, will report this week. Overall it has been a very strong period for US corporate profit announcements which has supported the recent rally in markets. Roughly 90% of the companies in the S&P 500 (top 500 US companies) have reported results so far this earnings season, and approximately 62% have delivered both earnings and revenue that exceeded financial analysts’ expectations, according to S&P Global Market Intelligence.

Stock in Focus: Scales Corp (SCL:NZ)

Shares in apple producer and storage & logistics business Scales were higher last week it 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. Scales has is intending to shift its business to a greater focus on pure agribusiness.

The transaction is subject to Overseas Investment Office approval. “We have identified our strengths as (1) operating fully-vertically integrated agriculture businesses, (2) participating in businesses with an export focus, and (3) adding value through connections to the China market,” said Chairman Tim Goodacre in a statement to the NZX. Goodacre said there are no plans to return to capital to shareholders but “the proceeds are intended to be used to pursue other attractive opportunities in New Zealand agribusiness, both currently and in the future.”

Our initial thoughts are that the transaction is a positive for Scales and frees up capital to pursue attractive growth opportunities in the agri sector.

3 Things Markets Will be Watching this Week

1.   Corporate earnings season rounds up in the US this week.
2.   Australian unemployment data is published on Thursday.
3.   Minutes from the last Reserve Bank of Australia meeting are released on Tuesday as well as a speech from the assistant RBA governor.

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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