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Australia (ASX) & New Zealand (NZX) Market Movers – 5th June – Stock in Focus: Elders

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

The Australian share market rallied on Monday (ASX 200 index +0.59%) as the market index bounced back above the 6000 level as global equity markets shrugged off Italy-related Eurozone concerns. The big stock news yesterday was Commonwealth Bank of Australia (CBA) receiving the steepest penalty in Australian corporate history as it agreed to pay a $700 million penalty after it failed to abide by anti-money laundering laws. Despite the headline, the fine was lower than some market observers had been expecting, with CBA shares rallying over the day.

The New Zealand market was closed on Monday for a public holiday. On Friday the market was lower (NZX 50 index -0.26%) in subdued trading with dairy companies A2 Milk and Synlait dropping while Air New Zealand gained. It has been a busy few weeks for NZ stocks with company reporting for the year ended March 31 now over, and the next slew of earnings not due until August.

Global markets were higher overnight with Wall Street starting the week on a positive note, with tech stock gains paced by Apple and Microsoft.

Geopolitical concerns took a back seat following the release of solid US jobs numbers on Friday and as Apple kicked off its annual developer’s conference while Microsoft announced an acquisition. European shares also extended a recovery on Monday as deal-making took centre stage after a week of political tension in Italy and Spain as well as friction between the United States and its allies over trade policies.

Interestingly, the price of oil continues to retrace sharply after US Crude Oil had broken above $70 a barrel. Part of the pullback has been attributed to the potential for Saudi to increase output given it has delayed the listing of the Saudi Aramco IPO.

Stock in Focus: Elders (ELD:AX)

Shares in diversified agri-business Elders (ELD.AX) have continued their strong run after posting a solid 2018 half year result last month. Elders reported a +8% rise in net profit after tax to $41.4m driven by strong performance in their retail business and additional earnings through bolt-on acquisitions.

We see this as another sign that the business has completely restructured itself. One Acquisition in Elders sight is New Zealand based diversified agriculture services group PGG Wrightson (PGW). While in early days, analysts have valued PGW at around $600m, but Elders have emphasised there were several other acquisition targets under consideration and it would only proceed on a deal if it is earnings per share accretive.

Elder’s management are now benefiting from the successful execution of their 8-point plan (with the company recovering from the brink of bankruptcy) as it continues to divest underperforming assets and embrace growth both organically and via acquisition.

3 Things Markets Will be Watching this Week

1.   The price of oil as it continues to retrace from recent highs.

2.   The Reserve Bank of Australia makes an interest rate decision on Tuesday.

3.    Australian economic growth (GDP) data is published on Wednesday.

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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