27 May 28th May: NZ, AU, World & Crypto
New Zealand Market
The S&P/NZX 50 Index rose 47.63 points, or 0.6 percent, to 8,638.4 at the end of business on 25th May, 2018. Within the index, 32 stocks rose, 13 fell and five were unchanged.
Comvita led the index higher, up 2.8 percent to $5.96. The manuka honey company’s shares had been down 14 percent this week since Monday, when it pulled out of talks with an unnamed third party looking to take it over when it couldn’t reach a deal on price.
A2 Milk gained 2.6 percent to $10.94. The stock, one of the most volatile on the index, has also had a turbulent week. The milk marketer’s shares slumped 13 percent last week and a further 9.3 percent in the first half of this week after it missed expectations, but rebounded and continued to make up lost ground on Friday.
Spark New Zealand rose 2.5 percent to $3.55. It expects annual earnings to fall by as much as 2.5 percent this year as it brings forward restructuring costs and accelerates its ‘Quantum Programme’ to transform the company into the operator with the lowest costs. It anticipates earnings before interest, tax, depreciation and amortisation of between $971 million and $991 million in the year ending June 30 as it doubles this year’s restructuring costs to $50 million-to-$55 million.
Synlait Milk gained 2.2 percent to $10.38, and Tourism Holdings advanced 1.7 percent to $6.61.
Air New Zealand was the worst performer, down 2.3 percent to $3.225. SkyCity Entertainment Group dropped 2 percent to $3.92 and Sanford fell 1.2 percent to $7.7.5
Outside the benchmark index, Steel and Tube dropped 4.3 percent to $1.55. The stock has dropped 22 percent this week following a significant downgrade. It now expects to post a loss before interest and tax (EBIT) of about $38 million this financial year, from positive EBIT of $31.1 million a year earlier, and breach its banking covenants after a restructuring that will see it exit its plastics business and write down the value of its assets.
The Australian share market is expected to open weaker on Monday with a fall in the price of oil and other resources.The benchmark S&P/ASX200 was down 0.07 per cent on Friday, to 6,032.8 points, while the broader All Ordinaries index fell 0.05 per cent, to 6,140.9 points.
Stocks of interest on the Australian stock exchange and their moves over the course of the week:
ALL – ARISTOCRAT LEISURE – up $2.93, or 10.3 per cent, at $31.32
Poker machine supplier Aristocrat’s first-half profit rose 2.8 per cent, buoyed by a huge jump in digital revenue and continued growth in the Americas business.
BWX – BWX – up $1.60, or 36.3 per cent, at $6.01
Personal care products marketer BWX received an $810 million buyout bid from senior managers teamed up with private equity player Bain Capital.
CBA – COMMONWEALTH BANK – down 63 cents, or 0.9 per cent, to $69.87
CBA hit a five-year low of $69.11 during Thursday trade before mounting a small recovery as investors remain cautious of the big four banks.
STO – SANTOS – down 36 cents, or 5.8 per cent, at $5.89
Oil and gas producer Santos rejected a $US10.9 billion takeover offer from US private equity firm Harbour Energy and terminated the negotiations in a move that surprised analysts.
TLS – TELSTRA CORP – up 2 cents, or 0.7 per cent, at $2.87
Telstra shares bounced slightly on Friday but remain near a seven-year low after the telco blamed network outages suffered on Monday, which left customers unable to make calls or use mobile data, on a software fault.
WBC – WESTPAC – down 56 cents, or 1.9 per cent, at $28.29
The Federal Court found Westpac engaged in unconscionable conduct over its trading in the bank bill market, but cleared it of more serious allegations of rate manipulation.
WES – WESFARMERS – up 52 cents, or 1.2 per cent, at $45.52
Wesfarmers announced on Friday it was pulling out of the UK hardware market, ending its two-year attempt to turn the Homebase chain into Bunnings stores. It will record a loss of around $323 million to $406 million on the deal.
The latest US jobs data and trade talks between the US and China will form a key focus this week as investors are gearing up for a widely expected Federal Reserve interest rate hike next month. Investors will eye the ADP employment report on Wednesday, followed by weekly jobless claims on Thursday and the government’s nonfarm payrolls report on Friday, while also watching the latest reading on the core PCE index, the Fed’s preferred inflation measure, due on Thursday. Investors will also eye oil which dropped last week amid signs OPEC and its partners might boost supply amid pressure from US President Donald Trump who’s wary of the speed at which prices have risen. US financial markets are closed for the Memorial Day holiday on Monday.
In Europe, the Stoxx 600 Index rose 0.1 percent on Friday. The latest economic data about the region set for release this week include reports on Germany’s unemployment and consumer price index, as well as eurozone business climate, due Wednesday; eurozone unemployment and CPI, due Thursday; as well as eurozone manufacturing PMI, due Friday.
Crypto watch: Regulatory concerns are still lingering over cryptocurrencies. Over the last seven days, Bitcoin is down 9.0%, Ethereum is down 14.3%, Litecoin fell 11.0% and Ripple dropped 8.7%. Bucking the broad downtrend is TRON, which is up 5% over the last week.
Term of the week
Debt ratio is an indication of how much debt a company is holding, when compared to the value of its assets. It can also be applied to individuals: in which case it is the cost accrued by their debt compared to total income each year.
Debt ratio is derived by dividing total debt by total assets, and representing that figure as a percentage. 0% indicates that a company or individual has no debt or close to no debt, and 100% indicates that they have debt equal to total assets.
Typical debt ratios vary from industry to industry, with some businesses requiring large amounts of debt to function and some tending to remain relatively debt free.
Generally, low debt is seen as a positive sign for a company. However, in many cases having a right balance of debt can help the company to grow further.