Markets read reticence into Reserve Bank Governor’s words – and Mainfreight and Sky TV promise growth and recovery.
The rampant property market has now been joined by a rampant kiwi dollar after the Reserve Bank slowed down moves to cut the official cash rate into negative territory.
BUSINESS & INVESTING WRAP: Mainfreight shares hit $60; Sky TV upbeat; Plexure seeks ASX listing; China online shopping frenzy; Airbnb IPO delayed
“Progress has been made on the bank’s operational ability to deploy a Funding for Lending (FLP) programme and a negative official cash rate. The monetary policy committee agreed that these instruments can be mutually supportive in bolstering economic activity if necessary,” the Bank said.
The aim of the FLP is to lower the cost of borrowing for businesses and households, thereby supporting economic activity and employment and helping keep prices stable.
Reserve Bank Governor Adrian Orr acknowledged economic activity since the August Monetary Policy Statement, both international and domestic, had proven to be more resilient than earlier assumed.
However, he also noted both headline and underlying inflation were below 2 percent, inflation expectations were subdued, and employment was assessed to be below its maximum sustainable level.
The kiwi dollar quickly responded to the inference that negative rates are on the back burner for now, jumping almost half a cent to 68.9 US cents (at 10pm Thur).
The decision also means interest rates here are above rates in Australia, where the RBA has cut the cash rate to 0.1 percent. As a result the kiwi also rallied against the Aussie dollar trading at 94.21 Australian cents up from around 93.75 cents prior to the statement’s release.
The trade-weighted index was at 72.98, from 72.44 yesterday.
Share market investors did not seem unduly concerned by the prospect of less stimulus as a result of the OCR remaining unchanged. After trading as high at 12,762 intraday, the NZX50 lost some of its early gains closing up 0.4 percent at 12,666.
Orr said he had been called by “every bank CEO” asking for loan-to-valuation ratios to be reimposed, a move he said was likely to happen in March next year. However Finance Minister Grant Robertson said he would like to see them reimposed “as soon as possible.”
Mainfreight shares hit $60 after earning lift and increased dividend
Mainfreight shares briefly touched a new all-time high of $60 yesterday after the company lifted its half-year dividend to 30 cents per share.
The global logistics and transport firm also forecast improvements across all its regions as it continues to increase its market share, despite the impact Covid is having on many of the international markets it services.
As supply chains and shipping conditions become more challenging due to the pandemic, the company said reliability is becoming a key metric for customers who are even willing to pay a premium for reliable, high-quality freight providers.
“The current conditions are, however, providing opportunities for more growth and attracting new customers, as they look for improved service and more certainty in their freight and inventory management,” managing director Don Braid said.
Mainfreight’s revenue rose 7.2 percent, or $108.4 million, to $1.61 billion in the six months ended Sept. 30, with its net profit up 23 percent at $72.9 million.
Braid said the strength of consumer spending in domestic economies had been underestimated heading into the pandemic and that strength had been demonstrated in freight networks.
The company told investors to expect a “much improved” full-year result in the current financial year.
Mainfreight shares rose more than 3 percent to $60 in early trading yesterday having jumped $20 in just for months.
Sky Network Television upbeat about its outlook for FY21
It has been a while since Sky Network Television announced a lift in its guidance.
In a sign that CEO Martin Stewart might be finally beginning to turn things around at the struggling broadcaster, the company cited growth in direct satellite customers and lower year-to-date annualised churn for an improved outlook for FY21.
The company now projects revenue for the 12 months to June next year at between $680 million and $710 million, up from a September estimate of between $660 and $700 million.
The pay TV provider said cost cutting means earnings will also improve and are now expected to fall between $140 million and $155 million, up from earlier guidance of between $125 million and $140 million.
Net profit after tax is forecast to be in the range of $20 million to $30 million, up from $10 million to $20 million previously.
Subscriber churn has also declined to 12.2 percent.
The company attributed its improved outlook to streaming revenue being higher than expected as a result of its Neon service. Sky purchased streaming platform Lightbox from rival Spark in February and has since folded it into a new-look Neon.
Sky Television shares closed up 6.6 percent at 16c.
Plexure to seek a secondary listing on the ASX
Mobile ad business Plexure is to seek a secondary, or foreign-exempt listing on the ASX and undertake an underwritten A$30 million private placement to Australian and New Zealand institutions and other investors.
Trading in the company’s shares was halted ahead of the announcement. Plexure will maintain its NZX primary listing and has also announced a NZ$5 million share purchase plan at $1.20 to existing NZ shareholders on the same terms as the same price paid by investors in the placement. The offering is a 22 percent discount to yesterday’s price before the trading halt was imposed.
In a statement, Plexure said key customer and shareholder McDonald’s had confirmed it will participate in the offer to retain its current 9.9 percent shareholding, with funds raised used to support “accelerated expansion of the company’s global customer base and fund further product innovation.”
The trading halt will remain in place until the completion of the placement or until Nov. 13, whichever is earlier.
Singles Day in China creates online shopping frenzy
Online shopping bonanzas don’t get much bigger than China’s annual Singles Day and this year looks set to be another blockbuster event despite the impact of Covid.
The online shopping extravaganza regularly hauls in tens of billions of dollars for e-commerce giant Alibaba and other retail companies in China. This year, it’s taking on new meaning as a showcase for the country’s success in battling the Covid-19 pandemic.
The event already appears to be on track to break last year’s record sales total. Alibaba reported yesterday that the annual sales frenzy has so far pulled in 372.3 billion yuan (NZ$82 billion). The total includes just the first 30 minutes of the event, along with an earlier three-day period that was added to boost post-pandemic sales.
With those added days, Alibaba has already beaten the record haul it brought in over its entire 24-hour Singles Day period last year. The event has seen revenues grow by an average of 25 percent year on year.
China’s economy has seen a strong recovery since April and Chinese consumers’ purchase behaviours have already returned to pre-pandemic levels, if not higher according to analysts.
China reported positive economic growth for the second quarter in a row last month, underlining how quickly the world’s second-largest economy has recovered from the pandemic.
US election fallout delays Airbnb’s IPO
In what has been billed as the most anticipated IPO this year, Airbnb, the world’s most popular online accommodation platform long-awaited market debut looks set to be delayed by another week.
The company, which had earlier intended to file documents related to the IPO this week, has decided on a delay to keep it from being overshadowed by the fallout from the US election. While former Vice President Joe Biden is recognized as the president-elect and is moving ahead with plans for a transition, President Donald Trump continues to dispute the election’s outcome and has refused to concede.
Airbnb is planning to raise as much as $3 billion in a Nasdaq debut, making it one of the largest IPOs on a New York exchange this year.
This year as the coronavirus pandemic shut down global travel, Airbnb saw its bookings plummet and revenue tumble. The company cut a quarter of its staff in May with reservations tumbling as much as 70 percent from a year earlier.
However, the company has bounced back faster than expected over the northern summer. In June, bookings were down only 30 percent compared with the same month in 2019. The surge in demand was driven by travellers seeking nearby vacation rentals to escape shuttered cities and take advantage of remote work policies.
