The New Zealand Prime Minister announced that the country is expected to come to Alert Level 1 ahead of schedule if everything goes well. As on 2 June 2020, the island nation has reported no new reported cases in the past 11 days and has only one active case in the country. Earlier Alert Level 1 was expected by 22 June, but now considering the favourable scenario at present, the Cabinet might consider moving to Level 1 earlier than planned.
This is good news for investors as well as most of the business will be entirely operational with minimal or no restrictions. While the economy has been getting back on track, there are a few stocks that have performed well in these testing times.
Let us look at five such stocks that weathered the storm in May 2020.
Oceania Healthcare Limited (NZX:OCA)
Auckland-headquartered, healthcare services company Oceania Healthcare Limited owns and operates retirement villages across New Zealand.
On 28 April 2020, the Company had notified that none of its retirement villages or aged care centres reported any cases of coronavirus. Also, Oceania Healthcare had authorised applications and completed Care Suites sales during the lockdown. OCA had mentioned that it expected to gain from the Government’s recently announced increase in funding to address aged residential care.
The stock of OCA closed the day’s trading at $0.940 per share on 3 June 2020, up 4.44% compared to its previous closing price. The Company has a market capitalisation of $577.998 million. OCA’s 52-week high and low prices are $1.39 and $0.38, respectively (as on 2 June). The stock has generated a return of 28.77% in the last month.
Vista Group International Limited (NZX:VGL)
Vista Group offers software and new tech solutions across the film industry sectors worldwide including exhibition, distribution, and consumer.
On 25 May 2020, The Company announced that it had signed an Enterprise Agreement with Netherlands-based Pathé Theatres. The deal is an extension of Vista’s agreement with the parent Company of Pathé Theatres, Les Cinémas Pathé Gaumont (Pathé) after installing the Company’s system at Pathé’s circuits in Belgium, France, and Switzerland.
· The operation in the Netherlands will consist of almost all Vista Cinema suite elements in a Cloud environment. This would be entirely managed by the Company and is expected to finish in early 2021.
· Pathé Theatres is Netherlands’ biggest cinema circuit managing 31 Cinemas that also includes Amsterdam-based Tuschinski Theatre.
The stock of VGL closed the day’s trading at $1.990 per share on 3 June 2020, up 21.34% compared to its previous closing price. The Company has a market capitalisation of $454.943 million. VGL’s 52-week high and low prices were $5.96 and $0.86, respectively (as on 2 June). The stock has generated a return of 65.25% in the last month.
Kathmandu Holdings Limited (NZX:KMD)
Kathmandu Holdings Limited is a marketer, designer, wholesaler and retailer of footwear, clothing, and equipment for travel and adventure.
Strong Growth in Online Sales
During April, the online sales of KMD saw massive growth and increased by 2.5 to 3 times as compared to last year. The highest growth rate was witnessed in the Australian market, which is the Company’s largest market.
The Company was financially stable, having recently raised $207 million via equity raising. KMD continues to work on cost management measures to bolster its financial position further.
The stock of KMD closed the day’s trading at $1.070 per share on 3 June 2020, up 0.94% compared to its previous closing price. The Company has a market capitalisation of $758.631 million. KMD’s 52-week high and low prices were $2.54 and $0.49, respectively (as on 2 June). The stock has generated a return of 44.00% in the last month.
Tourism Holdings Limited (NZX:THL)
Tourism Holdings Limited has started its consultation process throughout parts of its NZ business, with the aim of fitting crew numbers to present activity levels and anticipations for the coming months.
· An estimated 140 people will be affected with proposed modifications in these businesses.
· The consultation process will comprise of the workforce from Kiwi Experience, Waitomo, and group support.
The Company’s rental businesses in Australia, New Zealand, and the US, were considered as an essential service to provide motorhomes for COVID-19 related usage. The Company is serving its customers worldwide that are in lockdown situations in its vehicles. However, operations of the Waitomo Group and Kiwi Experience are temporarily halted. Many employees have been placed on discretionary leave, been furloughed, left the business or similar. The implemented change is the staff is expected to provide an approximately 60% reduction in labour expenses over the next 12 weeks.
The stock of THL closed the day’s trading at $2.170 per share on 3 June 2020, up 10.15% compared to its previous closing price. The Company has a market capitalisation of $321.192 million. THL’s 52-week high and low prices were $4.26 and $0.55, respectively (as on 2 June). The stock has generated a return of 66.41% in the last month.
Pushpay Holdings Limited (NZX:PPH)
Pushpay offers a church and donor management system across non-profit organisations, primarily in the US.
For the year ended 31 March 2020, the Company reported total revenue of US$129.8 million, up by 32% and Operating revenue stood at US$127.5 million, up by 33%. Pushpay provided the following guidance, which it managed to achieve or even exceed.
FY20 guidance achieved (Source: Company’s Report)
Pushpay increased its gross margin by five percentage points, from 60% to 65% for the year ended 31 March 2020. The EBITDAF increased by US$23.5 million to US$25.1 million, an increase of 1,506%.
In the coming future, the Company anticipates further strong growth as it continues to implement its strategy to gain the market share. The Company is expecting to achieve EBITDAF of between US$48.0 million and US$52.0 million for the full year ending 31 March 2021. In the long term, the Company is expecting to achieve more than 50% of the large and medium church segments - A market representing more than US$1 billion in annual revenue.
The stock of PPH closed the day’s trading at $7.500 per share on 3 June 2020, down 4.34% compared to its previous closing price. The Company has a market capitalisation of $2.067 billion. PPH’s 52-week high and low prices were $2.54 and $0.49, respectively (as on 2 June). The stock has generated a return of 75.58% in the last month.
NOTE: $ denotes New Zealand Dollar unless stated otherwise.
Sent: Tuesday, May 26, 2020 9:27 AM
To: Joseph Cederwall <email@example.com>
Subject: 4 C’s in Kiwi’s Scoop: Crisis, Containment, Conundrum and Collateral Damage around Helicopter Money
4 C’s in Kiwi’s Scoop: Crisis, Containment, Conundrum and Collateral Damage around Helicopter Money
While New Zealand sets the international benchmark in containing the spread of coronavirus pandemic, the policymakers seem to be going great lengths in rescuing the nation from economic crunch.
Finance Minister Grant Robertson recently indicated that for stimulating New Zealand’s economy, the Government is planning ‘helicopter money’, which would involve direct free cash hand-outs to the Kiwis.
The country, which is currently at alert level 2, has scripted a staggering success in reopening the economy through a range of state-backed initiatives and phased lockdown strategy. Kiwis are returning to work, while businesses are resuming operations with hygiene practices and social distancing norms in place.
In such a scenario, the Government’s proposal of ‘helicopter money’ could provide the much-needed impetus to the economic reboot. The extra money supply is further expected to provide a strong nudge to the demand side, which has relatively contracted amidst the pandemic shock and clampdown measures. However, there have been economists who are resisting the idea of unconventional monetary policy tool, citing dire consequences.
While the debate on this potential policy grows thick and fast, let us look at the 4C’s around the Helicopter Money.
Undoubtedly, overseas travel served as a portal to entry for Covid-19 infection, which started picking up momentum via community transmissions. Though NZ remained ahead of the curve with its strict lockdown measures and large-scale testing, enabling early success on Government’s ‘Elimination Strategy’, economic sluggishness has been the cause of concern for policymakers.
On equity market front, market players struggled amidst volatile scenario to tap potential investment opportunities across different themes, while attempting to time the entry amidst sinusoidal trends.
The economic and financial market upheaval amidst grave health crisis is casting dark shadows on nation’s economic growth, thereby presenting a strong case for bringing forth the discussion on Helicopter Money, although possible repercussions need to be incorporated in the decision making process.
New Zealand Government has presented a strong role model to the world on successfully flattening the infection curve and reducing the active cases to double-digit figures, backed by stringent social distancing regulations and precautionary health measures.
Piqued retail sales and emergence of technology trends have substantially offset the abrupt slowdown in the manufacturing output. The Government’s series of fiscal packages and employment centric $50 Billion budget along with the Central Bank’s quantitative easing is further bolstering economic recovery.
Notably, the country has been reaffirmed to ‘AA’ ratings with a positive outlook by S&P Ratings Agency. Meanwhile, prospects of ‘Trans-Tasman’ trade is infusing positive hopes amidst people. Besides, Government plans for fast-track funding ‘within-weeks’ to provide infrastructure to related projects is expected to further assist in kickstarting the economy.
On employment scenario, Social Development Minister Carmel Sepuloni commented, ‘Māori and Pacific people losing jobs in the early stage’ are lesser in the present Covid-19 crisis compared to the global financial crisis.
While the nation is keeping close eye on the probable second wave of infection amidst phased economic reopening given the dim prospects for virus vaccination in near-term, it is to be seen if the benefits of helicopter money on economic recovery outweighs the potential ill-effects.
New Zealand, in the face of Covid-19, has wielded a robust cash injection program through quantitative easing techniques like rate cuts, coupled with fiscal packages and money pouring budget. Meanwhile, the Government backed loans allowed many businesses to stay afloat amidst the crisis.
Regarding helicopter money Robertson said “the concept was being discussed but it's not something that has got to that level of discussion at all. I am pretty keen on making sure that fiscal policy remains the role of the government".
Moreover, policymakers seem to be mulling over the possible risks of long term inflation and threat to independence of RBNZ with the dumping of helicopter money in the hands of NZ citizens. Besides, discussions also need to include the source of additional money: firing money printing presses or external borrowings.
While policymakers are concerned about growing Government debt and fiscal deficit, the proposal of helicopter money- term coined by 20th century economist Milton Friedman is raising concerns over risk to currency, foreign investment and price stability. Moreover, it is always unclear as to how the recipients will utilise this money which is principally intended to boost consumer spending and provide push to economy recovery.
Opponents of helicopter money consider it to be less attractive than Central Bank’s Quantitative easing program and traditional debt-financed fiscal initiatives owing to dire consequences. While, proponents argue that the targeted economic reboot could enhance the trade surplus while also mitigating economic risks.