- Australia and US markets remained gloomy post Federal Reserve Chairman Jerome Powell’s comment that the US economy will take a long time to recover from the ongoing pandemic.
- Though COVID-19 has a severe negative impact on the global economy, there are few businesses like Wesfarmers that are performing well and cashing on opportunities.
- AER's final decision on SA Power Networks has approved revenue of AUD 3.9 billion over the regulatory control period of 2020-25.
At end of the trading session on 12 June 2020, the Australian stock market settled in the red zone, with benchmark index S&P/ASX 200 moving downward by 1.89 per cent to reach 5847.8.
Since Thursday, 11 June, the market has been displaying a downturn trend after posting a consecutive seven-day gain until Wednesday, 10 June. It seems the Australian market followed the US markets, post Federal Reserve Chairman Jerome Powell's comment on Wednesday that despite the surprising jobs report for May, the US economy has a long road to recovery.
Amid increasing anxieties over a possible second coronavirus wave and Federal Reserve's gloomy predictions, the stocks continue to plunge, and the US market remains low-spirited.
In this backdrop, let us discuss few ASX-listed stocks, covering their market updates.
Spark Infrastructure Group (ASX: SKI)
SKI is the owner of infrastructure businesses that are essential services and focused on efficiencies to provide customers with reliable and affordable electricity.
On 5 June, the Australian Energy Regulator (AER) unveiled its final take for the next regulatory period of 2020-25 for SA Power Networks, 49 per cent owned by Spark Infrastructure, according to a SKI announcement.
The regulatory authority has approved the following to apply for the period from 1 July 2020 to 30 June 2025.
- Revenue – AUD 3,914 million (nominal, smoothed)
- Rate of Return – 4.75 per cent (nominal vanilla WACC)
- Return on Equity – 4.56 per cent
- Capital Expenditure – AUD 1,596 million
- Operating Expenditure – AUD 1,470 million
SKI Managing Director Rick Francis stated that the company now has regulatory certainty for the next five years for the distribution system maintenance and development in South Australia.
At the time of market closure on 12 June 2020, SKI was down by 0.476 per cent and last traded at AUD 2.090 with a market cap of AUD 3.62 billion. The last one-month return of the stock stood at 7.73 per cent, with annual dividend yield of 7.18 per cent.
BHP Group Limited (ASX:BHP)
World-leading resources company, BHP Group is into the production of copper, iron ore and metallurgical coal while holding substantial interests in oil, gas and energy coal.
Operational Update for 9 Months to March - At the end of March 2020, BHP Group had six significant projects under development in iron ore, copper, petroleum and potash, with a total budget of USD 11.4 billion over the life of the projects.
Its financial position remains strong and at 31 December 2019, net debt stood at USD 12.8 billion, and cash and cash equivalents were USD 14.3 billion.
At Caval Ridge and Western Australia Iron Ore (WAIO), record production was achieved. Moreover, record aggregate concentrator throughput was delivered at Escondida, and record ore was collected at Spence.
The strong financial position and low-cost operations suggest that the company's business is resilient and is anticipated to generate substantial cash flow in the upcoming period.
For FY2020, production guidance remains unchanged for iron ore, petroleum and metallurgical coal at 242-253Mt, 110-116MMboe and 41-45Mt, respectively.
BHP is also reviewing the capital and exploration expenditure guidance for FY21, which is expected to be less than the current guidance of approximately USD 8 billion. The updated guidance will be released on 18 August 2020 with full-year results announcement.
On 12 June 2020, BHP settled at AUD 35.990, down by 2.095 per cent, with a market cap of AUD 181.96 billion. The last one-month return of the stock stood at 17.15 per cent, with annual dividend yield of 5.92 per cent.
Wesfarmers Limited (ASX:WES)
The Australian retailer has several businesses covering apparel & general merchandise, outdoor living & home improvement, and office supplies. It also has an industrials division with businesses in fertilisers, energy, chemicals, and safety products. The company is among the country's biggest employers.
COVID-19 Measures - WES Managing Director Rob Scott has stated that all businesses are being careful about the pandemic related safety measures, and safety of team members and customers remains a priority for the company. Stores are maintaining social distancing measures and restricting the number of people. At times, it creates inconvenience, but the company is grateful for the patience of customers.
To keep the operations safe, the company's retail divisions have added additional security and cleaning teams and have given more personal protective equipment to team members.
Trading Update - In New Zealand and north-western Tasmania, after the easing of trading restrictions, WES' retail networks are fully operational.
Sales increased for Kmart and Target with a general increase in customer base in shopping centres and there is an improvement in customer demand for garments, notably winter clothes.
As customers are spending more time on learning, working, and relaxing at homes, demand has continued in Officeworks and Bunnings, with increased sales growth in the calendar year to date period as compared to the levels achieved in the first half of FY20.
In the calendar year to date, Wesfarmers' retail businesses’ online sales spiked by 89 per cent. However, on a financial year to date basis, total online sales across the company increased by 60 per cent to AUD 1.4 billion.
At the end of trading session on 12 June 2020, WES settled at AUD 42.470, down by 0.235 per cent, with a market cap of AUD 48.27 billion. The last one-month return of the stock stood at 12.53 per cent, with annual dividend yield of 3.6 per cent.
BWP Trust (ASX:BWP)
BWP is an Australia-based real estate investment trust that manages and invests in large-format commercial properties across the country, like Bunnings Warehouses.
Given the COVID-19 related uncertainties, the trust in late-March 2020 withdrew its distribution guidance for FY20 ending 30 June 2020. Its debt position and balance sheet continued to remain robust, with AUD 129 million of cash and committed undrawn bank facilities, as at 31 December 2019. The company has no immediate debt maturing with the next debt maturing scheduled on 30 April 2022.
Here are few highlights from the company’s half-year results to 31 December 2019:
- Total revenue down by 3.5% to AUD 76.2 million
- Net profit stood at AUD 135.6 million, up from AUD 78.9 million in the year-ago period.
- Like-for-like rental growth of 2.2 per cent for the 12 months to 31 December 2019
- Weighted average lease expiry of 4.3 years as at 31 December 2019 with 97.5 per cent leased
- Gearing (debt/total assets) 18.0 per cent as at 31 December 2019
- Portfolio valuation of AUD 2.5 billion as at 31 December 2019
- Distributable amount was noted at AUD 57.9 million, an increase of 1.0 per cent on the previous corresponding period
- At December 2019, weighted average capitalisation rate stood at 6.08 per cent (June 2019: 6.30 per cent).
On 12 June 2020, towards the end of trading session, BWP settled at AUD 3.810, down by 1.039 per cent, with a market cap of AUD 2.47 billion. The last one-month return of the stock stood at 7.02 per cent, with annual dividend yield of 4.78 per cent.
There is no investor left unperturbed with the ongoing trade conflicts between US-China and the devastating bushfire in Australia.
Are you wondering if the year 2020 might not have taken the right start? Dividend stocks could be the answer to that question.
As interest rates in Australia are already at record low levels, find out which dividend stocks are viewed as the most attractive investment opportunity in the current scenario in our report.