5 NZX Stocks that bucked the bear market trends: THL, SKC, CVT, GEO, QEX

5 NZX Stocks that bucked the bear market trends: THL, SKC, CVT, GEO, QEX

The coronavirus pandemic has spared no nation, and New Zealand, despite the geographical advantage, has been affected by the outbreak of the infectious disease. The country had 1,112 COVID-19 confirmed cases and 16 reported deaths as of 23 April 2020. The government of New Zealand has incorporated some of the most stringent measures in place, entailing the complete closure of schools, entertainment places, non-essential activities, corporate and social gatherings. Considering the state of paralysis the economy is in, Jacinda Ardern, New Zealand’s Prime Minister recently took the initiative of lowering the salary of the ministers and top public servants by 20% for six months.

Despite the efforts, the New Zealand economy has had a torrid time which is evident from the YTD return of its benchmark index, S&P/NZX All Index (-10.31%) and the index for the 50 largest NZ stocks by market cap, S&P/NZX 50 Index (-9.90%) as on 23 April 2020.

While the NZ economy has seen better days, some companies are doing quite well in the current scenario and have gone against the wind concerning their overall performance. Let us have a look at five such stocks: THL, SKC, CVT, GEO, QEX.

Tourism Holdings Limited (NZX:THL)

Tourism Holdings is engaged in selling and renting holiday vehicles across the globe. Recently, the Company has taken specific measures to lessen the expenses and mitigate the impact of the coronavirus outbreak. The key highlights include:

  • Interim dividend of 10 cents per share for FY 2020 has been cancelled.
  • For the next four months, all Directors and Chief Executive will be reducing their fees or salary by 50%. Also, the Executive team will cut their salary by 30% for the coming four months.
  • THL’s rentals businesses in Australia, New Zealand and the US will continue to function as they are categorized as essential services.
  • Operations of Waitomo Group and Kiwi Experience have been temporarily shut.

To favour digital strategy focusing on Australia and New Zealand, THL agreed to undertake a managed exit from Togo Group (its technology JV). This allowed the Company to align closely with THL’s core business of RV rentals.

Tourism Holdings mentioned that it has net tangible assets of NZ$1.83 per share and nearly NZ$109 million of headroom available in its banking facilities, as of 31 December 2019. THL’s current facilities offer for up to NZ$306 million of debt, and its current net debt is nearly NZ$200 million.

As on 23 April 2020, THL has delivered an impressive one-month return of 71.2%.

SkyCity Entertainment Group Limited (NZX:SKC)

SkyCity is a casino operator listed on both NZX and ASX. The Company is involved in the tourism and entertainment industry.

SKC outlined the impact of COVID-19 and implemented changes to mitigate the risk, as follows:

  • Minimising operating costs and substantially lowering capital expenditure.
  • SKC’s management team and salaried employee base are getting restructured. The Company mentioned that Peter Alexander would step down from his role of Chief Property Officer, effective 02 July 2020.
  • As directed by New Zealand Government, SKC had closed all its entertainment and casino facilities operating in Hamilton, Auckland, and Queenstown in New Zealand. 
  • As announced on 23 March 2020, the Company’s hotels in Auckland will be operational for a while to accommodate some of the already staying guests.
  • Given the closure of SkyCity properties and uncertainty regarding the duration, SKC has withdrawn its FY 2020 earnings guidance for the period ending 30 June 2020.

While taking adequate steps to combat the spread of COVID-19, the SKC stock has gained momentum in the last month (as on 23 April 2020) with a positive return of 52.7%.

Comvita Limited (NZX:CVT)

Comvita manufactures and markets healthcare and skincare products.

The Company announced that it had robust demand for its products in mid-March which continued throughout March. Also, Comvita witnessed double-digit YoY growth in the quarter ending March. CVT mentioned that all its major markets are reporting sound output in terms of its sales.

The Company is confident of reducing its debt as it had earned profits in each month of the quarter and generated good cashflows with improvements in working capital.

Regarding honey harvest, CVT stated that it would increase by more than 60% year on year and more than 95% of the extraction was complete. Importantly, the Company mentioned that crop quality has also improved by more than 150%.

Two of the Company’s core products, Propolis and M?nuka honey contributed more than 90% of their revenue. During COVID-19, CVT has been witnessing a strong demand for these products as they are known for their anti-microbial, anti-viral and immunity benefits.

As on 23 April 2020, the CVT stock has delivered a significant positive return of 80% in the last month.

Geo Limited (NZX:GEO)

Geo Limited offers SaaS mobile workforce solutions to businesses.

On 26 March 2020, the Company mentioned about specific measures to address prevailing conditions arising from COVID-19. Following are the four measures:

  1. People safety: Being a technology company, the critical collaboration and productivity tools are all cloud-based. Thereby, GEO has implemented a normal remote work environment for ensuring the safety of its people.
  2. Cash reductions: After performing a well-thought analysis, GEO plans to reduce its business size and associated overheads to preserve cash.
  • Full-time headcount will be reduced by around 25%.
  • GEO’s board and all employees are considering 20% of voluntary pay cut, which is valid until the normal trading starts again.
  • Product and development will continue at current levels.
  • Marketing and sales cost and salaries will be brought to a lower level.
  1. Less reliance on capital markets: Based on the prevailing situation, GEO is unlikely to issue the second tranche of notes (pending in November 2019) within FY 2020. A range of support payments is being offered by the governments of NZ and Australia.
  2. Forward-looking approach: The Company has been exploring the opportunity to re-engineer and scale up to more efficiently in the recovery phase.

As on 23 April 2020, the stock has delivered a phenomenal return of 385% in the last month.

QEX Logistics Limited (NZX:QEX)

QEX Logistics is a provider of logistics services including packaging, storage, freight forwarding, customs clearance and delivery services.

The Company confirmed that FY 2020 revenue for the period ended 31 March 2020 is on track to reach the FY 2019 revenue, which was NZ$59.4 million. Regarding milk powder sales, QEX witnessed a strong result in February with revenue of NZ$5.4 million as compared to NZ$3.4 million in the previous year.

The gross margin for FY 2020 will be lower as compared to FY 2019, owing to the difficult period of the first six months of the year. International parcel deliveries contribute nearly 8% of the Company’s total revenue. This segment is likely to be impacted in the coming months due to reduction in air-freight capacity.

Given the uncertainty of COVID-19 outbreak and its duration, the Company expects that the first half of FY 2021 would be challenging. However, QEX stated that its balance sheet is robust, and it holds a good position to survive this period. As on 23 April 2020, the stock has delivered a positive return of 56% in the last month.

 


Disclaimer
The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. The above article is NOT a solicitation or recommendation to buy, sell or hold the stock of the company (or companies) under discussion. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site.

 

   
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