Shedding Light on Stocks amidst the Outbreak - AWF, BFG, GSH

  • Mar 30, 2020 NZDT
  • Team Kalkine
Shedding Light on Stocks amidst the Outbreak - AWF, BFG, GSH

Jostling with your restless thoughts, the grocery struggle never seems this horrid as you find yourself moving across the empty streets with a plethora of questions swirling in your mind. With your doubts girdling around the epidemic, disturbing thoughts and restless mind is inevitable.   

The hazy situation, absence of any Covid-19 drug and increasing rate of the infection are together enough to turn our moods grumpy. The lockdown, with our lives, wholly disrupted from the outside world further adds to the gloomy situation. At the same time, we acknowledge that social media and telecommunications remain our only connection from the outside world. 

Covid-19 has grappled our different walks of lives, and the human civilisation struggles to fight for its survival. However, you hope it takes a cue to leave as you realise that the clutches of the medical emergency even after almost three months do not seem to loosen as the grip grows stronger with the exceeding pace of infection. The 29 March 2020 report on coronavirus by WHO highlighted that the number of cases worldwide reached over half million (~634,835) as around 63 thousand more cases added in the span of 24 hours. New Zealand registered 60 new cases in the same time period, taking the total case count in the country to be 476. As approximately 30,000 deaths were confirmed, globally, the paranoia skyrocketed across the globe.

 

 

Amidst the burgeoning gloomy situation and the world ridden by health worries, our financial ambitions are stifled as we realise that the impending financial crisis stands looming over us. The businesses withdrawing their guidance and projection agencies lowering down the expected GDP makes it clear (the economic worries) that their lies a bumpy road ahead even if the world somehow miraculously is able to come out of the calamity. 

The apocalyptic situation seems to affect the vast number of business players across the different sectors. As business operations vastly remain shut following the imposition of four weeks of national emergency, many NZX listed companies highlighted key updates concerning the progress and resilience against the economic turbulence brought by coronavirus outbreak.

AWF Madison Group Limited (NZX: AWF)

New Zealand’s largest resourcing and recruitment company, AWF Madison Group Limited (NZX: AWF) provides staffing solutions across a range of sectors in the country. The group operates through varying subsidiaries, which include AWF, Madison Recruitment, Absolute IT Limited and JacksonStone & Partners. 

The Company, on 20 March 2020, reported regarding the resolution of the Labour Inspectorate investigation (dating back to 2018) that curtailed the flexibility in its migrant labour deployment and redeployment. The workflow was reduced at AWF due to the fire at International Convention Centre in NZ, thereby affecting overall earnings of the Company. Furthermore, a large project that has been suspended, has subsequently resumed. 

AWF, earlier on 24 October 2019, had advised that its full-year EBITDA earnings would lie in the range of $12.7 million to $14 million. However, owing to many unknowns, the Company is expecting that FY20 EBITDA would fall short of the guidance by approximate 10 per cent. AWF in relation to the rising impact of Covid-19 highlighted that while it is expecting EBITDA for FY20 higher than that in FY19, it is too early to project the social and subsequent changes economic scenario due to the outbreak. 

While the Company continued to trade normally following the announcement of the outbreak, it has started seeing many changes. Although permanent roles are being put on hold by many clients, several large organisations in blue and white-collar sectors enquired about requiring additional resources to cope with their response towards coronavirus. Amidst the uncertainty, the Company has substantial available undrawn bank capacity and cash on hand. 

By the end of the trading session on 30 March 2020, AWF Stock closed at $1.250, up by 3.31% intraday. The Company had a market cap of $42.9 million and gross dividend yield of ~18.6%.

Burger Fuel Group Limited (NZX: BFG)

Serving in the fast-food industry, Burger Fuel Group Limited (NZX: BFG) is engaged in providing burger, fries and other foodstuff through company-owned restaurants as well as franchisee. 

Given the rapid implementation of Government’s Level 3 and Level 4 Covid-19 measures that dictate the closure of non-essential services, Burger Fuel Group has closed all its franchised and company owned restaurants. The Company anticipates that in coming months its earnings would be materially impacted, with store closures to impact F21 financial year as well as the year-end results (as at 31 March 2020). 

However, as of now, the Company is unsure of the financial impact.

With a market capitalisation of $17.98 million, BFG shares closed at $0.335 per share on 30 March 2020, up by 11.67% intraday.  

Good Spirits Hospitality Limited (NZX: GSH)

Operating as an investment company, Good Spirits Hospitality Limited (NZX: GSH) is engaged in identifying acquisition opportunities (high quality) in the NZ hospitality sector. In 2014, the Company acquired The Better Bar Company, which has 10 sites across Auckland and Hamilton.

As NZ Government increased Covid-19 alert levels, mandating the closure of all non-essential services for 4 weeks, the Company has closed its all NZ operations in Hamilton and Auckland. GSH highlighted that it is in discussion with suppliers and contractors while remaining focussed on the implication for its employees. 

On 16 March 2020, the Company also withdrew its earnings guidance for the full year 2020, as the NZ government made effective self-isolation of international travellers. Amidst the uncertainties surrounding the world market, GSH believes that with the rapidly changing situation, the financial impact could be more significant than anticipated.

At a market cap of $3.03 million, the share price of GSH went down by 6.67% intraday and closed on $0.056 per share on 30 March 2020.

   
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