NZX-listed Value stocks to look at in 2021 

Summary

  • Value investing implies buying stocks that are priced below their worth. It can be a good method to diversify assets.
  • The a2 Milk noted that there could be uncertainty in achieving its earlier guidance due to the COVID-19-induced volatility.
  • Rakon Group expects softer demand in Telecommunications in H2 of 2020, but steady revenue growth is anticipated for the full year.
  • Summerset Group expects a positive business outlook ahead and anticipates its underlying profit between $96 million-$98 million for the year ending 31 December 2020.

 

Value stocks are shares of a company that trade for a relatively lower valuation than their fundamentals like earnings, dividends etc. 

They generally have steady growth rates, mature businesses, and stable revenues. However, value stocks can be a bit risky due to the market's uncertain stance towards them.

Value investors buy companies that are priced lower as they concentrate on steady income over rapid gains.

Source: Shutterstock

Let’s have a look at 3 NZX value stocks that can be considered for 2021.

 

The A2 Milk Company Limited (NZX: ATM)

 

A2 Milk witnessed many problems related to its infant nutrition business and disruptions to the corporate daigou/reseller channel amid COVID-19. In November, a2 Milk noted that there could have been uncertainty in achieving its earlier guidance due to the COVID-19-induced volatility.

The recent performance in the daigou channel had not been as strong as previously expected, and recovery in the channel was likely to be slower in the remaining part of the year.

ALSO READ: The a2 Milk (NZX:ATM) revises 1H21 and FY21 guidance

On 18 December, a2 Milk updated its earlier guidance for FY21. The Group expects its revenue to be between $1.40 billion to $1.55 billion while EBITDA margin between 26% and 29% for FY21.

The stock of ATM closed the day's trading at $12.07 per share on 31 December 2020, up by 0.17% on an intraday basis. The stock price fell by 26% on 18 December after the company revised its guidance for 1H21 and FY21. 

Rakon Limited (NZX:RAK)

 

Rakon achieved strong H1FY21 results due to quick mitigation actions in Q1 and a rise in demand in Q2 from the Telecommunications segment. However, revenue growth in telecommunications was counterbalanced by a fall in the Global Positioning and Space & Defence market segments. 

Source: Rakon HY2021 Review, NZX, dated: 16 December 2020 

Rakon reported an underlying EBIDTA of $11.4 million and NPAT of $4.6 million for 6 months ended 30 September 2020, up from $6.9 million and $1.3 million in HY2020.

The Group expects softer demand in Telecommunications in H2 of 2020, but steady revenue growth is anticipated for the full year.

The stock of RAK closed the day's trading at $0.58 per share on 31 December 2020, up by 1.75% on an intraday basis.

Summerset Group Holdings Limited (NZX:SUM)

The Summerset Group performed strongly in H1 2020 despite the COVID-19 impact as sales and settlements bounced back after April-May.

On 16 December, Summerset advised that its underlying profit is likely to be in the range of $96 million and $98 million for the year ending 31 December 2020. The Group also decided to return the COVID-19 wage subsidy of $8.6 million due to a 30% drop in revenues in April 2020.

To know more, Read: Market Guidance by Summerset for the year 2020

The Group is now in a stable financial position and expects a positive business outlook.

The stock of SUM closed the day's trading at $12.55 per share on 31 December 2020, up by 0.8% on an intraday basis.

(NOTE: Currency is reported in NZ Dollar unless stated otherwise)

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