How Is NZ’s Industrials Sector Placed Amidst Trade Policy Uncertainties – 2 Stocks to Consider

Company Overview:

Steel & Tube Holdings Limited (NZX: STU) is one of NZ’s leading providers of steel solutions, allowing access to the widest range of steel products in the market, via nationwide network of distribution centres. Accordant Group Limited (NZX: AGL) is a New Zealand-based recruitment company engaged in the supply of temporary staff, contractor resources, and recruitment of permanent staff.

Kalkine’s Sector Report covers the Key Financial Metrics, Risks, Outlook, Technical Analysis along with the Valuation, Target Price, and Recommendation on the stock.

Sector Landscape and Outlook

As per the ‘Fortnightly Economic Update’ dated 7^th March 2025 released by The Treasury, the domestic activity has been demonstrating signs of recovery. The international trade developments have created more risk for the external sector and tensions escalated as the US moved to raise tariffs. The construction activity remained weak late last year. Notably, the Building Work Put in Place survey exhibited that the volume of work declined 4.4% in the December quarter, while the decline in residential work was slightly larger than in non-residential work.

The businesses have been expecting a recovery in activity over 2025. As per ANZ’s February Business Outlook (ANZBO), the business confidence as well as anticipated activity remain elevated at +58 and +45, respectively. The indicators of economic activity demonstrate that growth has been gradually picking up.

Overseas merchandise trade: January 2025

As per Stats NZ, in January 2025, goods exports witnessed a rise of $1.4 billion (or 28%) to $6.2 Bn and goods imports increased $787 Mn (or 13%) to $6.7 Bn as compared to January 2024. The monthly trade balance was a deficit of $486 Mn. With respect to goods exports, milk powder, butter, and cheese increased $787 Mn (or 45%) to $2.6 Bn, while infant formula is included in preparations of milk, cereals, flour, and starch, that increased $42 Mn (or 25%) to $208 Mn.

With respect to China, the total exports rose $377 Mn (or 27%) and the largest increases were milk powder, butter, and cheese (up $322 Mn), and logs, wood, and wood articles (up $38 Mn). Talking about the USA, the total exports rose $244 Mn (or 49%).

Exhibit 1: Merchandise Trade Values ($ Bn), Exports and Imports, January Months, 2021–2025

Data Source: This work is based on/includes Stats NZ’s data which are licensed by Stats NZ for reuse under the Creative Commons Attribution 4.0 International Licence; Chart Created by Kalkine Group

Higher Home Consents in January 2025

As per Stats NZ, there were 2,203 new homes consented in January 2025, reflecting an increase of 11% as compared with January 2024. Out of the 2,203 new homes consented, there were 1,077 stand-alone houses consented, reflecting a rise of 20% as compared with January 2024, and 1,126 multi-unit homes consented, up 3.1%. Notably, the multi-unit homes consist of townhouses, apartments, retirement village units, and flats. The seasonally adjusted number of new homes consented in January 2025 witnessed an increase of 2.6% as compared to December 2024. This follows a seasonally adjusted fall of 5.6% in December 2024.

In the year ended January 2025, there were 33,812 new homes consented, reflecting a decline of 7.2% compared with the year ended January 2024.

Exhibit 2: Actual Number of New Homes Consented, Monthly, January 2022–January 2025

Data Source: This work is based on/includes Stats NZ’s data which are licensed by Stats NZ for reuse under the Creative Commons Attribution 4.0 International Licence; Chart Created by Kalkine Group

Key Risks and Challenges:

As per the recent FEU released by The Treasury, the signs of slower US growth have been impacting financial markets. The real consumer spending declined 0.5% in January, much lower than expected, along with softer housing market indicators. Also, there were signs of consumer caution in surveys from the Conference Board and the University of Michigan, which demonstrated concerns related to inflation, tariffs and jobs. Overall, the broader industrials sector is exposed to the risks related to supply chain, tariffs, labour shortages, etc.

Exhibit 3: Key Risks in Industrials Sector:

Source: Analysis by Kalkine Group

Outlook:

As per the recent FEU, the employment is also projected to recover over 2025. While employment levels remain down as compared to the prior year, the improvement in ANZBO business confidence has been supporting the continued lift in employment intentions. RBNZ stated that the Committee discussed recent domestic economic developments. The domestic economic activity is below trend, reflecting the falling activity in interest rate sensitive sectors including construction, manufacturing, retail trade as well as business investment.

In contrast, the activity in the primary sector has witnessed an increase. NZ’s export prices have held up, amidst the subdued global growth. The global supply conditions in beef and dairy markets have aided the export prices. This, together with the lower NZD exchange rate, are expected to increase the export sector incomes in NZ. Notably, RBNZ stated that economic activity is expected to recover over 2025, as reduced interest rates and stronger earnings for certain exporting industries help the demand. Also, the household consumption is assumed to gradually increase considering the lower interest rates.

Apart from the sector-specific factors, an analysis on 2 NZX-listed companies is provided. This report covers their insights, outlook, performance and potential as expected to be delivered in the near to medium term.

1) Steel & Tube Holdings Limited (Recommendation: Buy, Potential Upside: Low Double-Digit) (M-Cap: NZD 132.8 Mn, Annual Dividend Yield (TTM)¹: 10.54%)

Business Description:

Steel & Tube Holdings Limited (NZX: STU) is one of New Zealand's leading providers of steel solutions, allowing access to the widest range of steel products in the market, through its nationwide network of distribution centres.

Outlook:

While the market is expected to remain challenged for the upcoming few months, the cycle seems to have bottomed out, and STU is witnessing higher customer enquiries and tenders as business confidence starts to improve. The company is well-positioned to deliver material earnings growth as activity returns, and it is expecting significant pipeline of work as well as structural tailwinds ahead.

Technical Overview:

STU Daily Technical Chart, Data Source: REFINITIV

Technical Commentary

Fundamental Valuation

P/E Based Valuation

Stock Recommendation

Considering the aforementioned factors, a ‘Buy’ rating is given on the stock at the closing market price of NZD 0.79 per share, down by 1.25% as on 13 March 2025

2) Accordant Group Limited (Recommendation: Speculative Buy, Potential Upside: Low Double-Digit) (M-Cap: NZD 12.7 million)

Business Description:

Accordant Group Limited (NZX: AGL) is a New Zealand-based recruitment company engaged in the supply of temporary staff, contractor resources, and recruitment of permanent staff.

Outlook:

AGL’s local presence, national reach as well as the breadth of service spanning traditional to highly customised solutions places AGL well. Notably, Absolute IT remains appropriately sized for the current reduced demand for tech talent, while retaining enough capacity to deliver on the pent-up demand anticipated to materialise. Notably, the Madison Recruitment witnessed right-sizing activity throughout the market amid job-hunting inertia as well as business sector focus towards retaining talent.

Technical Overview:

AGL Daily Technical Chart, Data Source: REFINITIV

Technical Commentary

While undergoing a downtrend, AGL’s stock prices penetrated a significant support established by its previous trough, indicating a negative bias. Moreover, the momentum oscillator RSI (14-period) is trading below its midpoint, providing further support to the previous observation. Prices are trading below both 21-day and 50-day SMAs, which might function as dynamic resistance levels for the stock; in contrast, the stock’s nearest round level may act as a sentimental support level. A significant support level for the stock is positioned at NZD 0.350, while critical resistance level is located at NZD 0.400.

Stock Recommendation

The stock price as on the close of 12^th March 2025 was NZD 0.375 per share, the stock did not trade on 13^th March 2025.

Considering the aforementioned factors, a ‘Speculative Buy’ rating is given on the stock at the closing market price of NZD 0.375 per share as on 12^th March 2025.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4:  Annual Dividend Yield is on a Trailing Twelve Month (TTM¹) basis and are subject to change based on factors such as company performance, stock price changes, etc.

Note 5: Kalkine reports are prepared based on the stock prices captured either from REFINITIV or Trading View. Typically, REFINITIV or Trading View may reflect stock prices with a delay which could be a lag of 25-30 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.