NZME Limited

NZM Details

NZM Implemented Various Cost Saving Measures: NZME Limited (NZX: NZM) is a New Zealand based integrated media company, with a portfolio of market-leading radio, newspaper, digital and magazine titles, with a customer base of 3.3 million kiwis.

For the full year ended 31^st December 2019, the company reported operating EBITDA of $50.6 million, down 7% on the prior year. Cost savings and increased efficiencies across the business delivered a reduction in operating expenses of 4% compared to the pcp. Operating net profit after tax stood at $19.7 million and operating EPS of 10.0 cents, an increase of 4% compared to the previous corresponding period. Net Debt reduced by $23.6 million to $74.7 million, and leverage ratio reduced to 1.5 times operating EBITDA.

Financial Summary (Source: Company Reports)

NZME Exclusivity Period to Acquire Stuff: Nine has terminated further engagement with the company in relation to any acquisition of Stuff. The company’s view is that it is still in a binding exclusive negotiation period with Nine and does not accept that exclusivity has been validly terminated.

Cost Saving Initiatives: The company is operating effectively with most staff operating from home. However, several of the company’s people are needed to operate from the company’s premises to make sure its core business remains to operate effectively. The company has implemented several programs to reduce costs and capital expenditure throughout the business. All operating expenses have been evaluated with a stance to reducing total costs and cash outflows.

Reduced Outlook for FY20: In the release dated April 14, 2020, the company stated that there are expectations that advertising revenues for April 2020 would decline by 50% than April 2019. NZME would continue to monitor performance of revenue as well as potential cost saving initiatives in the future.

Technical Overview:

Weekly Chart –

Source: Refinitiv (Thomson Reuters)

Note: Purple colour lines are Bollinger Bands, yellow lines are retracement lines and orange colour dotted line is Parabolic SAR.

The stock came under selling pressure from its high of $0.57 which continued till it made the low of $0.178. From the low, the stock rebounded beyond 23.6% retracement level of $0.27 in today’s trading session of the on-going week but finally it gave close at $0.25.

Technical indicators such as MACD with bearish cross-over but curve at the end pointing up, and RSI with 39 reading and curve pointing up at the end, suggest gaining of bullish momentum for the stock.

Going forward, the stock may have resistance around $0.3012 as provided by 20 period SMA while on price retreating, it could have support around $0.182.

Stock Recommendation: The company’s EBITDA margin has increased from 13.5% in FY18 to 17.7% in FY19. As mentioned, NZM has taken cost saving initiatives so that the impact of COVID-19 can be minimized. The company has earlier stated that it is impossible to predict with any accuracy the impact of COVID-19 on its financial performance of the full year. We advise the market players to wait for some further growth drivers which could help the performance of the stock.

Considering the above facts, we have a watch stance on the stock at the current market price of NZ$0.250 per share, down by 5.66% on May 13, 2020.

NZM Daily Technical Chart (Source: Refinitiv (Thomson Reuters)

Smiths City Group Limited

SCY Details

Owners of New Zealand’s Oldest and Largest Retail Chain: Smiths City Group (NZX: SCY) was founded in Christchurch in 1918 and has a proud tradition as one of New Zealand’s oldest and largest retail chains. The company also operates the Smiths City Finance, and the Smiths City Commercial businesses. The company has a market capitalisation of ~$7.376 million on 13^th May 2020.

SCY Reports Growth in Cash Reserves: For the six months ended 31^st October 2019, the company’s revenue fell to $95.1 million from $114.2 million following store closures and strong prior year trading and the same store sales fell by 14.6%. The company reported net losses before tax of $3.8 million, down from a net profit before tax (NPBT) of $0.6 million. After excluding the one-off costs associated with the rationalization of the Auckland store footprint, net losses were $2.3 million. The net cash reserves increased to $9.2 million from $6.4 million at the end of April 2019, led by improvements in operating cashflows and reductions in working capital.

Consolidated Financial Statement (Source: Company Reports)

SCY Starts Restructuring Process: The company has started consultation with its employees and negotiations with its landlords to restructure the company. The Covid-19 pandemic and the temporary closure of store network since late March had a significant impact on the business. The company’s online segment has continued to trade; however, it was not enough to make up the shortfall in sales from the closed stores.

Technical Overview:

Weekly Chart –

Source: Refinitiv (Thomson Reuters)

Note: Purple colour lines are Bollinger Bands, yellow lines are retracement lines and orange colour dotted line is Parabolic SAR.

The stock fell from its recent high of $0.23 and made the low of $0.99. From the low, the stock rebounded till 38.2% retracement level of $0.15 and in today’s trading session of the on-going week, it has given close at $0.14.

Technical indicators such as MACD with bearish cross-over and flattish curve at the end, and RSI with 32 reading and flattish curve at the end, indicate at flattish momentum for the stock.

Going forward, the stock may have resistance at $0.17 while support could be around $0.010.

Stock Recommendation: The company’s operations were severely affected due to lockdown because of which it has taken initiatives to do a restructuring process. From the analysis the company has undertaken, a restructuring is clearly necessary in order to secure investment and have a sustainable, post-pandemic retail business. Therefore, we advise the market players to wait for some growth catalysts to emerge after the restructuring ends which could help the stock’s performance.

Thus, we to have a watch stance on the stock at the current price of  NZ$0.140 per share on May 13, 2020.

SCY Daily Technical Chart (Source: Refinitiv (Thomson Reuters)

Disclaimer

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