Analysts pick Covid-19 losers on NZX

Most New Zealand businesses will be affected by the current increased alert levels, Forsyth Barr says, but the extent of the impact varies.

Tuesday, August 18th 2020, 6:00AM

It has released a new report which shows the NZX-listed companies expected to be hardest hit by the Covid-19 pandemic overall include Auckland Airport, Air New Zealand and Tourism Holdings.

But for this latest alert level change, those most affected included SkyCity, which has had to close its Auckland casino and restrict activity in Hamilton and Queenstown, building sector companies that would have productivity problems because of additional social distancing measures, retailers who could not open in the normal way in Auckland and Abano Healthcare, which largely had to close its dental practices in alert level three.

SkyCity closed on Monday at $2.42, down from nearly $2.60 at the end of July. Abano was at $2.56, down from $2.78 in late July.

Others that would not have a direct impact but would be affected to some extent by the resulting knock to GDP included Freightways, Z Energy, Kiwi Property and the aged care sector.

“While travel and tourism related companies will be severely impacted by heightened restrictions their businesses are already suffering significantly from border closures, therefore, the impact of the alert level changes is less than those listed … in our opinion.”

Forsyth Barr said the latest lockdown highlighted some of the economic risks to New Zealand's zero tolerance strategy.

“We believe the Covid-19 lockdown of Auckland could chase some of the animal spirits out of the market. The very strong, relative and absolute, performance of the NZ market over the last few months are, we believe, in no small part due to the sense of relief and optimism driven by the eradication of community spread of Covid-19 and better than expected data post re-opening. This could present an opportunity for some investors as a good excuse to sell.”

They noted some analysts were expecting double-digit declines in growth across the board in the upcoming reporting season, the lowest level of forecast since 2009.

“However, our analysts expect the risk to near term forecast earnings is net positive, with a positive bias signalled for ABA, AIA (slightly positive), AIR (slightly positive), FBU, FSF, NZX, SKL, SKT, SUM and THL (slightly positive). Whereas just two companies have near term forecast earnings signalled with a negative bias, namely FRE (slightly negative) and NZK. For companies significantly impacted by Covid-19, balance sheets will be as, if not more, important than earnings results. Many have undertaken equity raises, some may still need to recapitalise.”

Tags: Covid-19 equities Forsyth Barr NZX