Continuous Disclosure: How much capital will Air NZ need to raise?

How much capital does Air New Zealand need? Photo / file

CAPITAL NEEDED

Capital raisings have continued apace this week with Sky Television Network completing its $157m capital raising and honey products company Comvita looking to raise $50m.

But analysts are also pointing to the need for loss-making Air New Zealand to potentially raise capital to shore up its balance sheet given its ongoing cash burn.

Forsyth Barr's Andy Bowley said in a note this week that gearing for the airline was at the top end of management's 45 per cent to 55 per cent target band in June 2019 and this position will have been exacerbated by the Covid-19 demand impact.

"In light of the severe demand implications of Covid-19 we believe a capital raise is likely to provide liquidity and protect the balance sheet."

Fat Prophets analyst Greg Smith said he wouldn't be surprised to see a capital raise from the airline.

"I think it would be reasonably well supported, although that always comes down to the discount," Smith said.

So far Z Energy's $350m capital raise is the largest to take place on the New Zealand share market this year.

Smith said he would expect an Air NZ raise to be at least that or somewhat higher given the airline was burning through around $100m in cash a month at the moment.

"It would have to be a sizeable raise. It would probably trump what we have already seen," he predicted."

Bowley who has a underperform rating on the stock is forecasting an after tax loss of $115.9m in its 2020 financial year followed by an after tax loss of $91.7m with a return to profit in 2022.

He has a target price of $1 on the stock and risk rating of high.

Bans on physically attending church has helped boost digital donations. Photo / file

LOCKDOWN GODSEND

The lockdown has been tough for church-goers who have been unable to attend in person congregations but appears to have been a boon for digital church donation firm PushPay.

Shares in the NZX-listed firm hit a high of $7.42 on May 21 and it is now the best performing stock in the NZX 50 so far this year topping the performances of alternative milk supplier A2 Milk and Fisher & Paykel Healthcare.

The company's share price has more than exceeded at least one analyst's target price.

Jarden analysts Wassim Kisirwani and Wilson Wong upgraded Pushpay's rating to outperform earlier this month with a target price of $6.54 - up from $4.53 on the back of a strong result.

On May 6 Pushpay said it expected its rapid pace of growth to continue, forecasting earnings before interest, tax, depreciation, amortisation and foreign exchange movements of between US$48 million ($79m) and US$52m in the March 2021 year.

It reported ebitdaf of $25.1m with revenue up 33 per cent.

One of the risks it faces with lockdowns easing is whether digital giving will continue to grow.

The analysts noted key risks were a decline in the US giving market, fee compression and slowing new customer revenue growth.

The Jarden analysts estimated a 7 per cent decline in total giving in the US market and a partial reversion to non-digital giving as churches re-open for physical attendance but said: "We believe the assumption of a reversion in digital giving rates is conservative,
providing scope for PPH [Pushpay Holdings] to exceed guidance and our revised forecasts."

For now its a stock which is continuing to give growth to its shareholders in a tough market.

The NZX 50 index is down less than 5 per cent since the start of the year. Photo / Supplied.

MARKET BOUNCE NOT EQUAL

While the NZX 50 index is now down less than 5 per cent since the start of this year it's only a small handful of stocks that are pulling it up.

A2 Milk and Fisher & Paykel make up such a large part of the index that their positive returns pull the index as a whole up.

But as Mark Lister, head of private wealth research at Craigs Investment Partners noted the other day the average share price movement has been down around 19.5 per cent.

Scraping down at the bottom of the performers are Sky TV, Kathmandu and Gentrack.

Outside of Pushpay, A2 and F&P positive returns have come from Chorus, Spark, the NZX, Goodman Property Trust and Vector.

SANFORD DIVES

Shares in New Zealand's biggest and oldest seafood company, Sanford, took a dive after the company reported a 17 per cent decline in first half earning.

The stock dropped by 44c or 6 per cent to $6.94 after reporting that its net profit came to $19m. Earnings before interest and tax came to $23.2m down 29 per cent.

Sanford has a diverse range of interests across fishing and aquaculture. In recent years, it has made a strategic shift into higher value products such as greenshell mussel powders and high end branded salmon.

The company's first half results were impacted in its fishing division by a shortfall in catch volumes for toothfish, caused in part by weather factors, it said.

Pricing for this species was also softer globally, following the impact of Covid-19.
Coronavirus impacts were also felt in other areas of the business, particularly toward the end of the reporting period.

Chief executive Volker Kuntzsch said that, while the overall interim result was below expectations, there was clear strength in salmon and greenshell mussels, demonstrating the benefits of Sanford's transition into a more diverse company.

He said food service channels have been severely impacted by Covid-19 but domestic retail sales have been holding up well.