If it ain't broke don't fix it - the benefits of staying put

A2 Milk chief executive Geoffrey Babidge addressing the company's annual meeting in Auckland. Photo / Dean Purcell

Dual-listed a2 Milk won brownie points at this week's annual meeting by confirming that it intended to retain its New Zealand listing.

A shareholder asked if the alternative milk company was looking at following in the footsteps of Xero, which this month announced plans to ditch the NZX and make Australia its primary listing.

Chairman David Hearn earned a round of applause when he replied: "I can categorically confirm at this moment that we have no plans to, nor have we considered the possibility of delisting from the New Zealand Stock Exchange."

A2 did not disappoint when it said its net profit for the four months to October was $52.4 million — up 137.7 per cent on the same period last year.

That came after a $90.6m net profit for the June year, which in turn was up 198 per cent on the previous year.

For analysts, the update meant it was back to the drawing board.

CLSA Australia, which early in the month shifted its recommendation from "buy" to "underperform", restored its call to "buy" after the meeting.

Seven of the nine brokers who cover the stock have lifted their earnings targets and two have increased their recommendations.

Brokers' earnings upgrades have put a2 Milk's share price back on its record breaking run, the stock yesterday hitting its highest ever point of $9.00, up 322 per cent since the start of the year. The stock later eased from its peak, closing at $8.43.

Shane Solly, portfolio manager and analyst at Harbour Asset Management, says the NZX remains a useful exchange on which to be listed.

Other companies in the "growth" camp — Fisher & Paykel Healthcare and Pushpay — have no plans to relinquish their NZX listings.

"The investors in these companies, both local and offshore, are aware they will reinvest a large proportion of earnings to support future growth and this has not constrained their performance," Solly says.

"Globally it is not unusual for a company to be listed, and have its shares traded on a number of different stock exchanges," he says.

"This allows a company to benefit from investors who can only invest in their local benchmark indices, while maintaining a strong 'home' support."

A2 Milk is at the crossroads in terms of how it manages its capital from here on in.
Does it reward shareholders with a special dividend, or does it reinvest for more growth? Investors will find out the answer to these questions in February, when its next update is due.

Tug of war
The question of who lists where is not an issue unique to New Zealand.

On the international stage, a trans-Atlantic tug of war is emerging over who gets to list Saudi Arabia's state-owned oil company, Aramco, on their exchange.

To say the stakes are high would be an understatement; the initial public offer of 5 per cent of the company, at US$100 billion ($145.5b), would value Aramco at US$2 trillion.

New York and London are vying for the oil behemoth to list on their respective exchanges, but Hong Kong and Tokyo are also understood to be in the running.

US President Donald Trump, in a tweet (of course), said: "Would very much appreciate Saudi Arabia doing their IPO of Aramco with the New York Stock Exchange. Important to the United States!"

Britain's PM Theresa May, along with London Stock Exchange chairman Xavier Rolet, met Saudi finance officials earlier this year to advance their case.

Moves are also afoot to have Aramco list solely on Saudi Arabia's own exchange, the Tadawul. If all goes to plan, Aramco will be listed — somewhere — in 2018.

But that is turning out to be a big 'if'.

Saudi Arabia's crown prince Mohammed bin Salman has launched a big crackdown on corruption and analysts say the move could cast a shadow over what is likely to be the biggest capital raising the world has ever seen.