Market close: Former market darling a2 Milk plunges to another low

A2 Milk, which sat at $19.92 on August 20 last year, has fallen to $7.46. Photo / File

The New Zealand sharemarket stayed stubbornly flat but storm clouds surround marketer a2 Milk as it fell a further 5 per cent and more to a new low.

The S&P/NZX 50 Index slipped 30.11 points or 0.24 per cent to 12,620.52, after trading in a narrow range of 12,592.77 to 12,693.15. There were 80 gainers and 58 decliners over the whole market on solid volume of 46.58 million share transactions worth $194.92 million.

Struggling a2 Milk, once a market darling, plunged 44c or 5.57 per cent to $7.46 on trade worth $13m, and looks in danger of falling out of the prestigious MSCI New Zealand Index because of its current price.

Hit with management changes, and a depressed daigou sales channel because of Covid-19, a2 Milk went on a slippery slide from $19.92 on August 20 last year. It seemingly steadied in late December at $12.20 but then continued to fall well below $8.

The MSCI index is being rebalanced in May and data is currently being collected over the last 10 trading days of April. Stocks are added or removed by analysts to ensure that the index still acts as an effective equity benchmark for the market it represents.

"If a2 Milk falls out of the index – we don't know yet – then passive fund managers who track the index will have to sell," said Dan Stratful, investment adviser with Forsyth Barr. "There may be more selling in a2 as investors like to get ahead of the curve. It's a bit of a worry for a2 Milk."

The MSCI index has seven New Zealand constituents – Fisher and Paykel Healthcare, Auckland International Airport, Spark, Meridian, a2 Milk, Ryman Healthcare and Mercury. They represent 85 per cent of the NZX's total market capitalisation, and Fisher and Paykel has the highest index weighting at 30.59 per cent, with a2 Milk fifth at 10.59 per cent.

There were further challenges for a2 Milk. Its Australian competitor Nuchev, which produces goat milk, has just reported a slight decrease in its third-quarter revenue, with a fall in orders through the daigou channel.

Stratful said this creates further uncertainty, and the Nuchev quarterly update rubs off on a2 Milk.

Fisher and Paykel Healthcare balanced a2 Milk's latest fall by rising 68c or 1.95 per cent to $35.48 on trade worth $21.4m to keep the index steady. Fisher and Paykel, which supplies respiratory devices, is no doubt benefiting from Covid outbreaks in places like India, and it is getting closer to its all-time high of $37.68 achieved on August 28 last year.

Quiet performer Skellerup Holdings increased 8c or 1.83 per cent to $4.44; Freightways was up 7c to $11.10; Mainfreight gained $1.13 to $69.60; Seeka rose 22c or 4.11 per cent to a new two-year high $5.57; and Briscoe Group picked up 8c to $5.60.

The leading energy stocks are finding it hard to settle following the exchange traded funds selling and the impact of the low hydro storage levels. Meridian fell 20c or 3.51 per cent to $5.49, but Mercury rose 16c or 2.35 per cent to $6.975 and Genesis, increased 7c or 2.07 per cent to $3.45.

Re-opening stocks SkyCity Entertainment rose 8c or 2.35 per cent to $3.48; Millennium & Copthorne Hotels New Zealand increased 6c or 2.47 per cent to $2.49; but Auckland International Airport was down 12c to $7.36.

Other gainers were NZX up 5c or 2.44 per cent to $2.10; Summerset Group Holdings gaining 11c to $12.11; Livestock Improvement Corporation, conducting a roadshow, rising 5c or 4.76 per cent to $1.10; Comvita collecting 8c or 2.41 per cent to $3.40; and Argosy Property up 2.5c or 1.67 per cent to $1.52.

Fletcher Building was down 10c to $7.20; Ebos Group fell 66c or 2.23 per cent to $28.94; Chorus lost 7c to $6.69; Napier Port declined 8c or 2.23 per cent to $3.51; Serko slipped 19c or 2.75 per cent to $6.71; Plexure Group shed 4c or 4.65 per cent to 82; and Investore Property decreased 3c to $2.06.

Asset Plus reported that the revaluation of its $172m portfolio was neutral for the six months ending March, with gains from their Auckland Graham St and Stodard Rd properties offset by the Christchurch Eastgate shopping centre valuation loss. Asset Plus's share price slipped 0005c to 33c.

Insurer Tower announced global rating specialists, A.M. Best, has reaffirmed its financial strength at A-, and Tower's share price gained 1c to 88c.