Stock Takes: Air NZ flies higher

Air New Zealand chief executive Christopher Luxon has plenty to smile about the airline's soaring share price. Photo/Jason Oxenham.

Flying high
Air New Zealand's strong share performance this month builds on gains in May when the airline's stock price rise outstripped healthy increases throughout the airline industry.

Global airline share prices made strong gains in May, rising 7.8 per cent in the month, to be more than 20 per cent higher over the past year.

During May, Air New Zealand's share price rose from $2.61 to $2.87, in increase of 9.9 per cent. Airline shares have now outperformed the global equity index in year-on-year terms, for the first time in about 18 months, according to figures released by the International Air Transport Association.

Airline shares increased in all three regions during May, but the gain was driven by a strong surge in the European index which rose 14.3 per cent.

North American shares also performed strongly, gaining more than 8 per cent in May, to be almost 40 per cent higher over the past year, IATA says.

Air NZ shares closed at $3.185 today.

Low turnover

The turnover for the NZX has been quite low in recent weeks with a dearth of company news and a quiet patch between reporting seasons.

Grant Williamson, a director at Hamilton Hindin Greene, says the market has been consolidating since early May and has traded in a very tight range around 7400 points.

"It looks like the market is in no man's land, waiting for something to move it."

While long-term investors were sticking with their share holdings there were very little flows coming in from new investors, he said.

There hasn't been any shortage of international political news what with the UK elections and ructions in the US over the alleged involvement of Russia in the Trump political campaign.

But markets have shrugged off all of that.

Williamson said New Zealand's September general election could see some uncertainty hit the local bourse but that might depend on what the polls say.

The S&P/NZX 50 Index hit a record high in September last year of 7571 points but has dipped since then.

Williamson said it was hard to make a call on whether the market would break above that point this year or go the other way and have a correction.

Not enough deterrent

New Zealand's first insider trading conviction is unlikely to prove much of a deterrent according to one academic.

Former Eroad employee Jeffrey Honey was sentenced to six months home detention this week.

But AUT associate professor Aaron Gilbert has said the punishment did not send a very strong signal to other insiders.

"Six months home detention doesn't sound a lot."

Gilbert said the regulator had lucked out in that the first case was small and didn't involve a lot of money unlike overseas insider trading cases which have involved millions of dollars.

Honey sent a photograph of market data and an accompanying text to a former colleague which said: "US sales not doing too well. Time to sell up. Confidential obviously."

The former colleague, who is facing separate charges and cannot be named, responded: "You're a bad boy, but thanks."

The man subsequently sold 15,000 shares in the company, valued at some $51,000.

Gilbert said the amount of insider trading was one of the hardest things to try to measure.

The UK regulator was one of the few which tries to measure this through a market cleanliness report, he said.

"Do I think it is rampant? I'm not sure."

But he said perception was more important than reality - if people perceive there is a problem with insider trading it will put them off investing.

Gilbert said the regulator and the NZX had an incentive to promote as clean a market as possible.

Eroad shares have bounced up a little on the news of the sentence but remain down close to 30 per cent in the last year. They closed at $1.70 today.

On Board
Chapman Tripp's first corporate governance report has revealed some interesting details in its analysis this week.

Among those is the average length of service for board directors.

The average across the top 75 listed companies was found to be 5.8 years and the highest board average was 18.9 years for Hallenstein Glasson.

The retailer is also one of the longest listed companies, having been on the exchange and its predecessors for nearly 70 years.

The individual with the longest board service is Mainfreight's Bruce Plested who has been on the board for 29 years. The average board tenure for Mainfreight in 2016 was 14.4 years.

Since then it has made two new appointments bringing Kate Parsons and Sue Tindal on board from January.

Chapman Tripp's Roger Wallis said the long tenures for both companies were linked to the founders still being on the boards.

The report notes that long tenures can have both positive and negative ramifications for companies.

"Extended length of service may compromise independence, especially if a director becomes close to management.

"On the other hand, listed entities and shareholders can be well served with a mixed tenure board including longer serving directors with a deep understanding of the business and newer appointees who can bring fresh ideas and perspectives."