Stock Takes: What's behind Tower's rise?

Tower shareholders seem to believe the company's fortune's may be picking up. Photo / Stuart Munro.

UNUSUAL RISE?

Tower says a number of significant positive announcements may be behind its share price rise in the last two weeks.

But Stock Takes can't help wondering if speculation around the sale of Vero's stake has been a factor.

Shares in Tower rose by 16 per cent between Tuesday February 27 and Wednesday March 7 from 67c to 78c.

Yesterday Vero revealed it had sold its 19.9 per cent Tower stake to US private equity firm Bain Capital for 80c a piece in a deal worth $53.9 million.

Tower's share price had been relatively flat since July last year. Since the beginning of last week it has only had one price sensitive announcement - its settlement with reinsurer Peak Re.

The agreement resulted in Tower getting $22m out of the $43.75m it had been seeking and will see a $15.6 mllion hit on its after tax profit this year.

A Tower spokesman said the settlement was positive because it had removed a significant risk from its balance sheet.

He also pointed to an update on its performance at its annual general meeting on March 1 that signalled strong growth above its expectations and the likely resumption of its dividend after being on hold since 2016.

"It has been pleasing to see the hard work our team are putting in to transform our business is delivering improving results, ultimately leading to increasing shareholder value."

Shareholders will likely be pleased to see the issue of Vero's stake resolved as well.

Vero was left holding the 19.9 per cent after the Commerce Commission turned down its application to take over Tower last year.

But it opens up more questions about what the new owner will do. Is this the start of a another takeover? Or just an investor taking a punt? Time will tell.

Tower shares closed on XX yesterday.

SHRINKING MARKET?

Law firm Chapman Tripp is expecting the New Zealand share market to be a hunting ground for buyers again last year which would could potentially see the number of listings on our bourse shrink again.

Last year there were eight "take private" transactions although three didn't get off the ground.

Partner Joshua Pringle believes that kind of activity is likely to continue this year.

"Private markets seem to have the upper hand over public markets at the moment," he told Stock Takes this week.

Private players which include private equity companies and trade buyers are finding it easy to access cash to make acquisitions while public listings are seen as less attractive because of their disclosure obligations and the costs associated with having investor roadshows.

The number of main board issuers fell for second year in a row in 2017 with just one new listing from Oceania Healthcare.

But perhaps we should take some comfort in that New Zealand is not alone in facing a shrinking public market.

Pringle said there had been a general decline in listings globally since the 1970s.

NEW HOPE

But there could be some hope on the horizon with more listings this year. The Vodafone listing has already been widely talked about and now there is speculation that financial services firm AMP may spin out its New Zealand arm onto the NZX.

AMP, which is already listed on the ASX, told investors at its recent results announcement that it was well progressed with the portfolio review of its Australian wealth protection, New Zealand and mature businesses and all alternatives were being considered.

Chief executive Craig Meller said it was in discussions with a number of interested parties.

AMP's New Zealand business could be an attractive float position given its large and growing KiwiSaver business.

Its financials show the company has had a stable period in recent years with operating earnings at A$125m for the year to December 31, down only slightly on 2016's A$126m.

But it also faces challenges on the advice front with digital advice exemptions now open for applications.

While AMP's review its yet to be completed Meller said it would provide an update either at or before its annual meeting which is due to be held on May 10,

GOOD START

Logistics company QEX which last month listed on the NXT - the small growth company board of the NZX - seems to have made a good start.

It updated the market this week increasing its expected sales turnover for the year to March 31, from $26m to at least $30m.

The company said the increase was due to a record trading period over the February Chinese New Year and stronger than expected sales out of Australia.

QEX has risen strongly since its 25c issue price and closed on XX yesterday.