An institutional investor sold $187m worth of Z Energy shares overnight. Photo / Dean Purcell.
Continuous Disclosure is a market news column, including analysis and opinion. Edited by Duncan Bridgeman, Tamsyn Parker and Jamie Gray.
In today's edition:
• Z Energy block trade
• A2 Milk swings index
• Tale of two banks
• Oil and gas out in the cold
Brokers have sold a 7.7 per cent stake in Z Energy in a placement of 30.8m shares priced at $6.08 a share.
The $187 million block trade passed through last night at a 4.6 per cent discount.
The sale by an institutional investor – thought to be Lazard Asset Management – followed Z Energy's full-year result yesterday when it announced a 12 per cent increase in dividends.
The company reported a 13 per cent decline in annual earnings due to the extended outage at Marsden Point refinery and as record prices at the pump trimmed petrol volumes.
A source told Continuous Disclosure the placement, handled by Credit Suisse, made some sense given positive stock price reaction to higher dividend despite a mixed quality profit result.
The transport fuels company said yesterday it continued to strip out costs since integrating Caltex into its network.
"The market liked Z because of the clarity about the dividend," said Stuart Williams, head of equities at Nikko Asset Management. "They didn't get that right going back to the half-year, but they've done a good job of explaining it which was welcomed by the market."
Z Energy shares advanced 2.6 per cent yesterday to $6.37 on a bigger-than-usual volume of 2.7 million shares.
A2 Milk mood swings index
Analysts hoping for an upgrade to guidance from A2 Milk this week were left disappointed after the company said revenue growth in its second half would be in line with its first half.
That saw the share price of A2 take a dip on Wednesday despite it giving an update showing revenue for the nine months to March 31 had grown 42 per cent to $938 million.
The stock has had a strong run in the past month with its share price rising 17.19 per cent in April, second only to PushPay's rise of 17.76 per cent.
A2 makes up nearly 12 per cent of the NZX50 index and one market player said nearly all of the index's strong growth in the past month could be attributed to A2.
PushPay and Gentrack have also helped in the good run but as much smaller stocks they have less of an impact on the index.
But the concern comes when the reverse begins to happen and investors got a little taste on Wednesday with A2's fall pulling the market down.
Still, analysts remain fairly upbeat on the stock despite its strong run.
Adrian Allbon and Luke Mills at Craigs Investment Partners retained their buy recommendation on A2 after the update to the market.
The pair said it was easy to get skeptical on A2 as the company's share price powered through analyst's target prices but they continued to have high conviction in the stock.
Allbon and Mills said A2 Milks' regulatory issues were now fading and the company was doing a good job in executing its business plans.
In China, it is heading towards a 7.5 per cent market share with 10 per cent in sight while recent data from Christchurch port showed it was scaling up well.
While in America it was reaching the point of making money after heavy investment.
Even without an upgrade the analysts estimated earnings per share compound annual growth rate of around 17 per cent over the next four years.
Cooling activity
Companies are increasingly blaming the economy for softer results.
The New Zealand arm of ANZ bank noted on Monday that its 4 per cent drop in half-year profits was due to "changes in the economy".
Chief executive David Hisco pointed to a levelling off in the housing market, low interest rates and stiff competition as being behind its muted revenue growth.
Yet, rival bank BNZ posted a 12 per cent lift in half-year profits, pointing to strong growth in home and business lending book.
Meanwhile SkyCity reinforced its concerns about the economy in an update at the Macquarie annual conference.
"As previously indicated, domestic and international economic environment becoming more challenging including increased cost pressure," the company said.
Shane Solly, fund manager at Harbour Asset Management, said ANZ, Sky City, Scentre Group - the owner of Westfield malls - and Z Energy had all noted slowing activity in the NZ economy.
"While this is not a surprise given the NZ economy is cooling from a strong rate of growth, it is interesting companies are specifically calling it out as a reason for slightly softer profit results given the slowdown is at an early stage."
Unemployment remains at near record lows and GDP growth is still relatively strong. Latest figures show GDP grew 2.8 per cent in 2018.
But Solly said the commentary may serve as a warning for investors.
"This may warrant some caution around the earnings of companies that need strong cyclical activity to drive profitability."
Oil and gas out in the cold
An oil exploration sector head will ''listen politely'' to discussions around the transition to a lower carbon future after being left off the official speakers' roster at an upcoming talkfest in Taranaki.
Chief executive of Petroleum Exporting and Production NZ, Cameron Madgwick, says he'll be all ears to speakers including filmmaker James Cameron and his wife Suzy and Midnight Oil frontman and environmentalist Peter Garrett at the Just Transition Summit late next week.
While it is understood an oil and gas company boss was invited to speak — but declined — Madgwick said he was surprised and disappointed he didn't get the call.
"It's disappointing because we absolutely support the transition to lower emissions. We would have liked the chance to talk about how natural gas can help by replacing coal and the use of carbon capture and storage too.
"We think that these are some of the issues the conference should be covering in helping to chart the pathway to a lower emissions future,'' says Madgwick, whose organisation was blindsided by the coalition's call last year to end offshore oil exploration, with no new onshore permits outside Taranaki.
He's seen plenty of direct action at previous industry events his organisation has hosted, but won't be taking a leaf out of the protesters' playbook.
"We will be attending the summit and plan to be a part of the conversation. We'll be listening politely."
National's energy and resources spokesman Jonathan Young says the Government ignored industry leaders and their own officials to ban new offshore oil and gas exploration last year.
"They rushed through legislation while refusing to come to Taranaki to hear from people whose livelihoods will be dramatically affected by the ban."
But Energy and Resources Minister Megan Woods said she was "really happy" with the line-up of speakers at the conference.
"We've got a great range of speakers from all over the world, including experts on the energy transition."
This conference would be a great opportunity to hear about how New Zealand can move towards its low-carbon future while ensuring it kept good jobs with good wages in regions which have previously relied on carbon-intensive industries, she said.
"We're holding this summit in Taranaki because the region has already started work on developing a transition roadmap and will be in a good position to share their progress and insights with the country."
"Sell in May and go away"
So goes the quaint old adage.
The phrase is thought to originate from an old English saying, "sell in May and go away, and come on back on St Leger's Day".
It comes from the custom of aristocrats, merchants and bankers who would leave the city of London and escape to the country during the hot summer months.
St Leger's Day refers to the St Leger Stakes, a thoroughbred horse race held in mid-September and the last leg of the British Triple Crown.
It may well have been a factor in years gone by, but not so today.
"It's a nice saying, but I think it's irrelevant," Salt Funds managing director Matt Goodson says.
"What really matters now is whether companies can deliver on current expectations in a market which, by almost all historical measures, is very expensive.
"The market reaction, if you miss your numbers, is savage, while if you make or exceed your numbers then, for a period, there can be no multiple high enough."
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The council has also been served with judicial review proceedings.