A challenging NZ reporting season has spoiled the party for the sharemarket. Photo / File
A challenging NZ reporting season has spoiled the party for the sharemarket. Photo / File
A raft of mostly disappointing company earnings reports has taken the shine off what had been a stronger sharemarket at the start of the month.
As the reporting season nears its end, the reality of many companies finding the going a bit tougher saw the sharemarket experience its biggest one-dayfall since June last year.
The cyclical stocks – notably Fletcher Building, Vulcan Steel and Steel and Tube - have pointed to tougher times ahead in their half-year reports and have seen their share prices come off accordingly.
The market has also been struggling under the weight of Ryman Healthcare’s $902m capital raise.
“As always, there are winners and losers,” Craig’s Investment Partner’s Mark Lister says.
“It’s still unclear as to what it’s going to mean in terms of the costs, the inflation impacts, the negative effect that it will have on businesses and the economy,” Lister said.
“We don’t know what the quantum of hard things is going to be in the aftermath, but we know it’s bad, so that drags things down as well,” he said.
“And the fact that the market has had a strong run in the lead-up to the reporting season raised the bar higher than it was before, that means that there has been less room for disappointment.”
Lister said the standout updates for the season had come from THL, EBOS, Sky City and Mercury.
Spark and Skellerup had disappointed, and their share prices had suffered as a result.
“We have had a pretty good bounce across the market since October through to early this month,” Lister said.
“That’s why I’m not surprised to see some of the share price reaction in some of these stocks.”
A matter of faith
The NZ Shareholders Association has joined the fray in opposing the scheme of arrangement for the takeover of church donation software company Pushpay Pegasus Bidco - a vehicle for Australia-based BGH Capital and Sixth Street Advisers from the United States.
NZSA highlighted that the offer for Pushpay shares of $1.34 per share is towards the bottom of the range contained within the independent report prepared by Grant Samuel of between $1.33-$1.53 per share.
ACC, ANZ Investments, Fisher Funds and Nikko Asset Management – together representing about 12 per cent of the stock – have said they will vote against the deal at the scheme meeting next Friday.
The Pushpay scheme requires 75 per cent approval of the shareholders voting on the scheme that are not associates of the bidder.
In other words, 75 per cent approval of the 80 per cent or so of shareholders who are not Pegasus and associates.
A growing number of shareholders are set to vote against a proposed Pushpay takeover deal. Photo / NZME
Salt Funds managing director Matt Goodson said the success or failure of the shareholder revolt was up in the air.
“It depends on your belief in the future,” he said.
“The last couple of years have been relatively disappointing.
“They have involved Pushpay heavily investing for growth with little evidence that it will be achieved, as yet.
“If you believe that they can deliver that growth then the holdouts probably have a point,” he said.
“If not, then it could be quite an attractive price, so it really comes down to a view about the future.”
Ryman breathing space
Overall the market has been under pressure due to the size of the Ryman issue.
Goodson said the capital raise should give Ryman three years’ breathing space.
“The great risk for the sector has been when they can’t re-sell units in the villages because the market may be too weak for people to sell their own houses in order to move in.”
“The model is very much built on the assumption that you can resell a vacant unit quite quickly.”
A Summerset bond
Fresh on the heels of Ryman’s capital raise, its rival retirement village company Summerset is looking to raise up to $125m in the debt market.
Summerset plans to issue a new 6-year senior bond and expects to release full details of the bond offer next week.
The initial interest rate has not been announced, but market expectations are for a rate of around 5.8 to 6.0 per cent.
Summerset has reserved the right to raise an extra $50m in the case of oversubscriptions.
A2 Milk caution
Brokers Forsyth Barr said a2 Milk Company’s first result continued to highlight its success and discipline in “controlling the controllables”.
Brand health metrics and, importantly, market share (particularly for China Label show ongoing improvement on the back of recent investment, it said.”
“Assuming revenue growth in line with the management scenario, the key question for investors is, can ATM expand margins to the low 20s to justify the current share price?
“While possible, we remain cautious given the ongoing mix shift to China label (lower margin channel), slower than expected English label recovery and increasingly competitive environment,” Forsyth Barr said.
Ryland steps down
Milford Asset Management chief executive Mark Ryland is to step down from the top job at the end of March 2024. Ryland joined Milford initially as a consultant in May 2014 before taking on a permanent role as manager of risk compliance and systems.
He moved up to head of products and operations in February 2017 and became chief executive in February 2019. Milford chairman Gavin Walker said despite the challenges presented by the Covid pandemic during a large period of his time at the helm Ryland had led the business through a period of strong growth with funds under management rising from $6 billion in 2019 to over $17b.
“Mark’s focus on ensuring consistent delivery of outstanding performance and service to our clients, together with the further development of our strong digital capability and culture, will be a legacy of which he can be very proud.
“Walker said Ryland would step aside next year and embark on his next challenge after spending time with family and travelling.”
