KiwiSaver provider Kiwi Wealth is up for sale. Photo / Getty Images
OPINION:
The sale process for KiwiSaver provider Kiwi Wealth is said to be progressing with three contenders in the running.
Australian media reported this week that Fisher Funds shareholder TA Associates, private equity firm PEP and Kiwi investment bank Jarden were lining up bids.
But the contenders have raised eyebrows, with one market player telling Stock Takes that whoever will pay the biggest price seems to be the guiding force behind the decision - rather than what might be best for members.
Kiwi Wealth is part of Kiwi Group Holdings, which is owned by NZ Post, ACC and the NZ Super Fund. It is the fifth largest KiwiSaver provider with around $6.8 billion in funds under management.
What makes it more attractive is that it was one of six fund managers to be appointed a default KiwiSaver provider by the Government last year, meaning it gets automatic allocations of new members from those who do not choose their own fund.
If TA Associates won the bid to buy Kiwi Wealth and add it to Fisher Funds, it would essentially double Fisher Funds' KiwiSaver business and make it the third largest player behind ANZ and ASB.
But that would also make a mockery of the Government's default provider appointment process. Fisher Funds lost its default provider status and allowing it to essentially buy it back could set a dangerous precedent.
On the other hand, neither Jarden nor PEP is seen as a good fit. There are concerns Jarden would see KiwiSaver funds as another place to sell any initial public offers it brokers through its investment banking arm, despite protests about Chinese walls stopping this from happening.
Meanwhile, Pacific Equity Partners is typically known for investing in turnaround and growth companies. It would be looking to invest and spruce up the business before a future re-sale and profit.
There are concerns that all three potential buyers might look to hike the fees members pay - exactly the opposite of what the Government has been trying to push for across the industry.
So, exactly how this would best serve Kiwi Wealth's members is unclear, depending on the outcome.
Based on analysts' calculations of MediaWorks having an equity value of around $225 million, its chief executive Cam Wallace could be in for a payout of about $3.825m if Sky TV buys the company.
Last week the Herald revealed Wallace had inked a potentially lucrative deal tied to his ability to find new owners for the radio and outdoor advertising business.
Accounts filed with the Companies Office show Wallace entered into a long-term incentive scheme in October 2021 entitling him to a share of any sale proceeds and the ability to buy shares in the company at a discounted rate.
The accounts record the value of these options - entitling Wallace to 1.5 per cent of any sale price excess above $175m and the ability to buy 1.5 per cent of shares in the company for $300,000 - as presently being worth $2.2m.
Wallace has been with MediaWorks only since the end of 2020, after 19 years working for Air New Zealand.
The hard part may be convincing Sky's shareholders. Sky TV's shares have fallen sharply since it confirmed media speculation on Tuesday that it was in exclusive negotiations with MediaWorks' shareholders.
Sky has said if the deal goes ahead it will require the seal of approval from shareholders.
With house prices continuing to fall, shareholders will be hoping Fletcher Building's June 22 investor day reveals something about when it expects building to peak.
Residential building consents are running at record highs of 50,000 a year, but analysts at Jarden expect that to fall to under 30,000 by early 2023, with lower house prices set to trim demand.
Grant Swanepoel and Luan Nguyen predict building product margins to remain elevated through Fletcher's 2023 financial year before falling sharply into 2025.
The analysts last week cut Fletcher's target price from $7.46 to $6.14 but retain an overweight position on the company, with its shares currently trading well below the target price.
They are forecasting Fletcher to mark a new high in the 2023 full year before slowing to a more healthy year in FY24, while FY25 was likely to be a trough year.
"We expect work in progress (WIP) to remain above capacity through to end FY24, this seeing peak margins in FY23, falling to normal margins FY24. As capacity takes time to reduce, we expect building activity to fall well below capacity in FY25, dragging margins toward a trough."
The analysts forecast that Fletcher Building's earnings before interest and tax (Ebit) will reach $875m in FY23 with a dividend of 44c per share implying an 8.1 per cent yield. That is up on a previous forecast of $834m.
But by FY25 they predict Ebit will fall to $592m.
Castle Point Funds partner Stephen Bennie says that like other building companies around the world, Fletcher has suffered from a souring in sentiment.
"This is probably why the share price has been down in 2022 despite consensus earnings upgrades."
He says the situation will be resolved either by the share price recovering or consensus forecasts falling.
The company is currently estimated to be trading at nine times its forecast earnings which is cheap when compared to the New Zealand market as a whole, which is trading at 20 times.
"There can be little doubt that the fizzy top is coming off house prices here, but there remains a very healthy pipeline of activity due to capacity constraints creating a backlog of work."
ASB has raised US$600m in subordinated debt in the first offshore raising by a New Zealand bank since new capital rules were implemented by the Reserve Bank.
The debt was sold to investors in Asia and the US and had a yield of 5.284 per cent, which would have been viewed as highly attractive in the current market.
Lead managers on the debt were Barclays Capital, Citigroup Global Markets, Commonwealth Bank of Australia and HSBC.
The higher capital requirements officially come into force from July after being delayed two years by Covid-19.
They are expected to result in the big four banks collectively having to hold an extra $15b to $20b by 2029.
Consultation on the changes in 2017 was highly controversial, with banks warning that they might pull out of New Zealand or reduce lending to certain sectors if the changes came into place.
There were also warnings that it would push up home and business loan interest rates.
Increased regulation was cited as one of the reasons why Westpac Banking Corporation looked at selling its New Zealand arm, but in the end it kept the bank.
ASB's move follows ANZ NZ, which raised $600m on the NZX in September last year. It set the five-year interest rate at 2.999 per cent.
ANZ NZ had first-mover advantage and the luck of raising the money before interest rates began shooting up steeply.
Forsyth Barr has given the May reporting season the thumbs-up, with growth slightly ahead of expectations.
Those reporting included the major property and aged care companies as well as NZ's largest listed company, Fisher & Paykel Healthcare.
The analysts said hits outweighed misses.
"Profit growth has finished ahead of our expectations, however, the property sector did provide a drag on overall median earnings."
Revenue growth across those reporting was 5.9 per cent, lower than expectations of 7.5 per cent growth.
But ebitda growth was better than expected at 5.1 per cent versus zero.
"Excluding the property sector, growth was high double digit and above our initial expectations."
But its analysts have added a median 6 per cent increase to interest expenses over the next three years and cut ebitda margins by an average of 2 per cent.
They pointed to a range of comments about inflation and cost pressures as well as staff absenteeism due to Covid.
Based on a three-day post-result price reaction, they said the most notable positive reactions had been for AFT Pharmaceuticals, Argosy Property, Infratil, Investore Property and Ryman Healthcare.
Those that disappointed the market included Asset Plus, Arvida, Pacific Edge, Pushpay, Rakon and Serko.
Australian trading platform Stake says its New Zealand users have changed tack with their investments this year.
The platform has about 60,000 NZ users and offers access to US shares and exchange-traded funds (ETFs) for zero trading fees.
Stake's data shows the five most-traded stocks for NZ users last year were Tesla, Apple, NIO, GameStop and Alibaba Group.
Other popular names include Amazon, Nvidia Corporation, Microsoft and Virgin Galactic Holdings.
But in the past three month it has seen more of a swing to ETFs, with its top traded instruments including a semiconductor ETF and Nasdaq 100 ETF. Apple and Tesla remain in the top five.
"We're also seeing increased behaviour in inverse ETFs, which offer investors upside exposure as the index moves down. That shows that investors are honing their ETF strategy to make gains in bearish markets," a company spokesman said.
NZ GDP falls 1% in September quarter; analysts expected 0.4% decline.