Kingfish sees local sharemarket positives

Carmel Fisher. Photo / Herald on Sunday

For the first time in a long time the June quarter saw share market behaviour and economic behaviour not joined at the hip, says small cap investor Kingfish.

The NZX-listed company, which invests in other NZX-listed companies, said in its June quarter report a number of achievements over the last quarter kicked off an encouraging start to the new financial year.

Kingfish's Net Asset Value (NAV) gained 12.8 per cent for the quarter, the strongest growth since early 2007, indicating that confidence was creeping back into the equity markets, said chairman Rob Challinor.

That compared favourably against the broader market increase of 7.9 per cent (against the NZX50 gross index) and mid cap sector (NZSEMC) increase of 7.2 per cent.

"The June quarter was pleasing in that for the first time in a long while, share market behaviour and economic behaviour were not joined at the hip," said managing director Carmel Fisher.

Share markets around the world maintained a reasonably buoyant tone, even as poor economic data was being released.

"Individual shares performed well on their own merits rather than as a reflection of the macro environment."

The June quarter saw a re-emergence of capital raisings in New Zealand with over $1.5 billion of new equity, a seven-fold increase in the same quarter last year.

A number of stocks in the Kingfish portfolio had strong June quarter share price performances.

Companies such as Wakefield Health, Ryman Healthcare, Tower, Freightways and NZX all reported solid increases in profitability, whilst Mainfreight held profitability year-on-year, she said.

Retail companies Pumpkin Patch and Michael Hill International were the strongest performers.

Kingfish's main investment (17 per cent) is Ryman Healthcare, which noted during the quarter that its shareholder returns over the last decade amount to a 21 per cent per annum compound return.

In the last quarter the Kingfish portfolio and the Kingfish share price have outperformed the market, and the Kingfish discount to NAV has narrowed slightly, said Fisher.

"We hope that this bodes well for performance as market confidence continues to grow."

The profit result season in the weeks ahead would be less about earnings - they will clearly still be bad and expectations had been lowered significantly - but more about valuation, she said.

Kingfish is also implementing a new dividend policy. The first distribution would be made in mid-September, followed by distributions in December, March and June.

Each distribution would be calculated at 2 per cent of the average preceding three months' net asset value of the company, per share.

- NZPA