Money Editor for NZ Herald

Stock Takes: Big listings, small listings - Meridian and GeoOp

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One analyst has lowered his profit forecast for Port of Tauranga over concerns the stock may be vulnerable to shocks such as a downturn in global trade. Photo / APN
One analyst has lowered his profit forecast for Port of Tauranga over concerns the stock may be vulnerable to shocks such as a downturn in global trade. Photo / APN

The two new listings to hit the sharemarket this week could not be further apart in their size or performance.

Mega float Meridian Energy made its debut on Tuesday after raising $1.88 billion in its initial public offer. Investors paid just $1 of the $1.50 share price in a first instalment with the remaining money due in 18 months time and were instantly rewarded on the first day of trading with an 8 per cent rise to $1.08.

Since then its instalment receipt has hovered between $1.08 and $1.10 and yesterday closed on $1.09.

In contrast sharemarket minnow GeoOP which raised just $10 million in a pre-IPO capital raising listed yesterday at $1 on the NZAX and had an opening price of $2.40 - a 240 per cent gain.

The two companies epitomise the listing trend this year with larger billon dollar-plus companies and small technology businesses making up the majority of those companies making the foray into the market.

Confusing much?

Selling off Meridian Energy in two instalments has been a key plank in the Government getting the deal away but in Stock Takes' view it has made it a tad harder for the average Joe to get their head around.

Last week investors were told the shares had been set at $1.50 apiece and this week the first trade was at $1.08. Punters could have been easily confused into thinking their new investment had taken a dive instead of a rise from the $1 initial instalment payment.

Instalment receipts are not well-used in New Zealand sharemarket floats and this could be a good reason why. It appears that even one professional investor has been caught out by just having the first instalment trading.

Bank of New York Mellon, which manages US$1.5 trillion in assets, declared in a statement to the exchange yesterday that it had bought 8.1 per cent of Meridian Energy.

But the substantial shareholder notice had to be clarified by Meridian who said that once the total number of shares were taken into account BNY Mellon only owned 3.98 per cent.

New owners

Initial disclosure notices for Meridian reveal the banks and brokers are some of the largest custodial shareholders.

Before trading began HSBC Nominees (New Zealand) was the largest instalment receipt holder with 9.68 per cent, followed by Custodial Services at 6 per cent. BNZ parent National Australia Bank was third at 4.86 per cent followed by the Accident Compensation Corporation at 3.11 per cent.

The New Zealand Superannuation Fund also took a chunk at 1.35 per cent - the 13th largest holder of the first instalment.

The top 20 investors hold nearly half of the first instalment receipts at 47.45 per cent although many will be held on behalf of smaller shareholders.

Fee increase

Mighty River Power will hold its first annual meeting on Thursday since becoming a listed company and already it's tackling the prickly subject of directors' fees.

Shareholders will be asked to vote on increasing the pool of money available to pay its directors.

The $85,000 boost won't increase the pay of directors but is designed to allow the board to grow from seven members to eight.

The company has a pool of $766,250 from which it pays $85,000 to each director, $150,000 to chair Joan Withers, $106,250 for the deputy chair and an additional allowance of $85,000 for board committee work.

It is proposing to increase the limit to $851,250.

The board is keen to find two new directors - one to replace Trevor Janes, who is stepping down next month, and a second person to help broaden its skills and experience. The company is also in the process of looking for a new chief executive.

Mighty River shares closed up 2c on $2.23 yesterday.

Shock wary

Morningstar analyst Nachi Moghe has lowered his profit forecast for Port of Tauranga amid concerns the stock may be vulnerable to shocks such as a slowdown in global trade or slower building in China.

The port company announced an 18 per cent increase in its dividend payment this year to 46c at its annual meeting last week and gave a trading update which showed flat net profits for the first quarter of its financial year.

Moghe said in a note that the firm had a strong competitive advantage but was arguably not priced for any disappointments.

"The stock appears modestly overpriced relative to our fair value of $13 per share and is arguably not priced for any disappointments, which could come from a slowdown in global trade and/or a dampening housing market in China, which has implications for log volumes, or nearly 30 per cent of total trade."

In light of the trading update Moghe reduced his forecast by $2 million to $80 million and has a hold recommendation on the stock. Shares in Port of Tauranga closed on $13.80 yesterday.

NZX pick-up

Craigs Investment Partners has upgraded its recommendation on stock exchange operator the NZX from sell to hold.

The NZX reported third quarter revenue growth of 11.5 per cent this week but its shares have struggled to make ground this year despite a bumper crop of new listings. Its share price has risen just 1c over the past year or 0.81 per cent and yesterday closed on $1.26.

But Craigs analysts Stephen Ridgewell and Bryant Cheong said in a note that following recent underperformances, NZX's share price was trading on a reasonable forward price-to-earnings ratio of 23 times, in line with its price target of $1.24.

"We continue to view NZX as a high quality, well managed business. Accordingly, we upgrade to hold [from sell]."

Craigs increased its price target to $1.24 from $1.20 and raised its 2013 net profit forecast by 4.7 per cent to $14 million, reflecting higher revenue and lower tax.

Minnow grows

Fish-oil refiner SeaDragon saw a healthy spike up in its share price this week after it reported at 113 per cent increase in sales.

The sharemarket minnow which back-door listed in 2012 has leapt in value from $29 million to $38 million with its shares moving from 2c to 2.6c apiece.

That makes it bigger than sharemarket newbie Snakk Media which listed earlier this year and is valued at about $26 million.

SeaDragon sold 10 million of its 25 million shares in Snakk in August and will put the money towards a new Nelson refinery. SeaDragon inherited the shares as part of its reverse takeover of Claridge Capital.

The company is said to be planning a share consolidation in the future to lift its share price out of the penny-dreadful corner and may consider raising more capital.

- NZ Herald

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Money Editor for NZ Herald

Tamsyn Parker is the NZ Herald's Money Editor. A business journalist for ten years, she has worked in the UK and NZ for the New Zealand Herald, the National Business Review and a specialist publication on investment products for financial advisors. She is passionate about helping readers learn more about to make their money work for them.

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