Some influential institutional investors have topped up their holdings in Reynolds Consumer Products, the Nasdaq-listed company majority owned by Kiwi billionaire Graeme Hart.
Stock exchange data shows Vanguard Group, BlackRock and Allspring Global Investments were among those adding to their holdings in the second quarter.
Meanwhile, Barclays analyst Lauren Lieberman raised her target price on the stock from US$27 to US$28 after Reynolds released its second-quarter earnings data last week. UBS maintained a hold rating on the stock with a US$32 price target.
The company’s shares closed on Monday at US$28.59.
Hart’s Rank Group floated Reynolds in January 2020 after raising about US$1.2 billion in an initial public offer. His Auckland-based company Packaging Finance Limited now owns about 74 per cent of the company, a stake worth about US$4.3b ($6.8b) based on the latest share price.
Reynolds last week reported earnings per share of 32c for the second quarter ended June 30 versus 25c in the previous corresponding period, surpassing analysts’ consensus estimates of 28c per share.
Net revenue was US$940m, up 3 per cent, and adjusted earnings before interest, tax, depreciation and amortisation of US$150m was up 27 per cent on the same quarter a year ago.
“We are forecasting strong earnings growth for the remainder of the year and have resumed paying down debt enabled by improved earnings, strong working capital management and continued capital investment discipline,” said president and chief executive Lance Mitchell.
The company produces and sells cooking products, waste and storage products and tableware under brands such as Reynolds and Hefty.
During the quarter, Reynolds made a voluntary US$100m debt repayment and at the half-year had outstanding borrowings of US$2.095b.
The board declared a quarterly dividend of 23USc a share, or US$96m in total. Hart’s share of that came to US$71m.
Hart has given no signal of selling down his stake further, but the institutional interest adds some intrigue.
The sale of a Auckland Council 7 per cent stake in Auckland Airport is expected to happen soon after the company’s result comes out next Thursday.
Auckland councillors voted in favour of reducing its stake in the airport from 18.1 per cent to 11.1 per cent on June 9, setting up a sale that was expected to raise $865 million.
Shares were trading at $8.75 on June 9 but have since slipped to $8.20. At that price, the parcel could be worth about $845m - $20m less than originally expected.
One market player said there were no restrictions around the council selling the shares ahead of the result, but the updated financials would give potential buyers more certainty about where the business is trading.
Yesterday’s announcement from the airport company on its aeronautical price setting disclosure will also have cleared the air a little for those who had regulatory concerns.
Stock Takes understands there has been lots of sounding-out of institutional investors and there is plenty of interest in the shares. The question now is whether the shares will be sold in a block trade to one or two large investors, or spread across a number of investors.
Retail investors who are keen to buy into the sale would do well to get in touch with their broker now if they want to get in on the action.
Auckland Airport is expected to report a robust return to profitability. Forsyth Barr analysts Andy Bowley and Paul Koraua noted that management tended to be conservative in their earnings guidance, which suggested the potential for an upside surprise.
The net profit after tax is forecast to be in the range of $125m to $145m, with analysts’ consensus picking $142m. But it is the 2024 and 2025 financial years where its profits are expected to come roaring back, with Forbarr picking net profit of $299.5m in FY24 followed by $313.5m in FY25.
Retail income is expected to pick up strongly, with the airport shifting to a single duty-free operator model, while new aeronautical prices are expected to drive strong earnings growth over the medium term.
There’s also good news in store for shareholders, with this result the first since the first half of 2020 that the airport’s lenders have allowed it to pay a dividend. Its payout ratio is 70-90 per cent, with Forbarr predicting the company will make a payout in the midpoint of this range at 7.6cps.
Some big players are excited about the possibilities for offshore wind power generation in New Zealand, but brokers Forsyth Barr are sceptical.
In a report, the broker noted that four big players had started early-stage work on the potential for wind power off the Taranaki and Waikato coasts.
The Government has also started work on developing a regulatory regime to cover offshore wind, should it become a reality.
“We are sceptical that offshore wind will be successful in New Zealand, given development costs are twice that of onshore wind; the scale of the projects make them too large for the existing market,” the broker said.
“It is a sector we will monitor, but we have not added it to the electricity generation pipeline.”
Offshore wind was first mooted in New Zealand in 2014 following a University of Canterbury research paper that analysed wind speed data on the Maui A platform off the Taranaki coast.
A more detailed 2018 study concluded offshore Taranaki could accommodate 7 gigawatts of fixed foundation turbines, generating 28.5 terawatt hours a year.
New Zealand currently has about 1.2GW of onshore wind installed or under construction, generating 4 gigawatt hours per annum.
Last month BlueFloat Energy, the Spanish company sizing up its prospects in New Zealand, said wind power generation off the Taranaki and Waikato coasts could become a reality within a decade.
The wind energy developer, which is owned by US green energy investor 547 Energy, is one of a handful of companies looking into wind power possibilities off the coast - a region better known for oil and gas production.
The New Zealand Super Fund has teamed up with Denmark’s Copenhagen Infrastructure Partners, and the pair are looking to bring large-scale offshore wind power generation to South Taranaki.
Australia’s Oceanex Energy is also in early-stage development of up to three projects off the New Zealand coast. And Belgium’s Parkwind has offshore wind ambitions for Australia and New Zealand.
Then there is Wind Quarry Zealandia — a privately held wind development company based in New Zealand affiliated with US-based Wind Quarry LLC.
Forsyth Barr said any offshore wind development is many years away and all projects are in a pre-feasibility phase, with the most advanced gathering wind data.
Offshore wind project developers talk about its potential for making liquid hydrogen, which requires huge amounts of power.
“Given the scale required for offshore wind, any hydrogen made using offshore wind would need to be exported — the potential local hydrogen market is not big enough,” Forsyth Bar said.
“Export hydrogen has already been ruled out as an option by Fortescue Future Industries and is borderline at best when using existing generation as Southern Green Hydrogen intends,” it said.
“In short, offshore wind is too expensive to make hydrogen.”
Australia’s Fortescue Future was founded by mining magnate Andrew Forrest.
Late last year Meridian, with the support of Ngāi Tahu, selected Australia’s Woodside Energy as the preferred partner to move forward to the development stage of the proposed Southern Green Hydrogen project in New Zealand.
A final investment decision will follow the development stage.
- Additional reporting, Duncan Bridgeman and Jamie Gray
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