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Home / Business / Markets / Shares

Stock Takes: Market rumours point to Compac IPO

NZ Herald
11 Feb, 2016 08:30 PM5 mins to read

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Compac's customers include Zespri and Mr Apple (above) in NZ and Sunkist and Halos in the US. Photo / Glenn Taylor

Compac's customers include Zespri and Mr Apple (above) in NZ and Sunkist and Halos in the US. Photo / Glenn Taylor

Opinion by

One of the rising stars of New Zealand's technology manufacturing sector could be gearing up to go public if market speculation is on the money.

Compac, whose fruit sorting equipment is used in more than 40 countries, announced a new executive team in December, which may have fuelled chatter about the Onehunga-based firm potentially eyeing an initial public offering this year.

Stock Takes got in touch with chief executive Mike Riley, who said all the things companies tend to say when an IPO is a possibility but they aren't in a position to make an official announcement.

Riley, who joined Compac in 2014, stopped short of confirming a listing is on the cards but said he'd been working with the board to review the firm's capital structure, although no timetable had been set.

Mike Riley. Photo / George Novak
Mike Riley. Photo / George Novak
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"Everything is possible in a business like this and we are looking at all the options," he said.

Riley, former CEO of New Zealand-founded technology firm Endace, said Compac was profitable and growing rapidly.

The company was founded in 1984 by Hamish Kennedy, who remains the majority owner with his wife Kim. The business has its roots in a university project in which Kennedy identified a gap in the market for a fruit sorting machine that combined mechanical, electrical and optical technologies.

Compac's customers include Zespri and Mr Apple in New Zealand and US citrus brands Sunkist and Halos.

The company has more than 500 staff and posted revenue of just under $100 million last year, according to the TIN100 report on New Zealand technology firms.

Craigs cools outlook on shares

Craigs Investment Partners has dialled back its recommendation on clients' exposure to equities for the first time in almost six years as sharemarkets around the world continue to be hit by waves of volatility.

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This week investors have been freaking out about everything from technology stocks to the credit risk of banks.

Craigs put an "overweight" rating on equities - basically meaning investors should hold more shares than they normally would - in March 2010, but this month downgraded that recommendation to neutral.

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Investment firm JBWere New Zealand made the same asset allocation shift in December.

"Looking ahead, global growth is subdued and likely to stay that way as the world gradually recovers from high indebtedness, changing demographics and other issues," Craigs said in a note to clients. "There is little sign of inflation anywhere, suggesting that high investment returns are less likely, particularly following a very strong six years."

Mark Lister, head of private wealth research at Craigs, said the neutral recommendation could stay in place for some time.

"We're certainly not in the RBS 'sell everything' camp," he said, referring to the British bank's prediction last month of a "cataclysmic year" in markets. "But we're just saying the easy gains are behind us now ... we've had a stellar run so it just gets a bit harder from here."

Bucking the trend

Oil stocks have been taking a battering globally thanks to the fact that, at around US$30 a barrel, black gold isn't living up to its name.

But NZ Oil & Gas is expected to deliver an improved half-year result when it reports on February 23.

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Its interim financials in the same period of last year were hit by a multimillion-dollar write-down on the valuation of the firm's Tui oil field, off the Taranaki coast.

The company reported a $10.5 million loss for the six months to December 31, 2014.

"NZO has had a tough year as it deals with low oil prices," Forsyth Barr said in a note.

However, the sharebroker said that with the Kupe gas contract being a major driver of income - as well as earnings from its investment in Australia's Cue Energy being included - a better interim result was expected this year.

Forsyth Barr has an "outperform" recommendation on NZ Oil & Gas shares, which closed up 0.5c yesterday at 42c.

"With NZO once again building up imputation credits, it is possible that it pays a dividend," Forsyth Barr said.

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Income boost

Investors could be in for some good dividend news on a number of fronts this earnings season.

Forsyth Barr is forecasting dividend growth of 14 per cent, helped by the resumption of dividend payments by Refining NZ.

The Marsden Pt operator, whose shares closed down 6c yesterday at $3.50, has been benefiting from the oil price slump, which bolsters margins through reducing import costs.

Forsyth Barr said a figure higher than its 15c-a-share final dividend forecast was possible. Even with the refining company excluded, Forsyth Barr is still expecting "very respectable" dividend growth of 10.5 per cent.

Chorus, which reports its half-year result on February 19, is expected to unveil its first dividend since 2013. Forsyth Barr expects a full-year dividend from the telecoms network operator of 13c a share.

Chorus finished 2015 with a bang after the Commerce Commission increased the price it can charge the likes of Spark and Vodafone for access to its copper line network.

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The regulator's decision was expected to boost Chorus' annualised earnings before interest, tax, depreciation and amortisation by $120 million.

Spark confirmed last month it would not be appealing against the Commerce Commission's ruling.

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