Gentrack executive chairman John Clifford withdrew full year guidance for the company this week amid the uncertainty over coronavirus. Photo / file
Gentrack executive chairman John Clifford withdrew full year guidance for the company this week amid the uncertainty over coronavirus. Photo / file
VIRUS HIT
Utilities software development firm Gentrack has been the worst performer so far this year of New Zealand's top 50 stocks but it already had issues before coronavirus began to take hold.
The company's share price had fallen more than 66 per cent as of 1pm Wednesday since January3.
But it has declined even more than that since July last year when the stock peaked at $6.50 a piece. Its Thursday opening share price was just $1.14.
On Tuesday, Gentrack withdrew its full-year earnings guidance as a result of the rapidly increasing uncertainty surrounding the duration and scale of the Covid-19 outbreak.
"We have made this decision due to the potential impact to ongoing projects and our sales pipeline," its executive chairman John Clifford noted in a statement to the exchange.
Mark Lister, head of private wealth research at Craigs Investment Partners, says those stocks most affected by the coronavirus have been Tourism Holdings, Vista, Sky TV, Kathmandu, Oceania, Sky City, Auckland Airport, Summerset and Ryman.
Air New Zealand is also part of that group but has been in a trading halt since last week so investors haven't been able to react to the latest news.
Lister reckons Air New Zealand's share price would have completely collapsed if it had been trading.
As of Thursday afternoon, the Government, which is a 52 per cent owner, was still in talks with Air New Zealand about financial support but the airline is due to come off a trading halt on Friday morning (March 20).
The uncertainty of how long the virus will continue to spread and have a major impact means at least eight NZX-listed companies have now withdrawn earnings guidance.
NO MOVIES
It's no surprise that any company connected to the tourism and travel industry has suffered given the urgent shut-down of travel while Sky TV has been hit by numerous sporting cancellations and retirement villages are essentially in lock-down.
But movie software company Vista is perhaps more of a surprise.
Tama Willis, portfolio manager at Devon Funds Management, sees the virus situation as a blip for Vista.
"Vista is a high quality business with software that is essential to the operation of cinemas so once we get through the Covid-19 crisis we expect a strong recovery in the global box office and Vista's share price."
Willis says Vista's decision to suspend guidance (previously 13-18 per cent revenue growth and flat underlying Ebitda [earnings before interest, tax, depreciation and amortisation] margin) reflects the impact of Covid-19 on the global cinema industry.
"Revenues and earnings are likely to be negatively impacted given mass closures of cinemas in key markets. These closures will mean stretched cinema clients will likely put on hold cinema expansions while Hollywood studios delaying the release of new films is also likely to impact the business short-term."
But Willis says more than 60 per cent of Vista's revenue is recurring in nature and the company is in a net cash position which is a good starting position.
"The group will need to focus on aggressively managing the cost base to ensure limited debt build during 2020."
Sharemarket
HEALTHY GAINS
Only three stocks were in positive territory for the year to date as of Wednesday 1pm - Fisher & Paykel Healthcare, Chorus and A2 Milk.
F&P has made a healthy gain this year rising more than 26 per cent on the back of several earnings upgrades.
On Tuesday it lifted its forecast net profit after tax to $275m-280m from $260m-270m.
Fisher & Paykel Healthcare is the only NZX50 company to post healthy gains this year. Photo / file
Craigs Investment Partners analyst Stephen Ridgewell has upgraded his 2021 financial year estimates and now puts the company's revenue at $1.6 billion and net profit at $405m.
However, he also expects a fall in earnings in FY2022 as demand boosted by the virus dissipates.
Ridgewell has maintained his hold rating on the stock but increased the target price by 2 per cent to $25.50 which is already below Thursday's opening price of $25.65.
The challenge for Fisher & Paykel now is not one of demand but one of production capacity, he noted.
