Flying high: Virgin Australia's ASX listing did not disappoint. Photo / Supplied
The New Zealand sharemarket has performed poorly over the first half of this year.
The S&P/NZX50 Gross index, which includes dividends, has fallen almost 5% over the period while most other major markets have gained ground.
There were however some strong performers over the half, which ends on Monday.
Insurance company Tower returned 43% over the period, followed by infant formula company a2 Milk (35%) and the Fonterra Shareholders Fund (32%).
On the other side of the ledger, retirement village company Ryman Healthcare dropped by 50%, followed by retail group KMD Brands, (39%) and casino operator SkyCity (37%).
“It’s a pretty disappointing performance, but it’s not the end of the world,” Craigs Investment Partners investment director Mark Lister said.
“New Zealand continues to be a disappointment, relative to other markets, and you could say the same for house prices as well,” he said.
“That’s probably a reflection of the economy.
“We’ve been sitting back waiting for the recovery to take hold, and interest rates have come down.
“We’re out of recession, but are still far from firing on all cylinders.
“We’ve got an economy that’s sort of spluttering along, and some sectors are really feeling the brunt of that.”
In that camp were the construction, housing, retail and hospitality sectors.
“Agriculture is really one of the only areas where there’s strength,” Lister said.
Aside from the weak economy, there were some company-specific issues.
“With Ryman, I think it’s probably both. You’ve still got a company that is not delivering, and it has disappointed investors.
“The management team and the board still have not got things right in terms of the execution,” he said.
Weakness in SkyCity was a reflection of the economic environment and weaker tourism numbers, while KMD Brands reflected depressed discretionary spending.
On the flipside, Tower continued to ride a wave on the back of improved earnings.
Last month, the insurer reported a six-month underlying net profit of $61.7 million, up 68.5% on the previous first half profit.
With Fonterra, Lister said: “The ship has been righted in recent years under the current management team and they have got themselves back on track.”
Lister said the standout was used car dealer Turners Automotive (up 27%).
Virgin Australia’s successful listing has been a boon for Aussie’s capital markets.
Fisher Funds senior portfolio manager – Australian equities Robbie Urquhart says it’s been a great week for Aussie initial public offers (IPOs).
Gold and copper explorer Greatland Resources, with a A$4.8 billion ($5.2b) market cap, rose 9% in the first couple of days, post-listing.
Virgin Australia (A$2.6b), which returned to the sharemarket after a stint in administration rose 15% in its first couple of days of trading.
Urquhart said the re-float proved that even capital-intensive airlines can deliver shareholders good returns when they’re priced attractively.
Lastly, Australian small-cap clean energy company Infragreen traded up 12% from its listing price on day one of trading.
“Capital-hungry growth companies, fund managers, investment bankers, and private equity operators seeking exits for portfolios of companies all would have breathed a sigh of relief,” Urquhart said.
“After a dearth of new issues for investors to consider, the Australian IPO calendar is wide open for well-structured and priced IPOs.
“Hopefully, this week’s trading spurs more businesses to consider entering the public domain as listed companies.”
Australia has a large domestic funds management community, underpinned by the industry super funds.
With compulsory superannuation contributions continuing to rise in Australia, structurally these institutions continue to be net buyers of equities, he says.
“If it plays its cards right, hopefully the ASX could use this window of opportunity provided by these successful IPOs to market the Australian bourse as an attractive proposition for international domiciled businesses looking to list.
“That would make for a nice change from the recent trend we’ve seen of companies de-listing from the ASX as they are opportunistically acquired by strategic or private equity buyers,” Urquhart said.
Fletcher Building (FBU) expects $573m to $781m of “significant items” to hit its bottom line this financial year.
Before significant items it expects earnings before interest and tax (ebit) of $386.4m to $391.4m for the year to June 30, the company said at this week’s investor day.
Forsyth Barr said the update was broadly as expected.
Key themes included simplification, greater decentralisation, a reduced overhead burden (cost and centralised control), improved financial discipline (capex, returns, and debt targets), and eventual portfolio rationalisation.
Dividends will not resume until net debt halves.
“While no asset sales were announced, the Residential and Construction divisions do not align with Fletcher Building’s medium-term manufacturing and distribution focus and were conspicuously absent from the update,” Forsyth Barr said.
Disappointments included: (1) another round of large significant items; (2) limited confidence in a near-term NZ recovery; and (3) little detail on self-help at the business unit level — “We suspect these are still being finalised,” the broker said.
NZ Windfarms shareholders this week approved the takeover of the company by Meridian Energy.
The scheme of arrangement remains subject to final orders being granted by the High Court.
If approved, this transaction will reward NZ Windfarms’ shareholders for the value created to date, while also enabling more efficient financing of the Te Rere Hau repowering project, Meridian said.
The project involves the design, construction and operation of up to 39 new turbines with generation capacity of up to 170MW.
It will be New Zealand’s first wind farm repowering project and has the potential to generate seven times the annual renewable energy production of the current turbines.
Repowering Te Rere Hau Wind Farm will see NZ Wind Farms’ current two-bladed fleet replaced with larger, more efficient three-bladed turbines.
Shaw and Partners, which is 100% owned by Swiss Bank EFG, has bought 75% of ISG, the company behind Devon Funds Management, for $67.5m.
ISG is a leading Auckland-based investment firm with more than $7b in assets under management across its wealth management, funds management, and investment platform divisions.
“This marks a key milestone for Shaw and Partners as it formally enters the New Zealand market and strengthens its presence across the region,” the company said.
“The acquisition supports the firm’s broader transtasman growth ambitions and creates opportunities to expand services and enhance client offerings.”
The ISG business will report to Shaw and Partners’ Australian CEO, Earl Evans. The acquisition brings the firm’s total assets under advice close to A$45b.
ISG operates two main offices in Auckland’s CBD and Takapuna, along with several regional offices across both the North and South Islands.
“This partnership provides us with the scale, resources, and capital to accelerate our strategic objectives,” Paul Glass, executive chairman of ISG, said.
As part of the deal, ISG’s international wealth business, JMI Wealth, will rebrand to Shaw and Partners Financial Services.
Devon Funds will continue operating under its existing name, retaining its independence and local leadership and ISG’s investment platform will remain a core part of the group’s offering.
Tower +43%
A2 Milk +35%
Fonterra Shareholders Fund +32%
Sanford +31.8%
Turners Automotive +27%
Channel Infrastructure +22%
Scales +20.4%
Sky Network TV +20%
Argosy Property +14%
Manawa +12%
Ryman Healthcare -50%
KMD Brands -39%
Sky City -37%
Serko -21%
Heartland -19%
Infratil -17%
Vulcan Steel -16.7%
Spark -15%
Summerset -14.7%
AIA -11.6%
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.