New Talisman Gold's chairman John Upperton is stepping down. Photo / NZME
Shares in Ebos have fallen sharply from last month’s high and the stock has continued to weaken since reporting its annual result.
The shares peaked at $41.25 on August 21, and then started tanking before the release of its result on August 27, continuing on its way south soon after.
Ebos traded yesterday afternoon around $29.20 - down 29% from its peak - but now looks to be levelling out.
With its 4.2% weighting on the S&P/NZX50, what happens with Ebos can have an impact on the S&P/NZX50 index, although its ranking on the benchmark has slipped.
In its result, Ebos grew underlying 2025 earnings before interest, tax, depreciation and amortisation (ebitda) by 8%, with 18% sales growth in higher-margin medical technology.
However, its 2026 guidance implied just 5% organic ebitda growth because of higher costs and softness in discretionary pet products, Morningstar said in its report on the result.
Analysts have put the stock’s weakness down to post-result earnings downgrades.
The past few months have been eventful for dual-listed Ebos, which now has most of its business in Australia.
In June last year, the company lost a lucrative contract to supply the Chemist Warehouse in Australia.
In February, Ebos announced that long-serving John Cullity would retire as CEO and be replaced by Adam Hall, who has a background in mergers and acquisitions (M&A), effective from July 1.
The company undertook a A$200m ($217m) placement in April and A$50m retail offer to fund the acquisitions of SVS Veterinary Supplies and the remaining 10% stake in Transmedic, a medical equipment supplier.
In late May 28, Sybos Holdings - representing the Zuellig family interests - sold 27 million shares (13.2%) in Ebos at $35.50 a share in a block trade.
Sybos also entered a 90-day escrow period for its remaining 4.9%.
Shane Solly, portfolio manager at Harbour Asset Management, said some of Ebos’ weakness could be put down to the number of new shareholders added to the register after the Sybos sale and capital raise.
He said there may have been a few who were unused to the idea that Ebos has had its ups and downs over the past three decades.
“It’s a business that does grow through acquisition and has periods of going sideways,” Solly said.
“Unfortunately, this is a period of going sideways.”
He said the company’s communications going into the result were poor, and there were expectations that Australian pharmaceutical activity would have been better than proved to be the case.
“There was an element of new investors who were quite widely disappointed by a result that was not what they expected.”
Ebos in recent years had delivered consistent growth, but not this time.
“If you combine that disappointing earnings outcome with a change in management, it looks like the new management team has been given a bit of a hospital pass.
“I’m not saying anything negative about the previous management team. It’s just that’s a tougher run for this current team.”
Ebos has been adding businesses for decades, and made a good call getting into pet care about five years back.
“Over that time, it’s been a great wealth generator and the pieces are still there,” Solly said.
The stock had run hard, entered a correction, but was now back to trading at long run average valuation multiples.
“It’s had a reset of earnings and it’s had a reset in evaluation, so it’s a bit of a double negative.
“Earnings have come back to numbers that are potentially more reasonable - we will only find out in time.”
“Over the last 10 years, the price to earnings multiple average for Ebos has been 21 times for prospective earnings, and it is currently at 19.4 times.
“It means that the market still wants to back the business, but it doesn’t want to back it as much as it was - it had gotten stretched.”
The good news for Ebos is that September 22 will see the stock included in the influential S&P/ASX200 Index.
Assuming everything goes to plan with the sale of its consumer business to Lactalis, Fonterra looks set to receive $4.22 billion.
The co-op is targeting a tax-free capital return to shareholders of $2 per share - equating to $3.2b - following completion of the sale.
That still leaves Fonterra with $1b in the bank, so how will that be spent?
“How Fonterra allocates the remaining amount will be guided by our resource allocation framework, which allocates funds to debt, investment to support our strategy and distributions to shareholders and unit holders,” the co-op said in response to a question from the Herald.
Freightways (FRW) has been one of the most acquisitive companies on the NZX over the past 20 years, yet its acquisition strategy has only recently started to add meaningful value as it has pursued larger deals within adjacent growth sectors, Forsyth Barr says.
“Its willingness to take on more risk - and greater reward - a competency that investors respect (and increasingly desire), is now being valued by the market via a premium rating,“ the broker said in a note.
FRW trades at a 10% one-year forward price earnings premium to the NZX50 market median.
“We retain a neutral rating but recognise the attraction of value-add potential from future M&A.”
FRW has acquired around 50 companies over the past 20 years in Australia and New Zealand.
“The majority (about 40) have been within its Information Management (IM) division, where — with the benefit of hindsight — strategic questions can rightly be raised,“ Forsyth Barr said.
“Yet total capital allocation is heavily weighted to Express Package (EP), given its two largest deals in recent years: domestic temperature-controlled player Big Chill in 2020, and Australian oversized parcel player Allied Express in 2022.″
Its core M&A focus is now on larger deals in the Australian EP sector.
FRW has exhibited a very disciplined approach to M&A historically.
“Its pipeline of potential opportunities is long (we suspect it includes parts of TGE, Hunter Express, ACN Delivers, Kings, and Capital Transport), according to management, but deals are usually subject to a willing buyer and a willing seller.”
Potential M&A can also include scope for divestments.
“Whether FRW is buying or selling, investors may need to continue to be patient,” Forsyth Barr said.
New Talisman Gold Mines, which is in the throes of raising capital, announced that its chairman John Upperton would be stepping down.
“I was elected to the NTL Board to instigate change in governance and bring Talisman into production,” said Upperton, who joined the board after a governance and management tussle in 2021.
“With these objectives now met, it is appropriate for me to consider stepping away to pursue wider interests in semi-retirement and take the chance to address some recurrent health issues.”
Upperton said he would work with the board to ensure a smooth transition “when the time is right”. There was no timeframe for the changeover.
“I’m also pleased to say I’m continuing to put my money where my mouth is by participating in this placement round,” Upperton said.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.