NZ stocks plummet as investors eye Ryman equity raise - Market close

The NZ sharemarket has fallen 4.1% since reporting season got into full swing on Monday last week.

News of Ryman Healthcare’s $1 billion equity raise has precipitated investors to exit their positions in other stocks so they can participate.

The S&P/NZX 50 Index closed at 12,531.72, down 220.865 points or 1.73% on Monday. Across the whole market, there were 39 gainers and 99 decliners, with 35 million shares worth $153.8 million changing hands.

The index has fallen 4.1% since earnings season got into full swing on Monday last week.

Forsyth Barr director of institutional sales Peter Sigley said while the headline figures look gloomy, it’s been a reporting season of outsized price reactions that make it appear worse.

“It’s tending to be dragged down by single names [such as Spark’s $1b valuation drop last week] rather than some sort of theme against the market,” he said. “If anything, there’s probably early signs of increased optimism towards the market.”

The big news on the exchange to start the week was Ryman Healthcare’s announcement that it will seek $1b from investors to help balance its books.

The retirement village and aged care facility provider will issue about 328 million new shares — roughly 48% of existing shares — at $3.05 a share, a 29.2% discount to Ryman’s last closing price of $4.31.

Given the company’s debt position, Hamilton Hindin Green investment adviser Jeremy Sullivan said the equity raise was “warranted” and “fundamentally attractive” from an investment perspective.

While a trading halt prevented Ryman’s share price from budging, Sullivan said the news appeared to have moved its chief competitor, Summerset, which fell 6.25% to $12 on volumes worth nearly $9m.

“The fortunes of both companies have been very different over the past five years, so people will be reducing Summerset to take up Ryman,” he said.

Oceania, the only other major listed retirement village operator on the exchange, fell 5.41% to 70c.

While Sigley could not comment on the merits of the equity raise because Forsyth Barr is underwriting it, he said the contagion appears to be broader than just the retirement sector.

“14 of the top 50 stocks are down by 2% or more. There are only two stocks that are up, ANZ and Westpac, are listed out of Australia,” he said an hour before the market closed.

Fisher and Paykel Healthcare eased 1.57% to $34.55; a2 Milk Company declined 1.41% to $8.39; Infratil was down 2.4% to $10.56; Meridian Energy shed 1.87% to $5.77; and Freightways decreased 1.7% to $11.

While Ryman consumed most of the day’s oxygen, earnings season continued behind the scenes, producing varying results.

Ultra-fast broadband network operator Chorus swung to a first-half net loss of $5m from a $5m profit during the same period last year. It warned that full-year operating earnings were “tracking to the lower half” of its $700-720m range.

Shares were down 4.82% to $8.50 on volumes amounting to $6.9m in value traded.

Michael Hill International, which declared earnings after market close on Friday evening, lost 5.56% to 51c on low volumes. The jeweller reported group revenue of A$360.2m ($398.98m) for the half year to December 29, down 0.7% compared with the previous corresponding period.

Revenue at New Zealand stores fell 7.4% to $60.5m for the half year and a decrease of 7.8% on a same-store sales basis.

Steel & Tube shares rose 2.41% to 85c after it reported a $10.39m loss for the six months to December 31 compared to a $5.3m profit a year ago. The company’s revenue fell 25% to $196m.

Sigley said despite the surface-level poor result, the company has shown discipline in managing its cash and initiative in its acquisition of privately owned firm Perry Perry Metal Protection for $43.5m.

“You’d have to say, on the surface of things, that management is doing a good job,” he said.

Last but not least, Millennium & Copthorne Hotels NZ shares rose 4.17% to $2.50 after the company reported its highest full-year revenue in five years and was upbeat about the tourism and property markets.

Revenue was up 21% to $176.2m in the year to December 31, while profit before tax jumped 25.6% to $47.1m.