A2 Milk investors are said to be unhappy at recent insider sales of shares. Photo / File
A2 Milk's share price has taken a hit lately, after being one of the strongest performers on the NZX amid the Covid-19 pandemic.
Shares in the alternative milk company have fallen from $21.50 on August 18 to an $18.79 close on Thursday - a slide of nearly 13 per cent.
Market commentators are pointing to the company's result falling short of some investors' expectations and a raft of insider share sales over the last week.
According to change of director's interest notices, the company's chair and non-executive director David Hearn sold 250,000 shares on August 24 for $20.31 per share, raking in just over $5 million from the sale.
Hearn's share ownership has reduced from 1,305,000 to 1,055,000 as a result.
On top of that has been a share sale by interim chief executive Geoff Babidge, who has reduced his holding from 400,000 to 300,000, netting $2.037m.
Chief growth and brand officer Susan Massasso and chief operations officer Shareef Khan also offloaded stakes.
But the biggest sell-off came from a2 Milk Asia Pacific chief executive Peter Nathan. After exercising 800,000 options at 63c per option, he sold 750,000 shares between August 24 and 26 at an average of $20.12 for almost $15.1 million.
The company has given no on-market explanation for the share sales. Investors rarely like it when insiders sell up and see it as a sign that share price growth will be muted.
As well, Bloomberg reported on Monday that a2 Milk has posted the biggest percentage increase in total bearish wagers among the most shorted stocks on Australia's benchmark index.
Short selling involves borrowing shares to sell them, with the aim of buying them back later at a lower price.
A2 Milk has been a target of short-sellers in recent years, with some market players believing the stock is overvalued.
Both the New Zealand and Australian sharemarkets have had gains for five months in a row, but New Zealand's benchmark has recovered faster.
Australia's ASX200 remains down 7.43 per cent from the start of the year to the end of August, while the NZX50 was up 3.88 per cent.
Sherifa Issifu, analyst, investment strategy at S&P Dow Jones Indices, says smaller-sized firms have led the way on both sides of the Tasman in the last few months, beating larger companies by several percentage points.
The NZX SmallCap index was up 24 per cent in the three months to August 31 compared to the NZX 10, which rose 0.97 per cent, and the NZX 50, up 9.7 per cent.
But over the year to date, larger company stocks have still fared better, with the NZX10 up 11.13 per cent and the SmallCap index down 0.2 per cent.
Issifu said the ASX200 has had its best five-month period up to August 31 since 2009, gaining 19 per cent since March, though a further 18 per cent gain was required to recover February's all-time-highs.
Australia's technology stocks have been the stand-out performers of late, with the sector up 35.66 per cent for the year to date and 28 per cent in the last three months.
But Issifu said although the tech sector's recent strong performance had increased its weight in the Australian market, it still comprises only 4 per cent of the overall S&P/ASX 200.
"The heavyweight sectors of financials and materials had a more pedestrian August, rising only 1 per cent and - with a combined weight of 46 per cent - dragged back the benchmark's return."
Financials, which are largely dominated by the big four banks - CBA, ANZ, Westpac and NAB - remain down by 18.7 per cent year to date.
Plexure Group has signalled that it may look to raise up to A$50 million through an initial public offer on the ASX to facilitate its growth plans.
The company has previously indicated it is investigating an IPO in Australia which would see it shift its primary listing from the NZX to the ASX while making its NZX listing a secondary listing as a foreign exempt issuer.
As part of its annual general meeting presentation the board said it had appointed Bell Potter and Ord Minnett in Australia to assist with investigating the IPO.
"The company's strategy and three-year plan contemplates a focus on international growth.
"The board considers that it may need up to A$50 million to facilitate the pursuit of this growth plan, which it considers will allow it to capture value accretive opportunities that would not be secured if the Company is constrained by current capital reserves."
Listed bond issues are coming thick and fast, as corporates grab the opportunity to lock in low cost funding for the longer term.
Goodman Property, Investore and Transpower have all raised debt on the bond market of late, with Mercury Energy joining the flood this week with an offer of up to $150 million in bonds.
The final interest rate on the Mercury bonds has yet to be set but is expected to be somewhere between 1.5 per cent and 1.6 per cent per annum over the seven-year term.
Investors would have laughed off such a low return just a year ago, but with predictions that the official cash rate will go into negative territory next year, the current rates on offer could be highly attractive.
Fisher Funds head of fixed interest David McLeish said the credit spread - the additional yield corporates need to offer over the swap rate - had collapsed since March, giving borrowers the ability to fund themselves very cheaply and many were taking an opportunistic approach.
McLeish said comparing New Zealand's corporate bond interest offerings with what was being offered overseas, a credit spread of 1.25 per cent was still quite attractive at a time when corporates in places such as the UK and Europe were offering 1 per cent.
He said Mercury's offer was also attractive compared to a recent similar offering by PowerCo. Although Mercury's credit spread was likely to be about 10 basis points lower, it had strong free cashflow compared to PowerCo's negative cashflow.
"In a historical context these are very low credit spreads. Our expectation is we do get a negative cash rate and in that environment something yielding 1.5 per cent is going to look very attractive."
Jarden has dropped its rating on Sanford from outperform to neutral, after the seafood exporter issued a profit warning this week.
Sanford has been badly hit as global Covid lockdowns close the restaurants and hotel businesses which would normally buy its products.
It saw third quarter sales fall by 15 per cent and is seeing a similar drop in its fourth quarter sales revenue.
The business is experiencing issues mainly in its wild catch arm, with aquaculture faring better.
Jarden analysts are picking second half earnings before interest and tax for Sanford to be down 44 per cent to $17.4 million.
"Looking forward our analysis suggests the outlook for WC [Wild Catch is] complicated by weaker pricing and volumes sold; and for mussels and salmon is the length of recovery in the higher end food service channels ... "
As a result, Jarden has cut its ebit forecasts by 26 per cent for Sanford's 2020 financial year, rising to 27 per cent in 2021 and 20 per cent in 2022.
It has cut its 12-month target price from $7.98 a share to $6.15. Sanford shares closed at $5.70 on Wednesday.
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