Shares fall as My Food Bag debut disappoints

The much-anticipated My Food Bag listing disappointed investors as it finished the day almost 6% below the IPO offer price, amid wider market weakness.

Friday, March 5th 2021, 6:23PM

by BusinessDesk

The S&P/NZX 50 Index fell 44.25 points, or 0.3%, to 12,224.5. Within the index, 25 stocks fell, 23 rose and two were unchanged. Turnover was $183.7 million.

While not included in the index, My Food Bag’s debut was the focus of market attention today.

Without a physical bell ringing due to alert level two in Auckland, most investors would have watched the share price fall, from the privacy of their home offices.

Head of research at Fat Prophets, Greg Smith said the listing had “missed its window” as interest rates have moved higher and taken the steam out of stocks with high valuations.

Five million shares changed hands on the first day of trading, wiping $26 million off its IPO valuation as the stock dropped 5.9% to $1.74.

Bond yields continued their upwards march, with the 10-year government bond settling just below 2% today, while five-year bonds hit 1.2%.

“Regular service resumed in local interest rate markets yesterday, with the NZ yield curve rising and steepening again,” said ASB economist Mike Jones.

“This followed several sessions of central bankers globally coming out to hose down the steep lift in longer-dated interest rates.”

High-priced utility stocks bore the brunt of the market decline today. Meridian Energy fell 6.4% to $5.31, Contact Energy dropped 4.1% to $6.71 and Mercury NZ was down 2.3% at $6.

Synlait Milk recovered 0.3% to $3.47 after plunging 10% when it pulled its earnings guidance yesterday.

Forsyth Barr today forecast the company would pull a net profit of $29.3 million, down from $75.2m last year, but warned there was “a high margin of error”.

“Confidence has been dented by the recent downgrade cycle – we expect this will take time to rebuild, reliant on improved clarity on the near-term earnings path, gearing and levers available to help offset any sustained pressure/volatility,” the analysts wrote.

Other dairy stocks were also stronger: A2 Milk climbed 1.2% to $10.13 and Fonterra Shareholders fund was up 1% at $5.14, despite the cooperative warning of increased earnings pressure.

Fonterra lifted its forecast payout for its farmer shareholders due to strong demand but noted the high input costs put pressure on the cooperative’s earnings.

The midpoint of the range, which farmers are paid off, has increased to $7.60 per kgMS and the lift means Fonterra will now pump more than $11.5 billion into the economy through milk payments.

Chief executive Miles Hurrell said the higher payout increases input costs, “putting further pressure on our earnings in the second half of the 2020/21 financial year”.

Shares in AFT Pharmaceuticals rose 5.8% to $4.39 after it signed an exclusive licensing agreement for the intravenous version of Maxigesic in eight new European markets.

Childcare and education centre operator Evolve Education Group climbed 6.5% to $1.32 after it acquired 10 childcare centres in Australia for approximately $30m.

The kiwi dollar was trading 71.27 US cents at 5pm in Wellington, down from 72.46 cents yesterday.

The trade-weighted index was at 74.69 at 5pm, from 75.19 yesterday. The kiwi traded at 92.99 Australian cents from 93.08 cents, 77.46 yen from 77.57 yen, 59.96 euro cents from 60.12 cents, 51.59 British pence from 51.98 pence, and 4.6389 Chinese yuan from 4.6885 yuan.

Tags: Market Close