Shares surge on Infratil's $3b Tilt sale

NZ shares surged as infrastructure investor Infratil made good on its promise to demonstrate its portfolio was undervalued with the almost $3 billion sale of Tilt Renewables in which it held a majority stake.

Monday, March 15th 2021, 6:42PM

by BusinessDesk

The S&P/NZX 50 Index rose 165.49 points, or 1.3 percent, to 12,592.26. Within the index, 35 stocks rose, 11 fell and five were unchanged. Turnover was $145.5 million.

In February, Infratil’s senior management told investors it was “crystal clear” that refusing AustraliaSuper’s $5.7b takeover bid put them “on the hook” to prove its portfolio had unrecognised value.

Today, they made good on that promise with the sale of Infratil’s 65% stake in Tilt Renewables for $1.93 billion – that’s double the value of the asset prior to the strategic review.

Jeremy Sullivan, an investment advisor at Hamilton Hindin Greene, said the price went some way to proving the value of Infratil’s portfolio.

“It’s a chunky revaluation of those assets, not just because of their quality, but also because of the global trend towards renewables,” he said.

The transaction values Tilt shares at $7.80 apiece, compared to last Friday’s closing price of $6.48, having risen from $3.92 on Dec 9, the day the Australian Super bid became public.

Nikko Asset Management’s head of equities, Stu Williams, described it as “a helluva price”.

Shares in Infratil climbed 3.6% to $7.46, Tilt Renewable’s shares leapt 17.4% to $7.61, and Mercury NZ – which is buying Tilt’s NZ assets – climbed half a percent to $6.03.

Other stocks were also buoyant as the fiscal stimulus package in the United States put downward pressure on bond yields which have been sapping equity prices.

Sullivan said “bargain hunters” were now buying after the steady declines had brought prices down to palatable levels.

Tourism Holdings led the market higher, climbing 4.4% to $2.35, followed by Vista Group International which rose 4.3% to $1.93. Both stocks are helped by the rapid rollout of covid vaccines now underway in many countries.

Shares in A2 Milk rose 0.9% to $9.52, perhaps with investors also hopeful the reopening of borders will revive its important daigou distribution channels.

Forsyth Barr conducted some on-the-ground research of mother & baby stores in China, where they found the brand was “well placed to continue to grow”.

However, they also warned that slow industry growth and growing competition from local brands meant A2 Milk would need to spend more on marketing in stores.

Fisher & Paykel Healthcare was up 4.3% at $30.38, its highest price this month after touching a low of $27.

Outside of the top 50 stocks, some smaller listed companies were making purchases.

New Zealand Rural Land Company bought its first farm, a 456-hectare dairy farm in Mokoreta, Southland, for $10.4m which will be rented by Fortuna Group for $515,000 per year. Its share price rose 0.9% to $1.14.

Meanwhile, South Port ordered a $9.4m tug boat to operate at its Bluff Port. Chair Rex Chapman said it was the “single largest capital expenditure decision the company has made since it was established in 1989”.

South Port shares climbed 5% to hit $8.85, just below a record high at $9 achieved in late February.

The kiwi dollar was trading 71.99 US cents at 5pm in Wellington, down from 72.14 cents on Friday.

The trade-weighted index was at 75.11 at 5pm, from 75.11 on Friday. The kiwi traded at 92.89 Australian cents from 92.71 cents, 78.56 yen from 78.44 yen, 60.22 euro cents from 60.31 cents, 51.68 British pence from 51.62 pence, and 4.6789 Chinese yuan from 4.6777 yuan.

Tags: Market Close