a2 Milk Company comes roaring back

The New Zealand market closed marginally higher as a2 Milk Company came roaring back from the depths of despair with a 6% bounce.

Friday, May 21st 2021, 6:19PM

by BusinessDesk

NZ shares edge higher as A2 Milk bounces

The S&P/NZX 50 Index rose 22.44 points, or 0.2%, to 12,459.61. Within the index, 24 stocks fell, 36 rose.

Milk marketing firm A2 led the index higher as investors rushed to buy the stock after it appeared to find buyers at $5.50 per share yesterday. The stock leapt 6.5% to $6.03 during trading today.

“A2 really picked up steam as the Aussie market opened up,” said Peter McIntyre, an investment advisor at Craigs Investment Partners.

“It has probably found a floor there, and it's up to management execution and a waiting game for China export to open back up,” he said.

McIntyre said the company’s plump balance sheet, with approximately $1 billion sitting on its balance sheet, should prevent the stock from falling too far – current market capitalisation is around $4b.

Sharesies’ Leighton Roberts said A2 Milk was one of the stocks users bought in high volumes after the budget announcement yesterday.

Retail traders had reacted to the budget’s broad support for the economy and made larger-than-usual purchase orders for stocks leveraged to local discretionary spending or economic activity in general, he said.

Meridian Energy, Sky TV and Z Energy all attracted a spike in larger buy orders following the announcement, he said.

The Warehouse saw its shares climb to $3.65 yesterday but were put into a trading halt today to allow supermarket cooperative Foodstuffs to sell its 9% stake.

The block sale was priced at a minimum of $3.35, which is an 11% discount to yesterday’s closing price.

Foodstuffs will lose some $50m on the trade, having bought at $5 in 2006, however, the purchase was made in order to block the Warehouse from establishing itself in the grocery sector – it has been successful by that measure.

Ryman Healthcare reported annual net profit up 60% on property revaluations but underlying profit down 7.3% because of covid-19 challenges. The retirement village operator weighed down the index, as it fell 3.4% to $13.90.

The result came with a surprise resignation from long-serving chief executive Gordon McLeod, although he will remain with the company until a replacement is found.

McIntyre said his departure likely accentuated the stock’s decline today.

Sanford shares dropped 1.1% to $4.40 after a rough half-year report had underlying earnings down almost a third to $25.8 million on $36.7m last year.

Oceania Healthcare reported a small rise in underlying net profit for the 10 months ended March as its valuers reversed last year's property write-downs boosting net profit to $85.5m.

The underlying result was up 1.8% to $41.8m and shares declined 0.7% to $1.34.

My Food Bag’s first-year earnings result failed to stem the stock’s share price slide despite delivering earnings ahead of forecast.

The meal-kit company today reported underlying earnings were 1.8% up on the initial public offer (IPO) forecasts at $29 million, on revenue of $190.7m.

Investors rewarded this strong result by pushing the share price to a fresh record low, down 4.7% at $1.42.

McIntyre said investors already had an expectation the company would exceed the prospectus with this result and it would’ve needed a “bigger beat” to drive the price higher.

The kiwi dollar was trading 71.87 US cents at 3pm in Wellington, up from 71.75 cents yesterday.

The trade-weighted index was at 74.70 at 3pm, from 74.70 yesterday. The kiwi traded at 92.61 Australian cents from 92.71 cents, 78.23 yen from 78.29 yen, 58.76 euro cents from 58.90 cents, 50.69 British pence from 50.83 pence, and 4.6235 Chinese yuan from 4.6187 yuan.

Tags: Market Close