NZ shares decline as A2 Milk pulls back

New Zealand shares declined as A2 Milk and Pushpay gave back much of the gains they won when the S&P and FTSE Russell indices were rebalanced on Friday.

Monday, June 21st 2021, 6:28PM

by BusinessDesk

The S&P/NZX 50 Index fell 52.57 points, or 0.4%, to 12,499.36. Within the index, 30 stocks fell, 18 rose and two were unchanged. Turnover was $161 million.

A2 Milk fell 3.7% to $6.50 after jumping more than 6% on Friday, and Pushpay Holdings declined 3.3% to $1.76 – after ending last week with a 4% surge.

Internet infrastructure firm Chorus fell 3.6% to an 18-month low $6.09. The stock has been sliding since late May when the Commerce Commission released its draft decision on the maximum allowable revenue the firm would be able to earn in the new regulatory regime.

Analysts have mixed views on the stock and valuations range between $7.60 and $6.20.

Shares of Air New Zealand fell 2.2% to $1.58 after analysts warned the airline was overvalued, even before investors get diluted in the approaching billion-dollar capital raising.

Forsyth Barr downgraded the stock in reaction to last week’s trading update in which the company said it would post an approximately $400m loss next financial year.

“In other words, the company’s return to profitability will take longer than we previously anticipated,” the analyst wrote.

The airline will have to pay more than $300m of deferred tax next year, which a capital raising of about $1.2 billion will help pay.

Jarden already had a sell recommendation on the stock but trimmed another 15 cents from its target price. The research team now values the stock at just 95 cents a share.

“Given Air NZ’s requirement for what will likely be a highly dilutive capital raise, material ongoing near-term losses and lack of comfort on the timing and trajectory of any earnings recovery, the shares present a negatively skewed risk-reward profile,” they wrote.

Auckland International Airport fell 0.3% to $7.44. Jarden analysts today repeated a ‘sell’ recommendation for Sydney Airport, saying its earnings may not recover fully until 2025.

Pacific Edge had the day’s biggest gain, climbing 3.3% to $1.24, after US healthcare giant Kaiser began rolling out another of its cancer diagnostic products across its network.

Mercury NZ was up 1.6% at $6.40 on news it had purchased Trustpower’s retail business for $441m. This follows the $770m purchase of Tilt Renewables’ local assets in March.

Precinct Property sank 2.6% to $1.55 after it completed a $220m equity raising to buy two buildings with government tenants.

The money will be used to purchase the Wellington properties, with the surplus staying on the balance sheet to fund extra opportunities, such as purchasing an Auckland carpark that is adjacent to Commercial Bay.

The US dollar continued to gain after last week’s US Federal Reserve meeting, pushing the local currency to its lowest level against the greenback in the past three months.

Any gains the kiwi dollar may have made from strong GDP data were washed away and it was trading at 69.52 US cents at 3pm in Wellington, down from 70.05 cents on Friday.

The trade-weighted index was at 73.26 at 3pm, from 73.60 last week. The kiwi traded at 92.68 Australian cents from 92.73 cents, 76.56 yen from 77.18 yen, 58.61 euro cents from 58.79 cents, 50.33 British pence from 50.25 pence, and 4.4869 Chinese yuan from 4.5163 yuan.

Tags: Market Close