F&P Healthcare drags NZX 50 lower

New Zealand’s benchmark equity index fell on Wednesday as its largest stock, Fisher & Paykel Healthcare, slipped almost 4% and the central bank said it would raise interest rates further.

Wednesday, May 25th 2022, 6:30PM

by BusinessDesk

The S&P/NZX 50 Index fell 73 points, or 0.7%, to 11,173.37. Turnover was $177 million.

Fisher & Paykel Healthcare was the biggest drag on the index, falling 3.9% to $19.90 after it reported full year earnings in line with expectations but without much future guidance.

The manufacturer’s net profit fell 28% to $376m and revenue dropped 15% to $1.7 billion as covid-related demand for its hospital products declined.

This outcome was widely expected but investors may have been hoping for more detail on what will happen next. The company said it was unable to give guidance.

Greg Main, a wealth adviser at Jarden, said the company had benefited from the pandemic but it had upset metrics and made it hard for investors to predict future earnings.

“The question has become: where does it fall back to? And how long are people prepared to carry the stock without knowing?” he said.

F&P Healthcare said the increased amount of its hardware installed in hospitals should lead to strong growth in its consumable products, but it was hard to say how long it would take.

Higher, sooner

The NZ dollar jumped three-quarters of a US cent this afternoon, to above 65 cents, when the Reserve Bank of New Zealand signalled it would keep hiking the official cash rate until it hit 4%.

This took the market by surprise, as it was more aggressive than previous forecasts given by the central bank.

Main said RBNZ was sticking with its ‘least regrets’ policy and putting through extra rate hikes to ensure inflation was brought under control, before trimming them back.

“The idea is to hit it hard now and then lower the rate later, if need be,” he told BusinessDesk.

BNZ said NZ wholesale interest rates increased sharply on the news. The 2-year swap rate – which is an important factor in mortgage rates – climbed about 20 basis points to 3.75%.

Longer term rates increased by a significantly smaller amount, which Main said suggested the market believed RBNZ would bring inflation under control. Ten-year bond yields have the largest impact on share prices and barely moved.

Still, NZ shares were broadly in decline on Wednesday as another mixed night on Wall Street left local investors with little to get excited about.

Travel software company Serko led the fall, dropping 8.5% to $3.75 as investors continued to digest its earnings result last week.

Main said the company was converting new customers more slowly than many had hoped.

On the other side of the board, Pushpay Holdings climbed another 3.6% to $1.45 on the new details it gave yesterday about the ongoing takeover negotiations.

Pacific Edge jumped 5% to 83 cents and Eroad was up 2.8% at $2.98 with both companies due to report earnings tomorrow morning.

Finally, Property For Industry rose 2.9% to $2.46 after it announced it would buy $60 million of its own shares over the next 12 months.

The property investment firm said it had looked at other opportunities to reinvest capital but decided buying its own shares would deliver a better return.

“The company is indicating it sees value in its own share price,” Greg Main told BusinessDesk. “And it will be interesting to see if any other listed property stocks follow its lead."

Tags: Market Close