Tower earnings downgrade causes sharemarket stir

The New Zealand sharemarket had a familiar late surge while Tower caused a stir with a significant earnings downgrade because of the impact of the recent flooding and cyclone.

Monday, May 8th 2023, 6:26PM

by BusinessDesk

After a choppy session, the S&P/NZX 50 Index climbed in the last 45 minutes to 11,942.49, up 53.47 points or 0.45%. The index hit an intraday low of 11,873.09.

Volumes were light for the third day running with 21.85 million shares worth $78.97m changing hands. There were 82 gainers and 39 decliners on the main board.

Paul Robertshawe, chief investment officer for Octagon Asset Management, said it doesn’t feel like there’s a lot of new money coming into the market at present.

“While interest rates are high enough, people would rather have clarity on the direction [of the market] before taking money out of term deposit. And people have already got their [share] positions set.

“They are sitting and waiting and there’s not a lot of churn amongst portfolio managers." The market was cheered by a strong rally on Wall Street at the weekend.

The Dow Jones Industrial Average had its biggest one-day gain since early January, rising 1.65% to 33,674.38 points.

The S&P 500 was up 1.85% to 4136.25 points, and the Nasdaq Composite rose 2.25% to 12,235.41 on the back of a strong quarterly result from Apple which climbed 4.69% to US$173.57 (NZ$275), its highest level in nine months.

Regional banks also recovered, with PacWest Bancorp climbing nearly 82% and Western Alliance up 49%.

At home, Insurer Tower fell 3.5c or 5.69% to 58c after downgrading its full-year net-profit guidance to $8m and $13m, from $18m-$23m.

Tower is making further reinsurance arrangements and increasing its large events allowance from $40m to $50m. Tower increased its guidance for gross written premium growth to 15-20%, up from 10-15%.

The upper North Island flooding is now expected to cost $195m-$225m with 5,500 insurance claims, and Cyclone Gabrielle $55m-$75m with 3,350 claims. Tower expects to report a half-year loss of about $3m and will not pay an interim dividend.

Ebos Group was up 58c to $44.77; Fletcher Building increased 11c or 2.34% to $4.81; Chorus gained 7c to $8.65; a2 Milk was up 5c to $5.76; and Freightways added 12c to $9.40.

In the energy sector, Meridian increased 11c or 2.06% to $5.46; Contact was up 9c to $7.98; Mercury declined 6.5c to $6.38; and Manawa was down 6c to $4.90.

Hallenstein Glasson picked up a further 15c or 2.22% to $6.91 as it enters the NZX top 50.

But Robertshawe said Hallenstein Glasson would be bumped out just as quickly if a company like freight forwarder Mondiale listed. “Telco 2 degrees could also come to the market within the next 12 months.”

Mondiale indicated it would consider an initial public offer once the merger with Australia’s Visa Global Logistics was completed. But no timeframe has been set.

Westpac Banking Corporation, increasing 64c or 2.81% to $23.44, announced a half-year net profit of $4 billion, up 22% on the previous corresponding period, and an increased interim dividend of 70c a share payable on June 27. Its net interest margin was up 5 basis points to 1.96%.

Westpac said it has made $1b in cost savings and the expense-to-income ratio was reduced to 45.9%. Interestingly, it stopped or recovered $215m in customer scam losses.

Westpac NZ’s net profit fell 33% to $426m which included $154m impairment charges for the recent weather events and worsening economic forecasts.

Other banks ANZ was up 12c to $25.65, and Heartland Group gained 2c to $1.56.

Comvita increased 11c or 3.74% to $3.05; Skellerup Holdings gained 9c or 1.89% to $4.84; Serko improved 7c or 3.14% to $2.30; Gentrack collected 9c or 2.64% to $3.50; Bremworth climbed 1.5c or 5.08% to 31c; and Michael Hill added 2c or 1.85% to $1.10.

Savor gained 1.5c or 4.05% to 38.5c, ikeGPS was up 2c or 2.44% to 80c, and Chatham Rock Phosphate increased 1.7c or 10.83% to 17.4c.

Mainfreight shed $1 to $70; Briscoe Group was down 10c or 2.2% to $4.40; Smartpay Holdings fell 5.5c or 3.49% to $1.52; and Winton Land decreased 4c or 2.11% to $1.86.

Carbon Fund declined 8c or 4.57% to $1.67, NZX was down 3c or 2.59% to $1.13; Rakon decreased 2c or 1.85% to $1.06; and Just Life Group shed 1.5c or 4.11% to 35c.

TruScreen Group gained 0.005c or 17.86% to 3.3c after telling the market its cervical cancer screening method has been recognised in a China Blue Paper as a leading-edge development.

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