Big news drive big moves on sharemarket

Ebos Group, A2 Milk, Synlait and Pacific Edge were the centre of attention with transformative developments, while the New Zealand sharemarket made a recovery after a midday slump.

Tuesday, June 6th 2023, 6:33PM

by BusinessDesk

When the stocks produced good and bad news, much of it surprising, The S&P/NZX 50 Index was down as much as half a percent, but it closed at 11,864.12 down 16.77 points or 0.14%.

There were 87 gainers and 48 decliners over the whole market on volumes of 37.21 million share transactions worth $203.03m, with Ebos and A2 Milk soaking up much of the trading.

The biggest shock came when Ebos, the seventh largest local stock on capitalisation and Australasia's leading health products distributor, told the market it will lose the contract to supply the Chemist Warehouse from the end of June next year. The contract is worth $1.9 billion in annual revenue.

Ebos led the market down, plunging $4.08 or 9.84% to $37.38 on trade worth $45.92m. Ebos lost out on the contract to smaller rival Sigma Healthcare which will supply pharmaceuticals and consumer goods to Chemist Warehouse for five years.

Greg Smith, head of retail for Devon Funds Management, said Ebos had indicated there was a risk of losing the contract, but it was hard to imagine they saw this coming.

“They could have expected to lower prices but not lose it. This will be a significant hit to Ebos’ earnings as they are unlikely to win the contract back,” he said.

Synlait received the long-awaited news that China’s State Administration for Market Regulation (SDAMR) has approved the re-registration of A2 Milk’s China-label infant milk formula through to September 2027.

Synlait surged 27c or 16.88% to $1.87 and A2 Milk rose 30c or 5.23% to $6.04m, with 2.57m shares worth $15.77m changing hands.

Production at Synlait’s Dunsandel processing plant will start later this month, and a2 Milk will switch its infant formula from the old to new registration over the first half of next year.

Synlait said the re-registration was pivotal for the ongoing success of the manufacturing and supply agreement between itself and A2 Milk.

Smith said the uncertainty over the SAMR re-registration had been weighing on the shares and the news came as a relief, with both Synlait and A2 Milk share prices rebounding strongly.

Pacific Edge went into a trading halt, probably till Wednesday, to consider the surprising development that it won’t receive Medicare funding for its Cxbladder tests in the United States.

Cxbladder accounts for about 60% of Pacific Edge’s revenue and it last traded at 49.5c, having fallen from a high of $1.56 at the end of September 2021.

Novitas, Medicare’s contractor, noted that Pacific Edge’s Cxbladder tests – triage, detect, monitor, resolve and detect+ – were not considered medically reasonable and necessary, the threshold for (funding) coverage under the US Social Security Act.

Big movers

On a busy day for corporate news, there were other big price movements.

Tourism Holdings was down 25c or 6.786% to $3.45. Eroad climbed 8c or 10.81% to 82c; Serko increased 19c or 6.21% to $3.25; Fletcher Building was up 20c or 4.04% to $5.15; and Sanford added 16c or 3.9% to $4.26.

Freightways decreased 15c to $8.85; Fisher and Paykel Healthcare was also down 15c to $23.81; Auckland international airport declined 7c to $8.72; Arvida Group shed 3c or 2.46% to $1.19; Seeka fell 10c or 3.57% to $2.70; and TradeWindow was down 2c or 5.41% to 35c.

In the property sector, Goodman Trust increased 5c or 2.34% to $2.19; Vital Healthcare Trust was up 4.5c or 1.97% to $2.33; Asset Plus gained 1.5c or 6% to 26.5c; and Stride declined 3c or 2.24% to $1.31.

Mainfreight collected $2.50 or 3.7% to $70.05; Summerset Group increased 20c or 2.22% to $9.19; Green Cross Health improved 4c or 2.86% to $1.44; Third Age Health Services was up 2.6c or 1.76% to $1.50; and Vista Group added 4c or 2.9% to $1.42.

Turners Automotive increased 8c or 2.22% to $3.68; Vulcan Steel was up 23 or 2.77% to $8.53; South Port NZ added 22c or 2.91% to $7.70; and NZ King Salmon Investments rebounded 1.9c or 9.69% to 21.5c.

Mercury, up 7c to $6.72, has launched a $100m five-year green bond, with the ability to accept a further $50m in over-subscriptions. Fellow energy companies Meridian was down 3.5c to $5.54, and Contact gained 6c to $8.01.

Cannasouth declined 1.5c or 5.45% to 26c after telling the market it has exported its first shipment of dried cannabis flower to Australia.

Tags: Market Close