Class of ’21: the lowdown on new NZX listings
AUCKLAND: A handful of new equity listings were added to the NZX in 2021.
NZ Automotive Investments listed in February, along with Third Age Health.
My Food Bag appeared in March, DGL Group in May and Greenfern in October.
TradeWindow, Ventia and Vulcan Steel all listed in November, while Winton Land debuted in December.
So how is the class of ’21 faring so far?
Duallisted Australasian steel distributor Vulcan traded at $7.50 on day 1 on the NZX.
It went on to peak at $10.33 in April this year before dropping back to its latest price of $8.70.
Vulcan’s earnings performance has been explosive in its short tenure as a listed stock.
Despite the disruptions caused by Covid19 and major floods across parts of Queensland and New South Wales, the company’s net profit of $142 million exceeded its prospectus forecast by 89%.
Vulcan expects a largely flat 2023, reflecting softer New Zealand activity and the impact of lower steel prices on margins, offset by its recent Ullrich Aluminum purchase.
Salt Funds managing director Matt Goodson said while Vulcan was clearly the pick of the bunch of the 2021 listings, the market was now grappling with how long the building cycle in New Zealand and Australia would last.
‘‘In particular, in their line of business when you have steel prices rising rapidly you tend to be able to buy inventory cheap and sell it dear.
‘‘But as the cycle turns, suddenly the inventory that you have bought dear is having to be sold cheaper, and that tends to coincide with the cycle where volumes start to fall away somewhat,’’ Mr Goodson said.
‘‘That’s what the market is grappling with and that’s the reason why Vulcan is well off its recent highs,’’ he said.
‘‘It’s great to see it listed but it will perform in quite a volatile manner, with the market’s changing expectations about the building cycle in New Zealand and Australia.’’
My Food Bag disappoints
Meal kit company My Food Bag has continued to disappoint, the stock last trading at 61c below its $1.85 IPO issue price.
The company has been caught by a sharp lift in distribution costs and labour shortages.
‘‘The balance sheet strong,’’ Mr Goodson said.
‘‘They are generating free cash flow, so it’s not an issue of company solvency or anything like that.
‘‘It’s a question of what are the sustainable earnings numbers for this company and what is a fair share price.
‘‘That’s where the market has taken a much harsher view since it listed.’’
Car trouble
is
Used car importer and dealer NZ Automotive Investments has struck difficult trading conditions in its first year as a listed entity. The disruption of Covid19 lockdowns helped drive the company’s underlying net profit after tax of $1.7 million in the year to March, down from $3.8 million in the previous year.
NZ Automotive, the company behind 2 Cheap Cars, has been rocked by boardroom resignations.
One of the new board appointments is insolvency expert Michael Stiassny.
The stock last traded at 49c — down from its $1.30 listing price.
Shares in residential property development company Winton Land last traded at $2.69 — down more than a dollar from its IPO issue price of $3.88.
Last month, Winton said its net profit was $31.7 million in the year to June, down from $46.1 million a year earlier, but ahead of its offer document forecast of $29.7 million.
Elsewhere in the class of ’21, Third Age Health — a medical service provider for retirement villages — traded at $2.04, down from its listing reference price of $2.15.
Medicinal cannabis company Greenfern traded at 15c from its reference price of 25c and software specialist TradeWindow was at 68c from its 92c listing price.
Chemicals handler and manufacturer DGL has made the ASX home.
In New Zealand, the shares were issued at $1.00 and quickly rallied to over $4.00 before delisting in June. In Australia, the stock now trades at $A1.78 — down from its high in April of $A4.15.
Sydneybased, duallisted infrastructure service company Ventia’s shares were issued at $ A1.70, compared with $A2.95 yesterday.
Or half empty?
Forsyth Barr’s analysis of the reporting season showed beats outnumbered misses by three to two during the August 2022 reporting season, a deceleration from the seven to two recorded last reporting season in February.
The market’s reception of the results was positive, there being a 3:1 skew in favour of outperformance after results.
‘‘Our analysts, on average, were less excited, with a meaningful tilt in favour of earnings per share downgrades for both 2023 and 2024, and six rating downgrades against four rating upgrades.
‘‘After some very weak business confidence survey data, we expected what increasingly feels like an unavoidable and meaningful economic slowdown to dominate proceedings, but not so.’’
Instead, the broker walked away with three main takeaways from company reports: nearterm cost pressures, interest expense and mostly positive outlook statements.
‘‘This is a meaningful deviation from our expectations,’’ Forsyth Barr said.
‘‘Are we seeing some light in the tunnel? Or is that just a freight train of stagflation heading our way?’’
Share market watchers were surprised by the resignations of Restaurant Brands (RBD) chief executive Russel Creedy and chief financial officer Grant Ellis after 20 years.
The company operates 359 KFC, Taco Bell, Pizza Hut and Carl’s Jr stores in New Zealand, Australia, California and Hawaii, and is the master franchisor of 101 Pizza Hut stores in New Zealand.
The stock is far less liquid these days after Mexican investor Finaccess Capital’s successful partial takeover of 75% of the stock in 2019 at $9.45 a share.
The resignations, combined with recent earnings pressures, have raised questions about just what is going on with RBD. —