Xero shares climb to top $30
Growth recalls 2014 glory days
Xero shareholders should be on a high after the share price rose to over $30 this week — the first time it has been back over that figure since June 2014. Xero’s share price chalked up massive gains in 2014 and one broker predicted the stock could be worth as much as $45 a share.
It never quite got there, peaking at $44.79 on March 7, 2014, before taking a big tumble.
The share price got down as far as $13.30 in September 2015. Since then there have been a few rallies, but it is this year that has witnessed a sustained climb upwards again.
James Smalley, a client adviser at Hamilton Hindin Greene, said Xero’s previous meteoric rise was more about the market getting carried away with itself in 2014 on the back of a mini-tech boom.
But the recent share price growth showed Xero’s shares were now tracking more in line with what the company was doing.
Smalley said the shares had gone up from about $20 in April, booking a 50 per cent gain for investors over just six months.
Xero this week announced it had passed 250,000 subscribers in Britain and had more than 200 staff there.
The cloud accounting software business is expected to announce a maiden profit in the next year, which could be another boon for its share price.
Xero shares closed on 88c yesterday, up 54.4 per cent over the past 12 months.
PETROL PRESSURE
Z Energy’s share price has been drifting downwards in recent months as regulatory uncertainty weighs on the stock.
Smalley said that since the Government released a report on the fuel industry on July 4, the stock had fallen from $7.89 and was now trading around $7.20. The Government has asked the Commerce Commission to look at the sector and whether fuel prices are being set competitively.
There are concerns that some fuel companies may be charging higher prices in Wellington and the South Island to subsidise lower prices in the upper North Island, where the market is very competitive.
Smalley said Z’s situation was similar to what happened to Chorus’ shares when it was under scrutiny from the Commerce Commission.
“A regulator looking at a business isn’t a good thing.”
Smalley said some investors appeared to be selling up.
If fuel margins were squeezed down by the regulator, it could result in a re-rating of the value of the stock, he warned.
But Z Energy appears confident it can weather any closer scrutiny of the sector.
Chief executive Mike Bennetts said in a recent update that Z was confident it could demonstrate that the New Zealand downstream fuels industry was highly competitive, with low barriers to entry, and that returns were fair and reasonable.
He said Z would make a submission to the Ministry for Business, Innovation and Employment on their Fuel Market Performance Study by next Friday.
Z is due to report its half-year result to the market on November 9 and has said the recent fuel pipeline crisis wouldn’t change its previous earnings guidance of between $445 million and $475m for annual replacement cost operation earnings before interest, tax, depreciation, amortisation and financial instruments (ebitdaf).
Z’s shares closed on $7.20.
NO ACTION
An investor who complained to the NZX about Refining NZ telling Energy Minister Judith Collins about its burst pipeline before informing its shareholders has been told the NZX won’t be taking any regulatory action.
The pipeline breakage was discovered on Thursday, September 14 but Refining NZ didn’t make a statement to the market until the following Monday.
Listed companies are required to disclose material information to shareholders as soon as possible.
In a letter, NZX compliance team leader Megan Blenkarne said the team had considered whether Refining NZ possessed any material information before its market announcement on September 18, 2017, that it was required to disclose. “We are satisfied, based on our inquiries, that no regulatory action is required in this instance.”
Blenkarne said that although Refining NZ was aware of the leak and had discussed it with the minister, the company said its initial view was that the pipeline repair could be done within two days.
She said disclosure of information to the minister might be required for a variety of reasons, but that information might not have to be announced to the market.
Refining NZ’s shares have bounced back to where they were before the pipeline burst and yesterday closed at $2.55, down a cent.