Sharemarket down amid lighter trading
Fonterra and Trade Me both slide as Ebos takes a jump
New Zealand shares fell in light trading, led by Fonterra Shareholders’ Fund and Trade Me Group while Ebos Group surged on a new deal which could bring A$1 billion ($1.09b) in revenue in its first year.
The S&P/NZX 50 Index dipped 0.66 points, or 0.007 per cent, to 8924.47. Within the index, 24 stocks fell, 19 rose and seven were unchanged. Turnover was $90.7 million.
“Even though Friday night’s close in the US wasn’t too bad, Asian markets are a bit skittery but we’re not following suit, we’re flat. We haven’t had a lot of volume,” said Peter McIntyre, investment adviser at Craigs Investment Partners.
Fonterra led the index lower,
down 2.6 per cent to $5.30, while Trade Me fell 2.4 per cent and Australia and New Zealand Banking
Group dropped 2.1 per cent to $30.35. Ebos Group was the best performer, up 7.2 per cent to $19.25, though it surged to a record $19.50 during the session. The pharmaceutical and animal health products maker won a bid for a distribution deal with Australia’s Chemist Warehouse which could bring in A$1b of revenue in the first year. The two expect to sign a five-year supply agreement, starting July 2019.
“It’s pretty massive really, and the company itself is confident they can generate what they deem to be an acceptable return on capital on the deal so all pretty positive,” McIntyre said. “We see it very much earnings
per share accretive for Ebos, and it further diversifies their business model as well. They’ll probably need to increase their working capital anywhere between A$120m and A$180m, so as far as return on investment 12 per cent after-tax potentially.
“It means they become a dominant player and on the other side it limits their acquisition capacity in the shortto-medium term.” Heartland Bank rose 1.8 per cent
to $1.73, Kathmandu Holdings gained 1.7 per cent to $2.96, and
Stride Property advanced 1.6 per cent to $1.86. Outside the benchmark index, Steel & Tube Holdings rose 2.8 per cent to $1.49. It has obtained a waiver from its banks after writedowns and impairments put it in breach of at least one lending covenant.
In May the Lower Hutt-based supplier of steel building products said it expected a loss on an earnings before interest and tax basis of about $38m in the year ended June 30.