MARKET WRAP: NZ shares fall, Comvita rises

Harbour Asset Management analyst Shane Solly says the market has been cautious.

Harbour Asset Management analyst Shane Solly says it’s a “huge week ahead” for the New Zealand exchange.

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The local sharemarket treaded water today ahead of a number of key data points expected through the week.

At market close the S&P/NZ50 Index had fallen 8.42 points, or 0.1%, to 8406. Turnover was $93 million.

“We have seen a very cautious market around ongoing trade conflicts between the US and China and a bit of uncertainty around Syria action,” Harbour Asset Management analyst Shane Solly says.

Fletcher Building shares slipped 7c, or 1.1%, to $6.27 amid news Sydney-based fund manager, Ellerston Capital, accumulated a 5.1% stake.

Ellerston now owns nearly 35.8 million shares, having spent nearly $230.5m or an average price of about $6.44 per share.

“Ellerston is an active, value focused manager. They buy shares where they see value and they’ve used this weakness to keep on adding,” Mr Solly says.

Meanwhile, honey products company Comvita shocked the market when it announced a possible takeover without naming any potential suitor.

Mr Solly says there is speculation Shenzhen-based food giant China Resources may be an interested party, given it already owns 8.3% of Comvita.

At the same, Comvita said its after-tax operating earnings for the financial year ending June 30 is likely to be downgraded from $17.1 million to the range of $8-11m.

Due to the share-price sensitivity of the downgrade, the board felt it was obliged to also announce the potential takeover discussions. 

It’s shares last traded at $7.10, a 1.87% gain for the day.

A2 Milk shares gained 2.2% to $12.47 after it announced it is expanding into South Korea through a sales distribution agreement.

Air New Zealand shares were down 2.2% reflecting oil prices which hit a three-year high.

Looking ahead, Mr Solly says the Empire State Survey in US tonight, REINZ housing data for March tomorrow and a number of other data points later in the week will get the market moving.

Mr Solly says the US and Europe data will be “key pointers” of where our markets will go, as investors look for confirmation from company profit recording globally.

Top 5 gainers of the day
ikeGPS Group Limited $0.55. Up $0.050 / 10.00%

Moa Group $0.50. Up $0.030 / 6.38%

The Bankers Investment Trust $16.55. Up $0.480 / 2.99%
Plexure Group $0.19. Up $0.005 / 2.70%

Metro Performance Glass $0.83. Up $0.020 / 2.47%

Top 5 losers of the day.
Pacific Edge $0.33. Down -$0.025 / -7.04%

Wellington Drive Technologies $0.135. Down -$0.010 / -6.90%.

Smartpay Holdings $0.19. Down -$0.010 / -5.00%.

GeoOP $0.12. Down -$0.006 / -4.76%

SLI Systems $0.30. Down -$0.010 / -3.23%.

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2 Comments & Questions

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Questions about the Comvita announcement today -

Mr Craig said, “Comvita is party to a Confidentiality Agreement with a third party, pursuant to which a due diligence process on Comvita is being conducted. The purpose of the due diligence is to enable the third party to assess the potential acquisition of all or substantially all the shares in, or assets, of Comvita, whether by way of takeover, scheme of arrangement, amalgamation or other business combination.

Question 1 - Why did this not get announced to the market when it was entered into?

Question 2 - Is NZX regulation looking into this?

Question 3 - was the half yearly release (dated less than 2 months ago) and titled in bold letters ‘Comvita announces a strong Half Year result’ misleading?

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Why would such a proud company roll over and expose itself to DD with just a single bidder? We need to see the company's up to date financials to check this is legitimate takeover or just a bailout by another name. Unless we have better disclosure here, better informed holders will exit through mid may period at the expense of the takeover frenzied fodder, if takeover doesn't eventuate or values cvt a lot lower.

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