Tower had its worst week in almost nine years.
Serko, at its IPO.
New Zealand’s S&P/NZX 50 index rose this week as tech duo Serko and Vista Group International found favour among investors, while Infratil continued to advance amid renewed optimism about artificial intelligence having cashed up some of its stake in Contact Energy.
Tower was the biggest laggard of the week in its sharpest decline in almost nine years as its first-half earnings sank from a strong prior year, prompting analysts to revise down their outlook for the general insurer.
The NZX50 closed out the week on an upbeat note as Oceania Healthcare’s record result helped it enjoy its best day in almost two years, while Mainfreight drove the index as oil prices eased amid progress on the Middle East peace talks.
And retailers had a mixed response to Statistics New Zealand’s stronger-than-expected consumer spending figures for the first three months of the year, with economists warning the pain from the energy shock is still to come.
The NZX50 rose 113.24 points, or 0.9%, to 12,991.31, with 36 stocks gaining, 11 falling and three unchanged. That took the weekly gain to 0.2%.
Serko snapped five weekly declines to post the biggest gain on the week, climbing 13% to end Friday at $1.64. The travel software developer’s annual result was broadly in line with expectations, although it lifted its projected spending to accelerate its product development. Forsyth Barr analysts trimmed their price target and kept their ‘outperform’ rating on the stock, while Citi analyst lifted their price target by 2% to A$2.90 – the dual-listed stock jumped 9.6% to A$1.315 in late Friday trading on the ASX.
Meanwhile, Vista climbed 10% to end the week at $2.28, with the cinema analytics firm’s new cloud contracts finding favour with investors, and Infratil advanced 4.3% in its fifth straight weekly gain as AI optimism remained intact.
Tower had its worst week since July 2017, sinking 14% after the 40% decline in first-half earnings from a strong period a year earlier was in line with expectations, but prompted a downgrade to a ‘neutral’ rating by Forsyth Barr analysts and a 10-cent trimming of their price target to $2.40. It declined 3.1% to $1.865 on Friday, the biggest fall on the day.
“Tower continues to add customers and improve portfolio risk quality, but a challenging economic backdrop, the ongoing roll-through of risk-based pricing, and elevated competition are pressuring premium growth,” analysts James Lindsay and Georgio Toulis said in a note to clients.
The S&P/NZX 20 index futures contract for June was unchanged on Friday at 7,339, with 200 lots traded for a value of $1.5 million. The NZX20 rose 0.8% to 7,381.39.
Turnover across the main board was $153.7 million, of which Infratil accounted for $26.9 million, unchanged on the day at $15.90.
Oceania Healthcare led the NZX50 higher on Friday, climbing 9.2% to 71 cents after the aged-care operator lifted underlying annual earnings 20% to a record $97.7 million in the 12 months ended March 31 and signalled positive free cash flow in the current financial year. It didn’t declare a dividend, instead repaying debt to bring its gearing ratio to the bottom end of its target range.
Ryman Healthcare, which reports next week, jumped 6.3% to $2.18 and Summerset Group Holdings climbed 5.3% to $7.70.
Logistics group Mainfreight provided the biggest tailwind to the NZX50 on the day, rising 4.3% to $58.13 in the latest bout of hope that the US and Iran would reach a peace deal. The Polymarket prediction market was pricing in a 19% chance of a lasting peace by the end of the month and a 39% chance by the end of June. Brent crude oil futures rose 1.5% to US$104.12 a barrel.
Tourism Holdings jumped 9% to $2.19, while Air New Zealand was unchanged at 42.5 cents. The national carrier’s chief executive Nikhil Ravishankar told RNZ’s Nine to Noon programme that the airline needed to consolidate services, such as its new international routes out of Christchurch, to reduce the impact of the fuel shock.
Retailers were broadly stronger after Statistics New Zealand figures showed consumer spending rose 0.9% in the first three months of the year, beating economists’ expectations. Still, more recent electronic card spending data indicate households have pulled back their expenditure in recent months. The kiwi dollar traded at 58.75 US cents at 5pm in Auckland from 58.64 cents yesterday and was on track for a 0.6% weekly gain.
Darren Gibbs, a senior economist at Westpac NZ, said strong tourism growth contributed to the March quarter lift, and that the Middle East conflict has since squeezed discretionary incomes.
“The current quarter is likely to be a much tougher one for retailers – especially those selling discretionary items,” Gibbs said in a note. “And it is consistent with our view that the economy overall is likely to contract modestly during the quarter.”
KMD Brands rose 1.6% to 6.4 cents and Hallenstein Glasson Holdings advanced 2.2% to $10, while Briscoe fell 2% to $4.40. Outside the NZX50, Warehouse Group rose 2.3% to 65.5 cents and Michael Hill International slipped 1.3% to 39.5 cents.
Spark New Zealand was the most heavily traded stock on the top 50 index with a volume of 2.3 million as it rose 1.3% to $1.99.
Outside the benchmark, Pacific Edge slipped 1.8% to 27 cents on a volume of 3.7 million shares.
Asset Plus was unchanged at 17.7 cents as the commercial landlord posted a 67% decline in adjusted funds from operations due to leasing costs and incentives.
General Capital slipped 1.8% to 17 cents after the non-bank lender reported a 3% decline in annual profit, due in part to a writedown in the value of its Investment Research Group arm.
Reporting by Paul McBeth.
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