Mighty River shares find their range after strong start

UPDATED:

After a solid debut Mighty River Power shares have found a trading range with most of the first day action coming from institutional investors.

Having opened at $2.73, up 23c, shares in the electricity company settled down to trade at around $2.65 – a 6% premium on the $2.50 issue price.

Shortly before 4pm, more than 50 million shares had changed hands at a value of $135 million.

Brokers say it’s a very good start for Mighty River.

Most of the initial trading was between institutional investors with reports some local firms could not get allocated all the shares they wanted.

“We haven’t seen very much retail activity in the first day’s trading,” says Hamilton Hindin Green director Grant Williamson. “So I think the retail investors are looking at it from the point of view of a long-term investment and looking to collect the loyalty bonus after two years.

“There has been maybe a little bit of retail buying on the market but that’s mainly just investors looking to top up their holdings. Obviously there was some scaling involved for applications over $15,000 so a number of retail investors will be looking to spend their refund cheques with a few more shares.

Finance Minister Bill English says Mighty River shares traded as expected.

Mr Williamson says some institutions may need to weight their shareholding to the NZX indices but that will happen over a period of time depending on liquidity and market conditions.

“I think the stock has found a bit of a range and we may not see too much movement for a wee while, maybe a slight move on the upside but really it is going to now come down to the buoyancy of the market which obviously is very good at the moment.

“The stock will begin to follow the general market trend to some degree. And then the longer term it will depend on the guidance in the investment statement.

“It’s a good start from both points of view not just investors but also the government. It hasn’t listed at a huge premium where the government might get criticised for selling the crown jewels a little bit on the cheap side. So I think around these levels its traded today has been good from both sides.

EARLIER:

Shares in newly-floated electricity company Mighty River Power [NZX:MRP] have opened above their issue price, with a premium of up to 23 cents seen at the start of conditional trade.

Investors in the government privatisation float of 49% of Mighty River shares paid $2.50 and at the listing the first recorded price was $2.73.

While not quite as strong as the 20% premium Contact Energy delivered in its first few hours after first listing back in 1999, the 9.2% rise is seen as an excellent start for Mighty River.

"That's a very strong opening on liquidity," says Nigel Scott of Craigs Investment Partners. 

"That’s probably a slightly better opening than the market anticipated."

Within a few minutes the price edged lower to $2.70, up 20 cents, with more than 20 million shares traded. 

After an hour and a half, the price settled to around $2.65 as trade progressed in sizeable chunks.

Volume passed 40 million shares and brokers say it looks like 10% or more of the total stock will pass through the market on day one.

The float is to raise over $1.7 billion for the government, and is the first of three state owned electricity companies to be put up for partial sale with Meridian Energy tipped to go next.

In all 686 million shares were floated, with more than 113,000 New Zealand retail investors buying into the offer.

Treasury had expected more than 220,000 New Zealand retail investors after 440,000 people pre registered their interest.

However many so-called “mum and dad” investors were put off by a last minute Greens-Labour policy announcement to try and lower power prices.

The final price was also lower than expected due to the opposition parties’ proposal.

Mighty River Power supplies 17% of the country's power, through nine hydro dams on the Waikato and four geothermal outlets near Taupo. A 82MW geothermal plant is due to be commissioned shortly.

The company is one of the world’s largest geothermal power station owners and generates about 90% of its electricity from renewable sources.

Mighty River expects profits for the current year to climb to $94.8 million, up from $67.7 million last year, and is forecasting another jump in 2014 to $160.4 million.