Market News 19 May 2025

Johnny Lee writes:

MAY’S reporting season has had a strong start, with fishing and aquaculture company Sanford declaring its half year results.

One of the NZX’s oldest listed companies, Sanford has enjoyed a significant share price rebound over the last six months, rising 27 percent over that time.

Last week's result saw profit more than double, from $16.2 million last year to $34 million this year. 

This supported a modest 5 cents per share dividend and a significant reduction in net debt, which fell 25 percent.

The result was driven by a strong performance from the salmon division, with both volume and margin improving in that area.

The company warned that the full year result - due in November - would not replicate this performance. 

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MANAWA also produced its full year results last week, in what will likely act as the final set of financial results for the company. Contact Energy intends to finalise its takeover of Manawa in July.

Profit fell 99 percent, following sharp declines in both wind and hydro volumes. Manawa also wrote off $6.8 million as part of the Prime Energy collapse. 

This saw net debt increase 10 percent.

The company continued its ongoing asset refurbishment programme. Several turbine replacements were completed, and the solar and wind development pipeline saw progress, although these projects will ultimately be completed by Contact.

No dividend was declared. Such a payment would have been largely irrelevant for shareholders, as the takeover price has an adjustment for dividends paid.

The company also did not issue guidance, as it now expects any guidance to be superseded by that of the new owners, once the takeover concludes in July.

Manawa released further details of the takeover this morning, including the scheme booklet and independent valuation. Shareholders now have the opportunity to vote on the takeover proposal on 18 June. With the two major shareholders already signalling their intention to accept the offer, this is unlikely to be a roadblock.

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ONE sector enjoying a modest bounce of late has been the listed property trusts.

All of our major LPTs - Property for Industry, Vital Healthcare, Argosy, Kiwi Property Group, Goodman, Stride, Investore and Precinct - have seen an increase in share price this month. 

Whether this is a blip, or the beginning of a new trend, remains to be seen. The downward trend had persisted for almost four years.

May has not seen many updates from the property sector, although Property for Industry did publish an update in late April, upgrading its dividend guidance for 2025 and increasing 2026’s guidance.

2025 will see a dividend of 8.6 cents per share, climbing to 8.80 to 8.90 next year.

Outside of the PFI news, updates have been few and far between.

However, some data points may be evident soon. Argosy reports its full year results on Wednesday. Kiwi and Goodman report next week.

Another key driver may be the Reserve Bank’s decision on 28 May.

Lower interest rates lead to both lower funding costs, and increases to the relative value of fixed lease income. 

Market expectations remain that the Reserve Bank will cut rates at next week's meeting, with some expecting a 50 point cut from 3.50 percent to 3.00 percent. 

Such a double cut would be music to the ears of the Listed Property Trusts. The sector has been calling for further rate relief for months now, and worsening economic conditions may yet lead the RBNZ to bring about such relief.

The modest share price bounce over the last few weeks among the property stocks has been encouraging to observe. The upgraded dividend from Property for Industry also shows there is growing optimism from the sector, especially within the industrial and warehousing space. With interest rate relief on the horizon, investors will be hoping the worst is now behind the property sector.

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PROPERTY for Industry is just one of many companies on our exchange that has seen growing dividends in recent times.

The electricity sector has seen increases to their dividend payouts, with Contact Energy, Mercury Energy and Meridian Energy all lifting dividends over the last twelve months. Genesis Energy elected instead to divert some of its earnings towards an expansion of its solar generation profile, which saw dividends fall last year. Already, some of this reduction has been clawed back.

Both Vector and Chorus have also lifted dividends in recent years.

Companies like Infratil, Fisher and Paykel Healthcare and Skellerup have a history of consistently lifting dividends through both ends of the economic cycle, while others like Mainfreight and EBOS have paused these increases in recent history, citing uncertainty and other factors.

Some companies have seen dividend cuts, as companies look to balance debt and expenditure. Spark is an obvious example, cutting its dividend in February and leading many to wonder whether a further cut will be announced in August. Data centres are expensive. 

Heartland is another that recently cut its dividend.

Others have suspended dividends entirely, including Sky City, Ryman Healthcare The Warehouse and Fletcher Building. With luck, these will be reinstated soon. 

Dividends are a vital component for the incomes of investors. This is particularly true in New Zealand, where many investors invest specifically for this income stream. Decisions to cut or suspend dividends are not taken lightly, and often lead to grumpy shareholders.

With a diverse range of companies due to report over the coming two weeks, expect dividends to continue to remain under the spotlight.

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TWO offers closed last week, as the EBOS capital raising and the Summerset bond offer were both finalised.

The EBOS offer closed modestly oversubscribed, receiving applications of $54 million Australian dollars, $4 million above the $50 million sought. 

The company elected to accept ALL applicants in full. This includes those who applied beyond their pro rata entitlement.

The price applied to the offer was $36.65.

The Summerset bond also closed oversubscribed. It is clear that the dearth of new bonds has resulted in significant pent-up demand from bond investors.

This may be exacerbated in the coming months with a number of maturing bonds, including some from Infratil, Meridian, Auckland Council and Wellington Airport. Additionally, Manawa bonds may be repaid early, depending on Contact Energy’s final decision following the conclusion of the takeover.

The coupon of the Summerset bond was set at 5.70 percent.

The next issue expected to occur is the Capital Note offer from Chorus. Full details on this offer are expected shortly.

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Travel

Auckland (North Shore) – 26 May – Chris Lee

Auckland (Ellerslie) – 27 May & 28 May am – Chris Lee

Lower Hutt – 29 May – David Colman

Napier – 9 June – Chris Lee

Tauranga – 11 June – Chris Lee

Whanganui – 11 June – David Colman

Hamilton – 12 June – Chris Lee

Christchurch – 23 and 24 June – Chris Lee

Ashburton – 24 June(pm) – Chris Lee

Timaru – 25 June – Chris Lee

Please contact us if you would like to make an appointment to see any of our advisers.

Chris Lee & Partners