Market News 9 June 2025

Johnny Lee writes:

New Zealand small cap Pacific Edge has announced its financial results and a capital raising, as the company seeks to raise $20 million from shareholders to accelerate its growth strategy. This includes increased investment in clinical evidence generation, aiming to provide more robust justification for the use of its products by healthcare providers.

This figure was later increased to $21 million, following demand from institutional shareholders. The market capitalisation of the company prior to this new issuance was barely $80 million.

The $21 million raising is being completed in two parts, with $16 million allotted to institutional shareholders and $5 million set aside for retail shareholders.

The funds will be added to the nearly $20 million cash already on the company’s books, which should provide approximately 12 months of breathing space.

Pacific Edge elected to price this issue at a premium to market, with the offer priced at 10 cents per share, compared to around 8.2 cents at the time of the announcement. Typically, capital raisings are conducted at a discount to encourage participation.

Pacific Edge did this after consulting with institutional backers, who expressed support at that pricing. The share price has since rallied and now trades close to 10 cents per share.

The timing of the issue is also unusual.

While the institutional placement has already taken place, it has not yet been approved by shareholders, with this approval not being sought until late July. Allotment is expected in August. Retail shareholders will be invited to participate at the same 10 cents per share, also in August. These dates remain subject to change.

For Pacific Edge, the $16 million provides confidence in committing to its longer-term plans, particularly when the short-term picture – clouded by uncertainty around Medicare coverage – remains highly uncertain.

For retail shareholders, it remains business as usual for now. In August, shareholders can expect a request from the company seeking $5 million – again subject to change – at 10 cents per share. Given current global volatility, it is pointless to speculate whether this price will represent fair value.

Outside of the capital raising, the company also reported its financial results.

Revenue fell 8% to $21.8 million. The loss widened to $29.9 million. Net cash fell from $50.3 million to $22.6 million (as at March end).

The major issue remains the loss of Medicare coverage, which took effect in late April.

The company is now focused on regaining coverage for some products, and obtaining coverage for its newer range. It is also seeking to grow revenues in the non-Medicare space, where it has had modest success.

The coming 12 months will be busy, with several reconsideration requests under review. If these are successful, and Medicare coverage resumes, shareholders would expect much greater certainty around cashflows and profitability. If not, a pivot in strategy may be required.

It has been a long and difficult journey for Pacific Edge shareholders. Receiving yet another invitation to inject capital will be neither welcome nor unexpected. Retail investors have another two months to decide whether 10 cents represents fair value, and whether to commit further funds to a company once again trading near record lows.

Fisher & Paykel Healthcare’s record result has sent its share price higher, with strong growth across all key metrics.

Revenue grew 16%, net profit rose 43%, and the dividend increased by a further 0.5 cents per share.

The company has returned to a healthy net cash position, with over $200 million now on the balance sheet.

Tariffs remain an unresolved issue, unlikely to be clarified during the current US presidential term. Fisher & Paykel has included a potential tariff impact in its 2026 guidance, but notes that this is based on numerous assumptions about how tariffs will be applied.

In reality, it is impossible to forecast this accurately, as the rules appear to change week by week.

New Zealand ownership of Fisher & Paykel Healthcare has now been eclipsed, with Australian ownership (36%) exceeding local ownership (34%). The company is dual listed, and Australian market volume has been steadily growing for years.

Fisher & Paykel remains New Zealand’s largest listed company by market capitalisation.

Outlook remains strong, with a full year result expected in November in the range of $390 to $440 million. The company hopes its continued investment in Research & Development, patent expansion, and evidence-based healthcare will support a continuation of its historically strong performance.

Fisher & Paykel remains one of our best-performing companies and has been an immensely successful long-term investment. It is cash-rich, profitable, and pursuing a credible long-term growth strategy, while investing in better outcomes for patients globally.

Mainfreight’s result also pleased investors, with another increase in both revenue and net profit.

The dividend was unchanged.

Revenue grew 11%, and net profit rose 31%.

Mainfreight also operates in a net cash position, with approximately $14 million on hand.

The company continues to invest in growth, with around half a billion earmarked for capital expenditure over the next two years.

Across divisions, all three core products – transport, warehousing, and air & ocean – saw revenue growth. Demand for logistics remains strong, particularly towards the second half of the year.

By region, Australia continues to lead with strong gains in revenue and profit. Europe also recorded modest growth. Asia and the US continue to lag. New Zealand, once its largest market, saw profit before tax decline 10%.

Outlook remains positive, with the company expecting a soft start to the year – shaped by short trading weeks and tariff uncertainty – to give way to a stronger second half as improvements are made.

The company is taking a prudent approach to the current environment: moderating capital expenditure, managing overheads and labour costs, and focusing investment in areas likely to provide the best opportunities for long-term growth.

Bond issues

Infratil confirmed that its 7-year senior bond, will have a fixed interest rate of 6.16% per annum. This was set slightly higher than the minimum interest rate, with Infratil covering the transaction costs (resulting in no brokerage payable by clients).

Clients who would like this bond should urgently contact us for an allocation.

Payment will be due no later than Friday, 13 June. 

Travel

Whanganui – 11 June – David Colman

Wellington – 18 June – Edward Lee

Auckland (North Shore) – 25 June – Edward Lee

Auckland (Ellerslie) – 26 June – Edward Lee

Auckland (CBD) – 27 June – Edward Lee

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

Chris Lee & Partners