Market News 28 April 2025

Johnny Lee writes:

READERS would be forgiven for losing track, but the US markets rallied late last week, following the announcement from the US administration that it would “be very nice” and that the previously announced tariffs would “come down substantially”.

Share investors have endured a wild ride of late, particularly holders of the commonly used US ETF “USG”. The value of the fund has seen 10 per cent fluctuations week to week. So far this year, the fund is down 17 per cent overall.

The issue now may be one of credibility. It has become increasingly difficult for companies to accurately forecast markets, let alone investors trying to make long-term investment decisions.

This may become apparent next month. With April now almost over, investor attention is turning to reporting season. While the financial results will reflect the previous period, focus will be on the company guidance on the outlook ahead.

May sees a number of our largest companies report their financial results, including Ryman, Mainfreight and Fisher and Paykel Healthcare. All three of these companies have their own unique challenges at the moment.

Ryman’s share price continues to slide, following the undersubscribed rights issue from March. That stock placement saw the underwriters and sub-underwriters carry a significant share of the burden, and selling pressure continues to this day. 

Mainfreight is currently one of the worst performing stocks of the year and is trading down 21 per cent for the year so far. This decline is not out of place among other, larger global logistics companies. Ultimately, freight companies will flourish when the world is freely trading and transporting goods around the world. Tariffs and other trade barriers will instead see countries become more insular.

Fisher and Paykel, of course, remains in limbo with the threat of tariffs still seemingly unresolved. So far, the company’s response has been to “look through” the entire affair, but the lack of clarity has hurt its share price as investors retreat to cash and bonds.

Most of these companies report late in May. With the volatility seen over the past few weeks, some last-minute adjustments may be needed.

 _ _ _ _ _ _ _ _ _ _ _ _

ANOTHER company reporting next month is Infratil, which recently published a shareholder newsletter following a visit to one of its new data centres in Melbourne.

CDC, the subsidiary which operates these data centres, has been a major driver of Infratil’s growth over the past few years, with its share of the business growing to valuations nearing $7 billion New Zealand dollars.

At the same time, the value of data centre operators around the globe has declined this year. Major Australian data centre operator NextDC has declined 25% so far, with fears of increased competition and a pullback in demand.

Infratil remains ambitious longer term, highlighting the value of the long-dated contracts being signed, and the strong reputation the company is developing as a leading operator in the data centre space.

Infratil also highlighted its environmental credentials – including its investments into liquid cooling systems which remove the use of water in the process. Water usage is a hot-button issue for many users in this sector, and being an early adopter of these technologies may very well prove a useful edge against the competition.

As for May’s result, an update regarding Longroad will also be useful for shareholders. Infratil will be better placed than most to assess the state of renewable energy in the US at present. 

_ _ _ _ _ _ _ _ _ _ _ _

MILLENIUM and Copthorne shareholders received an update last week regarding the takeover offer currently tabled by CDL Hotels.

MCK received a takeover offer in January this year, with its majority shareholder CDL Hotels offering to buy the remaining shares that it did not already own at a price of $2.25 per share.

In February, the independent directors of MCK formally responded, stating their view that the offer was too low, and that an independent valuation would be solicited to determine an external view of the company.

Two weeks later, the independent directors advised that this value was independently determined to be nearer $4.70 per share.

Last week, CDL gave notice that it intends to lift its offer price from $2.25 to $2.80 per share. CDL is also waiving its previous minimum acceptance threshold, meaning all sellers who accept the offer will receive payment, regardless of the overall response.

Those who have already accepted will receive the higher price.

The independent directors responded to the new offer this morning, again rejecting the offer as too low compared to the independent valuation.

This new offer will be the final one made by CDL Hotels this year and is very much a “take it or leave it” offer. As CDL already controls 76% of the company, a competing bid has not emerged and seems improbable at this stage.

This situation – where a large shareholder controls a large proportion of a listed company – is not unique. Restaurant Brands is majority owned by Finaccess Capital, Briscoes is majority owned by the RA Duke Trust and Manawa Energy is majority owned by Infratil. Manawa, of course, is currently under takeover from Contact Energy.

Millennium Copthorne’s update last week has propelled the company up 60% for the year, to mark it as one of our best performing stocks for the year. Regardless of outcome, the independent directors have managed to squeeze an improved offer from CDL. It remains well short of the figure suggested by the external valuers. However, retail shareholders will need to make a choice as to whether to accept the highest price seen in more than five years or remain minority shareholders.

Shareholders have until 8 May to accept the offer.

_ _ _ _ _ _ _ _ _ _ _ _ 

FOUR other companies have received a takeover bid this year, with at least two of them likely to proceed to a successful conclusion.

IkeGPS and Smartpay have not published any updates, although one of Smartpay’s suitors, Tyro, stated at the time that the discussions would remain ongoing for some time. 

Marsden Maritime’s takeover has received the approval of Northland Regional Council, which was considered a key step for the takeover progressing. Further updates to this offer are expected throughout May.

Meridian’s offer for New Zealand Windfarms is progressing, with a number of institutional shareholders accepting the offer. A booklet is expected to be sent to New Zealand Windfarm shareholders shortly, prior to the vote, expected in May.

The other company under takeover, Manawa, will also receive an update by next week. The Commerce Commission has already delayed its decision multiple times, and shareholders will be hoping for some clarity on (or before) the due date of 9 May. The Manawa share price continues to lag the takeover value, suggesting market expectations remain low.

May is shaping up to be an important month for share investors.

_ _ _ _ _ _ _ _ _ _ _ _

Travel

Lower Hutt – 29 April – Fraser Hunter

Auckland (Ellerslie) – 1 May – Edward Lee

Auckland (Albany) – 2 May – Edward Lee

Palmerston North – 6 May – David ColmanWellington – 7 May – Edward Lee

New Plymouth – 9 May – David Colman

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

Chris Lee & Partners