Chris Lee & Partners Ltd

Market News 17 August 2026

Johnny Lee writes:

Vital Healthcare has published its full year results, posting an increase in distributable profit as it completed its first year since the buyout of its management contract. Vital Healthcare owns a portfolio of hospitals and healthcare facilities across New Zealand and Australia.

Vital raised $220 million from its shareholders last November, as part of its plan to buy out Northwest as the manager of the Trust for $214 million. Management fees totalled over $17 million in FY25, and over $24 million in FY24, before being bought out by Vital. This $214 million was later determined to be fully deductible for income tax purposes, resulting in a net payment nearer $180 million.

One of the main attractions to Vital as an investment prospect is the very long-dated nature of its income. Its tenants (healthcare facilities) sign extremely long leases, with over 80% of its leases not due to expire for another 10 years. This leads to predictable, known income, with flows through to predictable, known dividends.

Gearing improved modestly and now sits under the 40% mark. This was driven by both the balance of the equity raise, and modest revaluation gains. Net Tangible Assets fell, although this was largely due to the capital raise: the 16% increase to net assets was outweighed by the 19% increase in number of shares on issue. 

Building new and developing existing facilities remains a key pillar of its current strategy. Three developments concluded this year, including the refurbishment at Boulcott Hospital in Lower Hutt. 

Guidance remains unchanged. The company expects another annual distribution of 9.75 cents per unit, as it continues to navigate its development pipeline. Longer-term, it hopes that distributable income will climb, as these developments complete and leasing activity commences.

Overall, it was a year of significant change for Vital. The buyout of its management contract has resulted in significant long-term cost savings. Vital continues to use its balance sheet to target long-term income growth, as it looks to improve occupancy at its most recent developments, and continue pre-leasing its upcoming projects.

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A2 Milk’s result left the market disappointed, as the company reported a modest decline in net profit.

It is worth noting the wild ride the share price has endured this year. It began the year around $10.50, soared to almost $12, halved to $6, then rallied back to $8.20 prior to the full year announcement. The price has since fallen 10% to $7.40 after the results were announced. 

Sales remain strong. The Asian segment climbed 11%, Australia and New Zealand rose 10% and the US business finally began to gain traction, up 28%. The weaker New Zealand dollar also helped. 

The company continues to see positive signs out of Chinese birth rates. A modest increase in Chinese marriage rates, considered a key leading indicator, is expected to lead to a rebound in newborns. 

A2 notes that although market share weakened, this was being largely driven by a lack of supply. Consumers were choosing to use alternative brands due to the lack of product on the shelves, an issue the company was actively working to resolve. 

This lack of supply was being caused by an unusually high level of demand depleting existing stocks, “freight challenges”, Synlait production issues and additional customs requirements. 

The balance sheet remains in a strong state, despite the capital return earlier this year. The company has over $700 million in cash, allowing it to increase its dividend to 9.5 cents per share for the 6 months. This brings the full year dividend to 21 cents (ignoring the special dividend), up from 20 cents.

Outlook was cautious, with the company highlighting the supply chain difficulties it is currently experiencing. It expects the half year result, due in February, to reflect this, before seeing more meaningful improvements in the second half of the financial year.

A2 Milk is planning a further update in mid-November, where it hopes to have an update to the current supply chain difficulties it is currently navigating.

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Freightways, the owner of various commercial brands including New Zealand Couriers and Post Haste, has also published its results, with rising profits leading to rising dividends.

Revenue climbed 13%, profit was up 17% and the dividend rose 12%. Despite this, the share price eased after the announcement, down 5%.

The full year result from Freightways acted as a reminder of the year that was – a clear upward trend for the first half, before a sudden deterioration following the conflict in the Middle East.

For Freightways, the sharp increase in fuel prices in March led to a notable consumer response, noting “current demand has not returned to pre-Middle East war levels”. 

Gearing climbed throughout the period, reflecting the acquisition of VT Freight Express in December. Gearing now sits at 35% excluding lease liabilities, within the company’s targets.

The 6-month dividend climbed to 24 cents per share, up from last year’s payment of 21 cents. 

Looking forward, development at the Christchurch Airport facility and Palmerston North Airport facility is progressing. Both are expected to complete by the first half of next year. 

The company is also looking at further acquisition targets in Australia. Freightways has explored over 70 such opportunities and is actively considering making such acquisitions in the medium-term.

Overall, despite the positive performance, the company’s outlook was middling. Freightways is realistic about the impact of higher fuel prices on consumer demand, having observed a strong demand response mid-year. This year, Brent crude has swung from $60, to $110, to $70 and now sits around $88 a barrel. Freightways will be hoping for some degree of normalisation by the end of the year.

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David Colman writes:

Auckland’s long awaited City Rail Link (CRL) will open officially on 13 September.

The massive inner city infrastructure project opening has the potential to revitalise a city that has been hampered by the project itself.

Underground rail is commonplace in cities around the world and provides a safe, fast and frequent public transportation option and the CRL is expected to significantly increase Auckland’s transport capacity.

The completion of the project will also mean the multi-year disruptions above ground which included the blocking of roads and footpaths as the tunnels were bored, tracks were laid, and stations were built will dissipate.

Visitors to Auckland in recent years have had to navigate these obstacles and, much like Christchurch following the 2011 earthquakes, visitor impressions can affect tourism numbers as word-of-mouth describing mesh fences, endless orange cones, blocked streets and noisy construction sites deters travellers away from the city.

The New Zealand International Convention Centre (NZICC) opened in February, new train stations in Drury and Paerātā opened in August, and Auckland Airport’s terminal integration is scheduled for completion by 2029 which should result in Auckland being viewed more positively by visitors and residents alike.

Auckland is a massive driver of growth for New Zealand (a third of New Zealanders live there) and the opening of the CRL in conjunction with these other projects is ideally helping provide some much-needed economic momentum for the city and by extension the country.

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Travel

Johnny Lee - Taupo - 1 September

Johnny Lee - Hamilton - 2 September

Johnny Lee - Tauranga - 3 September

Johnny Lee - Christchurch - 7 September (FULL)

Markets News 10 August 2026

Johnny Lee writes:

Contact Energy’s annual result was announced this morning, bringing both rising earnings and rising dividends.

Earnings rose 31%, while profit climbed 62%. The September dividend of 24 cents is a cent higher than last years, while also enjoying a higher level of imputation. The dividend is forecast to rise again next year, from a 40 cent full year dividend (24 and 16) to 42 cents per share.

Progress continues at Contact. The synergies between Manawa and Contact have now been achieved, while the development pipeline continues to be utilised as new demand emerges.

Perhaps the most interesting part of the announcement was that of a potential major new data centre, to be developed in Stratford. The data centre would be designed and owned by CDC Data Centres, with electricity supplied by a long-term agreement with Contact. At this stage, the data centre remains in the concept stage, with each group “exploring” the possibility.

The data centre, initially scoped for a 250MW size, would be similar in size to the “AI Factory” data centre proposed for Makarewa, by Datagrid. Interestingly, a key aspect of the Southland data centre was the fibre connectivity introduced by the planned “Tasman Ring Network” of subsea cables. The TRN initially included three other landing spots across New Zealand – Auckland, Greymouth and New Plymouth.

The electricity generators have long suggested that data centres would play a major role in future electricity demand. Contact has suggested that a large solar farm and a very large battery installation would be utilised for the facility.

Indeed, Contact highlighted the “shape” of the demand as a major benefit. Data centres use more power during the summer to cool down, while New Zealand retail demand tends to spike in winter, as we reach for the heaters.

The two companies involved, Contact and CDC, share a significant shareholder in Infratil Limited. Infratil reduced its stake in Contact back in May this year, while also agreeing not to reduce it further until the announcement of Contact’s full year results (today). This “overhang” will hopefully resolve itself soon, as Infratil makes its intentions clearer.

There was also a snippet in the full year results of interest to bond investors. Contact has confirmed that it intends to redeem the Capital Bond, CEN060, in November this year. It then intends to issue a replacement bond. CEN060 was a $225,000,000 issue. With the lack of primary issuance of late, this will be welcome news for those with surplus investible capital.

Overall, the announcement was well received by the market, with the share price rising 1%. Progress continues, and new projects are emerging to help firm up the demand for New Zealand electricity.

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The unemployment rate continues to creep higher, with 5.6% of New Zealanders now classified as unemployed.

It marks the highest level in 11 years. Unemployment continues to be heavily biased against the North Island, with a figure of 6% in the North and 3.7% in the South. Women also saw a lower unemployment rate, a more recent trend in our unemployment statistics. 

The employment rate was steady at 66.7%, despite the rise in unemployment. The discrepancy between the two statements is reflected in the participation rate, or the proportion of New Zealanders actively looking for work, which climbed.

The result was broadly expected, only marginally higher than economist expectations. Many expect the weaker than expected job creation to be spurred by renewed uncertainty from employers around tariffs and fuel costs, factors that may improve by the time of the next data release.

Accordingly, the market broadly took the result in its stride. Market pricing continues to imply several rate hikes over the next twelve months, with the RBNZ next meeting on 2 September.

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The announcement from ANZ, confirming its intention to buy back the $600 million of its listed Subordinated Notes (ANB170), will not have caught informed bondholders by surprise. The notes will be repaid on 17 September and total $600 million.

These securities were part of the round of Tier 2 Capital raised in 2021, with the ANB170 paying 2.999% for a ten-year period. Like many of these Tier 2 issues, it carried a prescribed option for the ANZ to redeem the notes after 5 years. This option has now been exercised.

Due to the relatively low coupon carried by these notes, the early redemption will be welcomed by long-term noteholders, who can now secure higher returns than those seen five years ago when this product was launched. Indeed, comparable products trade nearer to 5% on the secondary market today.

Since the most recent capital setting review from the RBNZ, this style of issuance (Additional Tier 1 and Tier 2) has been the topic of some discussion, as funding was driven in-house and AT1 was signalled to be removed from the “capital stack”. 

The Perpetual Preference Shares, listed on the NZDX, are one such example of Additional Tier 1 Capital.

Additional Tier 1 Capital was created to act as a buffer between certain debt (including Tier 2 Capital), and shareholders, in the event of a bank failure. That is to say that, after wiping out all shareholder equity, AT1 Capital Preference Shareholders would be next in the firing line, if necessary, to repay higher ranking debt holders.

The Perpetual Preference Shares issued so far have carried an optional redemption date, giving the issuer the right to repurchase the bonds at par. With the exception of COVID, which saw delays in repayment, all these issues have repaid at the first available redemption date.

In practice, this means that the Perpetual Preference Shareholders have received a modestly higher return and have been repaid as expected. For some, like ANZ, BNZ and Kiwibank, this has meant continued issuance and high levels of demand for such products, reflecting the trust earned.

With the most recent RBNZ review, AT1 capital is being phased out for the major banks, with the new Capital Standards beginning on 1 December 2028. New AT1 capital instruments cannot be issued by this group after 1 October of this year.

This change has triggered the “Regulatory Event” clause of the Preference Shares and presented the option for the banks to redeem them early. Such an early redemption could affect the likes of ANBHD, BNZHA, BNZHB, KWBHB and WNZHA. The issuers of these securities have already indicated to market that an early redemption is being considered. The sum of these five issues is $1.75 billion.

For most holders, such an early redemption would not be anything beyond inconvenient. These holders have enjoyed outsized returns and have had their principal returned, albeit earlier than anticipated. 

The future of capital requirements will no doubt continue to evolve, as the RBNZ tries to strike a balance between resilience and efficiency. These instruments were created to help the banks adhere to a set of rules, and these rules are undergoing constant evolution. For now, new issuance seems less likely, and bondholders should consider their liquidity needs ahead of the 17 September date.

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David Colman writes:

Japan and the USA proved to the world how closely linked their financial fortunes are with a rare, coordinated currency intervention.

On 31 July, Japan’s Ministry of Finance purchased Japanese yen in coordination with the U.S. Department of the Treasury.

It is estimated that the Bank of Japan bought approximately US$50 billion worth of yen and the New York Federal Reserve sold euros and bought up to US$10billion worth of Japanese yen which was at a near 40-year low against the US dollar.

Loose monetary policy epitomised by low interest rates set by the Bank of Japan has eroded the yen’s value in US dollar terms for years.

Japan imports 90% of its energy needs, such as oil, natural gas, and coal, so the yen has been particularly sensitive to elevated commodity and fuel costs of late.

The Japanese currency is no longer viewed as a safe haven currency like it once was.

The joint currency intervention by two of the largest and most influential global economies provided a clear example of intervention risk - the risk that large, powerful institutions such as governments and central banks will intervene in a particular market.

The last time coordinated currency intervention occurred by the two nations was in 2011 when the Japanese yen was sold in a response to it surging in value after the Great East Japan Earthquake (the tsunami of which inundated the pacific coast of the Tōhoku region critically damaging the Fukushima Daiichi power plant). The case for intervention then was to restrain Japanese selling of their overseas investments to raise cash (in yen) during a crisis. One US dollar could buy about 77 JPY in 2011, less than half the 155 JPY it can buy today.

Last week’s intervention was not tied to a major natural disaster despite coincidentally a significant, seismic event in Kumamoto, Japan occurring the same week.

The Japanese Finance Minister Satsuki Katayama revealed that both countries had bought yen in line with a Japan-USA currency alliance.

At odds with the intervention, a joint statement from the countries’ respective finance ministers in September last year reaffirmed their view that exchange rates should be market-determined so the intervention was a shock to global foreign currency traders who will now have to factor in that two sovereign states are determined to protect the yen. 

The defence of the yen was accompanied by warnings to speculators that the alliance will use aggressive measures to halt further falls in the yen in a bid to stabilise exchange rates.

The yen had fallen to about 164 to the US dollar before the intervention perhaps identifying a level that will not be tolerated by the alliance.

For New Zealanders the intervention is expected to have some ramifications as the USA and Japan are New Zealand’s 3rd largest and 5th largest trading partners respectively.

A stronger and protected Japanese yen will be beneficial to exporters to Japan but would be expected to make the cost of imports to New Zealand from Japan higher.

New Zealand exports to Japan include dairy products, fruit, aluminium, meat, and timber with imports from Japan including vehicles, machinery, fuel, and electronics.

The U.S. backed purchasing of the yen was funded by selling Euros which might have been designed to keep overall USD strength. Typically, the currency used to prop up the value of another currency is weakened.

U.S. Treasury Secretary Scott Bessent intended the intervention to strengthen the yen and in turn keep other Asian currencies from weakening by limiting incentives for Asian countries to devalue in competition with each other. He emphasised that the intervention was a strong signal to speculators but noted that fundamentally Japanese adjustments to monetary policy and fiscal strategy will be required to provide ongoing support for the yen.

A major factor and a key catalyst for the joint intervention was that the Bank of Japan has kept interest rates low which has pushed the yen to 40-year lows against the US dollar.

The U.S. Treasury is fearful that if the Bank of Japan requires US dollars to defend the yen’s value then it and other Japanese Financial Institutions will seek to sell US Treasuries.

Japan is the largest holder of U.S. debt outside the USA with over US$1.1trillion in U.S. Treasuries and if a decision is made by one foreign country to sell U.S. debt then it is possible other countries may follow suit.

If U.S. Treasuries are sold off more aggressively it would result in higher interest rates for the U.S. Treasury and by extension higher global interest rates for businesses and consumers with corporate borrowing rates and mortgage rates likely to climb further in such a scenario

10 year U.S. Treasury yields have risen sharply since the initial U.S./Israel strikes on Iran in late February from slightly below 4.00% to over 4.65% today.

Current yields are close to levels not seen since before the 2007/2008 Global Financial Crisis  -the US 10 year treasury rate was last above 5.0% in 2007 before plummeting and staying lower (generally below 3%) throughout the 2010s.

Tariffs that are seen as barriers to trade, geopolitical events that have caused higher energy prices, and US Government spending far exceeding tax revenue are all global inflationary pressures and are impacting the longer-term outlook for interest rates.

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Travel

Johnny Lee - Taupo - 1 September

Johnny Lee - Hamilton - 2 September

Johnny Lee - Tauranga - 3 September

Johnny Lee - Christchurch - 7 September

Market News 3 August 2026

Johnny Lee writes:

Spark

Spark Limited looks set for a further change, as the company gears up to begin another restructure.

The restructure will look to divide the company into two divisions. The first, Connectivity, will represent the core business of Spark. This includes mobile, broadband and its business arm.

The second division, Digital Services, would encompass “beyond the core” elements of Spark, including its cloud and IT services.

At the same time, Spark announced a strategic review of the new Digital Services brand. While Spark did not commit to a sale of the division, the review was being undertaken to “maximise shareholder value”. 

The review is expected to conclude early next year. The interim head of this division, Greg Clark, has since announced he will be leaving the firm at the end of the year. 

Assuming the review results in a sale of its Digital Services division, the next step would be a determination by the board as to the best use of its proceeds. Recent asset sales have led to significant debt reduction.

The market responded positively to the announcement, with the share price rebounding around 20 cents per share. So far, Spark’s share price seems to respond more positively to announcements which undo initiatives, rather than those that create initiatives.

Separately, Spark also affirmed its previous guidance, ahead of its financial results to be released on August 20. Free cash flow is still expected to total between $290 million and $330 million. At a midpoint, this implies a full year dividend of around 8 cents per share, bringing the total annual dividend to around 16 cents per share.

It has been a lousy few years for Spark. A combination of poor strategic decision-making and a difficult trading environment has led to significant declines to both the share price and the dividend. Its result announcement on 20 August will need to instil confidence in shareholders that the long-term plan, SPK 30, remains on track and that the company has finally found its footing.

2 Cheap Cars

2 Cheap Cars, formerly NZ Automotive, is heading back to private ownership, five years after listing on the exchange.

Its majority shareholder, Yusuke Sena, also known as David Sena, has formally offered to buy back the shares he does not already own. Mr Sena already controls around 77% of the existing shares.

Sena also acts as the company’s chief executive.

NZ Automotive listed in 2021 as a compliance listing. A compliance listing means that the company did not raise capital, instead listing as a way to introduce external shareholders and provide liquidity for existing shareholders.

NZ Automotive operates a series of 10 dealerships across the country under the 2 Cheap Cars brand. Four of these are outside of Auckland, including Hamilton, Tauranga, Christchurch and Wellington (in Lower Hutt).

A large placement occurred shortly after listing, as shareholder Eugene Williams sold 9.3% of the shares on issue, about 20% of his holding, at 93 cents per share. The company’s announcement at the time stated that the purpose of this sell down, which raised approximately $4 million for Mr Williams, was to improve liquidity in the company’s shares.

A few months later, the company was ensnared in further drama following mass resignations across its board, including the resignation of Mr Williams. This was put down to a “fundamental breakdown of trust” and “irreconcilable differences”. The CEO, David Page, also tendered his resignation, shortly followed by its auditor, Grant Thornton, resigning from its role.

The share price collapsed to 44 cents and eventually reached a low of around 23 cents. 93 cents was never seen again.

But the company survived. Its two largest remaining shareholders, Sena and Williams, agreed to a transaction where Sena would acquire William’s remaining holding at 32 cents per share, which was subsequently approved by shareholders. 

Its new CEO Paul Millward then resigned, leading to Sena taking over the CEO role in 2024.

Now, Mr Sena is aiming to take the company private by buying back all the remaining shares at 80 cents each. In recent media interviews, he has expressed the view that the company should never have been publicly listed, stating that the company was not suited for public ownership. 

On this point, he is undoubtedly correct. With a market capitalisation of around $36 million and a full year profit that has ranged from $3 million to $6 million in recent years, the costs of being listed were difficult to justify. This does not just refer to the actual fees associated with the NZX, but also the time and energy required to adhere to the standards expected of a publicly listed company. 

Realistically, with over 75% of the shares tied up long term in the CEOs control, there were few benefits remaining for the retail shareholders, and a takeover was the cleanest way of writing the final chapter of 2 Cheap Cars’ story as a listed company.

Two main lessons should be taken from this affair.

The first is the value of investing in very small companies. Investing in these microcaps can be hit and miss, and has proven to be more miss than hit of late. Many have elected to simply leave the exchange, leaving minority shareholders without a platform with which to trade their shares. In this instance at least, Mr Sena is buying out the remaining shareholders.

The second lesson is the caution required when purchasing shares in a company with a single, very large shareholder. Such investors must ensure that their values and financial goals align with those of the majority shareholder – a rule that applies across the market, whether one is considering Meridian Energy or Winton Land.

Assuming it meets 90% acceptance threshold, 2 Cheap Cars intends to make payment by 24 August. Acceptance of the offer must be done online and is unanimously recommended by the independent directors.

Precinct Convertible Notes

Last Monday, this column discussed the upcoming conversion of the listed Precinct Convertible Notes, PCTHB. This led to some discussion from clients regarding the optimal strategy ahead of the possible conversion of these notes into ordinary shares, as we approach the 21 September conversion date.

Precinct, of course, has the right to repay these bonds in cash, rather than convert them into shares. Such a cash conversion would cost the company $65 million, being the number of PCTHB on issue. The first issue, PCTHA, converted to shares.

Last Thursday, Precinct announced it had raised $65 million via a five-year wholesale bond issue, to “refinance upcoming maturities.” 

A cash repayment of the PCTHB would be most welcome.

Travel

David Colman - New Plymouth - 7 August

Edward Lee - Auckland (Ellerslie) - 6 August

Edward Lee and Gavin Parkes – Wellington – 10 August

Johnny Lee – Taupo – 1 September

Johnny Lee – Hamilton – 2 September

Johnny Lee – Tauranga – 3 September

Johnny Lee – Christchurch – 7 September