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Last Article Uploaded: Tuesday, September 21st, 6:41PM

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The Markets

Earnings fail to excite the market

New Zealand shares fell as earnings results failed to impress investors worried about inflation. Serko led the decline after posting a near $30 million loss.

Wednesday, May 19th 2021, 6:16PM

by BusinessDesk

The S&P/NZX 50 Index fell 134.36 points, or 1.1%, to 12,294.26. Within the index, all but ten stocks fell, with three of those unchanged.

Serko’s loss, while hefty, was not unexpected and was in line with analyst expectations. The company today reported a net loss of $29.4m on operating revenue of just $12.4m.

Shares in the travel booking software company plunged 6.7% to $6.25 as investors were hoping for the stock to beat its expectations. Serko had a 2.2% jump ahead of the result yesterday and is up almost 9% this year.

Head of private wealth research at Craigs Investment Partners, Mark Lister said the lack of earnings guidance for the coming 2022 year had likely disappointed some investors as well.

Lister said the company was still on track to hit its revenue goal of $100m in the next few years.

“There are always a number of things around the corner that could go wrong, but I’d back them,” he said.

Argosy Property also gave back its pre-earnings spike, falling 2.6% to $1.51 today after jumping more than 3% yesterday. The stock is up marginally across the past five trading sessions. 

The property developer said annual net profit had more than doubled due to $157.7m worth of unrealised property revaluations. Net distributable income, a more tangible measure, rose to $67.7m from $59.6m.

Inflation fears appear to be weighing on investors around the globe, and particularly in interest rate sensitive stocks such as property.

NZ ten-year swap rates hit 2% yesterday and the yield on a ten-year bond rose to 1.9% as the market attempted to get ahead of a monetary policy statement from the Reserve Bank of New Zealand next week.

“The better global backdrop, higher NZ inflation pressure and a much better labour market suggest that the RBNZ must surely be contemplating the endgame for the current stimulatory monetary policy stance,” said BNZ interest rate strategist Jason Wong.

The central bank has so far refused to flinch as economic data has improved dramatically but the general consensus is interest rates can only go up from here – it is just a question of when.

Electricity generators were among those pulling the index lower today. This category of stocks makes up a significant portion of the NZX 50 and have contributed to its decline this year as bond yields have risen.

Mercury NZ dropped 4.3% to $6.27, Meridian Energy fell 2.1% to $5.21 – despite analysts noting recent heavy rainfall was providing a tailwind for the company – and Genesis Energy slipped 1.9% to $3.39.

There was no relief for A2 Milk which dropped another 1.4% to $5.48 as it continues to test new lows. Synlait Milk was down 1.7% at $2.88.

Tourism Holdings led the way among the handful of stocks to post gains, edging up 0.8% to $2.42.

Infratil climbed 0.3% to $7.32, despite posting a confusing $16m loss after a year seemingly chock full of victories. The investment company’s statutory earnings plummeted from a $484.2 million profit in the year to March last year.

However, its preferred measure – proportionate earnings before interest, tax, depreciation, amortisation and changes in the value of financial instruments – was up on last year at $398.8m. It announced an increased dividend of 11.5 cents per share.

The kiwi dollar was trading 72.35 US cents at 3pm in Wellington, down from 72.36 cents yesterday.

The trade-weighted index was at 75.15 at 3pm, from 75.24 yesterday. The kiwi traded at 92.96 Australian cents from 92.92 cents, 78.89 yen from 79.00 yen, 59.20 euro cents from 59.48 cents, 51.00 British pence from 51.07 pence, and 4.6499 Chinese yuan from 4.6555 yuan.

Tags: Market Close

« NZ shares rise as investors bet on earnings resultsLabour's big budget boosts sharemarket »

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Last updated: 20 September 2021 8:55am

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