Ryman Healthcare drags NZ shares lower

New Zealand’s benchmark equity index edged lower as one of its 10 biggest stocks, Ryman Healthcare, shed $365 million from its market capitalisation following analyst downgrades.

Monday, May 24th 2021, 6:09PM

by BusinessDesk

The S&P/NZX 50 Index fell 10.61 points, or 0.1%, to 12,449.00.

Within the index, 14 stocks fell, 26 rose and five were unchanged. The retirement village operator fell another 5.3% to $13.15 today, bringing its decline since Friday’s weak result to 8.5%.

Investors are worried about Ryman’s mounting debt which rose by $540m to $2.25 billion in the year ended March, taking gearing to 44.3%.

Forsyth Barr analysts downgraded the stock, giving it an ‘underperform’ rating and slashing 11% off their target price.

“Ryman is now valued at a meaningful premium to both its historical average and peers despite having the lowest annuity ebitda growth in the sector and the highest leverage,” they said.

The analysts said rising debt levels will likely continue and will reduce Ryman’s ability to lift its build rate in the medium term. Jarden’s equity research team had already given the stock a ‘sell’ rating, but also trimmed their target price to $11.60 today.

The stock was overvalued due to its “stretched balance sheet that acts as a natural constraint on debt funded growth” and “unappealing absolute value with 16% downside potential”.

Synlait Milk told investors to expect a full year loss somewhere between $20m and $30m, prompting its shares to fall 1.6% to $3.05.

The milk processor had previously forecast a breakeven result, but today said ongoing shipping delays will result in some expected sales to now occur after the 2021 balance date. A2 Milk followed Synlait lower, after some recovery during the past two trading sessions.

The stock dropped 2.7% to $5.87 today but remains above this year’s low of $5.42.

My Food Bag dropped to a new record low, down 4.9% to $1.35 today, even as equity research teams reaffirmed their rating of the stock following its earnings result. Jarden analysts bumped up their 12-month target price by 5 cents, to $1.95, describing the stock as attractive due to its large addressable market and scalable business model.

The “clearly disappointing” share price performance may be due to investor concern about the durability of revenue and ability to retain customers, the analysts said.

Investors will be looking ahead to the Reserve Bank’s monetary policy statement on Wednesday afternoon, which may have an impact on interest rates, as well as earnings from market heavyweights Mainfreight and Fisher & Paykel Healthcare.

Pacific Edge – which is also reporting later in the week – was one the biggest gainers on the day, climbing 2.6% to $1.19 after already gaining 4.5% across last week.

The stock is getting closer to analysts' ambitious valuation at $1.40.

The kiwi dollar was trading at 71.70 US cents at 3pm in Wellington, down from 71.87 cents on Friday. The trade-weighted index was at 74.64 at 3pm, from 74.70 last week. The kiwi traded at 92.83 Australian cents from 92.61 cents, 78.10 yen from 78.23 yen, 58.85 euro cents from 58.76 cents, 50.70 British pence from 50.69 pence, and 4.6153 Chinese yuan from 4.6235 yuan.

Tags: Market Close