Z Energy jumps but index suffers from ‘endemic covid’

Shares in fuel retailer Z Energy jumped almost 7% on an improved takeover bid, while the rest of the market declined on data which suggests endemic covid is slowing US jobs recovery.

Monday, October 11th 2021, 8:43PM

by BusinessDesk

The S&P/NZX 50 Index fell 67 points, or 0.5%, to 13,019.37. Turnover was $161 million.

Employment data released in the United States caused share markets there to move lower on Friday night. Asian markets are following that lead with US futures pointing towards another decline on Monday night.

The US payrolls report showed just under 200,000 new jobs were created in September when economists were expecting 500,000.

“The delta variant outbreak in the US is thought to be at least partly to blame for the underwhelming job gain,” said BNZ strategist Nick Smyth.

NZ has its own delta outbreak to deal with and economists will be watching electronic card transaction data tomorrow to get a sense of how badly the economy has been affected.

Covid cases continue to trend higher, and it is looking less likely the variant can be eliminated in Auckland, Smyth said.

“The prospect of ‘endemic’ covid-19 in New Zealand may mean a less vigorous post-lockdown rebound in spending than that seen after the original lockdown last year”.

Most stocks declined today but those that struggle to operate with covid in the community were the worst hit.

Auckland-based casino operator SkyCity Entertainment fell 4.2% to $3.16. Well-known business figure Rob Campbell announced he will step down from chairing its board of directors early next year to focus on a new public sector role.

Campbell said he was leaving SkyCity with a clear trading strategy now in place.

Other covid-affected stocks include Kathmandu Holdings which fell 1.9% to $1.54, Air New Zealand down 1.8% at $1.665, and Auckland International Airport which fell 1.4% to $7.79.

Fuel retailer Z Energy was hard hit by the pandemic as the world stopped burning jet fuel and demand for vehicle fuel also declined.

The stock dramatically almost halved in value, from $4.75 in January 2020 to trade as low as $2.52 this May.

However, this changed when Australian fuel company Ampol stepped in with a takeover offer at $3.78 per share that gave investors a possible exit.

Today Z’s board of directors endorsed the takeover offer after Ampol agreed to allow the company to pay out $26 million of dividends to current shareholders, effectively boosting the offer to $3.38.

This sent the share price soaring 6.8% to reach $3.61, still short of the takeover offer which depends on approval from regulators and shareholders, as well as the Marsden Point refinery transitioning to an import operation and final sign off from the high court.

Nikko Asset Management’s Michael Sherrock said the upgraded offer was what shareholders like his firm had asked for, meaning the deal will likely get approval.

“They’ve run a pretty good process in terms of canvassing shareholders prior to giving their endorsement to any bid,” he said.

Sherrock said it was still possible for another bidder to offer more than the current $2 billion on the table, but it was “an outside possibility”.

The NZ dollar was marginally weaker against the US dollar today – at 69.38 US cents – after weekend trading drove the currency as low as 69.08 and as high as 69.58.

Westpac bank’s head of NZ strategy Imre Speizer said the next month would be dominated by the local covid outbreak, but things may improve before the end of the year.

“The economy has been on a solid footing and activity should jump once covid restrictions are relaxed,” he said.

Tags: Market Close

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