Business & Investing: Big result pushes Warehouse shares to a seven year high, Plus: My Food Bag investors down nearly 20 percent

While shoppers have been scoring plenty of bargains at The Warehouse Group’s retail stores in the past six months leading to a record first half result, shareholders might be feeling somewhat short-changed after the company lowered its dividend payout.

The company’s new dividend policy that will now distribute at least 70 percent of the group’s full-year adjusted net profit, at the discretion of the board and subject to trading performance, had previously been set between 75 percent-to-85 percent.

However, the 13 cents a share interim dividend follows a special 5 cents a share dividend in February, after shareholders were left empty handed last year as the company opted to conserve cash in the wake of the Covid-19 pandemic.

After years of lacklustre performance the country’s largest retailer appears to be finally turning the corner after reporting an adjusted net profit of $111 million in the six months to January 31, a record result, versus $46.2m in the same period a year earlier.

Group sales were up 7.4 percent at $1.8 billion with online sales growth of 50.3 percent, making up almost 12 percent of total Group sales. Its online hub has continued to scale and now offers 2.5 million active products, and 4,490 brands from more than 600 merchants.

CEO Nick Grayston said the company had rebounded strongly from the pandemic related disruptions last year.

“As a result of the hard work to execute our transformation by our whole team over the last few years, we were able to drive significant gross profit improvement and cost leverage.”

The company did not provide forward guidance.

Warehouse Group shares closed up 3.6 percent at $3.78, a seven year high.

A2 Milk shares slide below $9 for the first time in three years

Where’s the bottom for a2 Milk? It’s a question shareholders must be starting to ask themselves after the company’s shares continued their unrelenting slide lower yesterday, closing below $9 for the first time since January 2018.

It wasn’t much better for infant formula producer Synlait, which supplies a2 Milk, after its shares fell 4.5 percent to close at a new low of $3.45. Synlait shares had rallied up to $4 in recent weeks but the move was short-lived as sellers resumed pushing the shares lower.

Not even the weaker kiwi dollar was able to offer some respite as investors remain concerned at the company’s uncertain sales outlook. The ongoing impact of border closures resulting in the loss of much of the daigou channel trade, where Mandarin-speaking agents buy infant formula cans locally and courier them directly to customers in China, has severely impacted its recent trading performance leaving a2 Milk struggling to make up for its loss.

Since reporting a 35 percent decline in its half year profit to the end of December a month ago and forecasting revenues for FY21 are likely to be at the lower end of its previous guidance, a2 Milk shares have fallen a further 5 percent to close yesterday at $8.87, down 1.9 percent. The shares are now down almost 60 percent since their August 2020 peak of $21.40

My Food Bag investors down almost 20 percent

Shares in recently listed My Food Bag continued to head south yesterday, trading as low as $1.50, as investors face mounting ‘paper losses’ of almost 20 percent below the issue price of $1.85, though recent trading volumes suggest some have already thrown in the towel.

Since listing earlier this month the company’s shares have not traded above their issue price which is likely to have surprised some investors – many of whom are also My Food Bag customers – given the extensive PR hype in the lead up to the listing.

Falling consumer confidence and a less than certain economic outlook will be weighing on sentiment for a customer offering that is discretionary at best.

The company is expected to report its half year results to the end of March in mid-May and investors will have fingers crossed that CEO Kevin Bowler was right in his off-script prediction that the business was likely to exceed its financial forecasts in its first year.

2degrees mulls possible NZX listing later this year or early in 2022

Mobile phone company 2degrees could be set to join rival Spark on the NZX as its Canadian-based owner weighs up a possible listing to take advantage of elevated stock markets and increasing amounts of capital on the sidelines looking for assets to invest in.

New Zealand’s third biggest mobile carrier is 73.2 percent owned by Trilogy International Partners which is listed on the Toronto Stock Exchange.

It’s not the first time Trilogy has considered listing 2degrees after deciding against pursuing a similar option previously.

Trilogy said it’s exploring a partial listing of the local mobile carrier on both the NZX and ASX, highlighting buoyant global equity markets, attractive valuations for telcos and a strong kiwi dollar.

“This compelling macro backdrop, combined with the resilience, scale and growth of the 2degrees business, suggests now is an opportune time for the shareholders of 2degrees to explore a partial listing of the business,” said Brad Horwitz, Trilogy chief executive and 2degrees chair.

Horowitz said an equity event in New Zealand would raise primary capital to accelerate growth initiatives at 2degrees as well as enable Trilogy to reduce the debt it incurred while building the 2degrees business.

2degrees also faces a looming capital cost outlay as it gears up for the roll out of 5G mobile networks, which is set to become a new competitive positioning amongst the country’s three mobile phone operators. The company said it would make an announcement in coming weeks on its roll out of 5G.

Property valuations lift 3.1 percent for Kiwi Property Group

Kiwi Property Group has seen a 3.1 percent or $100 million gain in the value of its properties in the six months ended March.

This is on top of the $9.2m gain recorded in the first half of its financial year and comes as a result of a new draft property revaluation.

Surprisingly, given the increase in home-working, the biggest increase was in the value of its office properties, which gained 5.4 percent or $52m, to just above $1 billion, followed by the 2.4 percent, or $38m, increase in its mixed-use centres including Sylvia Park which lifted its valuation to $1.62b.

The retail portfolio’s value fell 1.7 percent to $461m, which Kiwi said was driven by an increase in seismic-related capital spending and a softening in market rents.

Other assets rose by approximately 8 percent, or $18m, to $245m.

The net asset backing of Kiwi’s shares rose about 6 cents to $1.29 between September and March.

“While Covid-19 continues to impact the sector, the outlook is far more positive than it was when valuations were last undertaken in September 2020, especially with the vaccine rollout now underway,” said chief executive Clive Mackenzie.

The valuations are subject to external audit and Kiwi is due to report its full year results on May 24.

Kiwi Property Group shares closed up 2.9 percent yesterday at $1.25.

China’s tech sector comes under pressure as US regulators take action on compliance breaches

Chinese technology stocks dropped sharply on growing concerns of possible delistings from US exchanges and reported plans by Beijing to take control of companies’ user data.

The Hong Kong-listed shares of Alibaba, the Chinese e-commerce group, fell 4.2 percent, while internet business Tencent saw its shares fall 2.3 percent. Shares in Baidu, the search engine group that debuted on the Hong Kong exchange this week, tumbled almost 9 percent.

Hong Kong’s Hang Seng Tech index, which tracks shares in big Chinese tech groups, fell as much as 5 percent yesterday. The losses came after the US Securities and Exchange Commission said on Wednesday that it was taking initial steps to force foreign companies listed in New York to provide access to financial audits or risk being forcibly delisted after three years of non-compliance.

Beijing has long denied US regulators access to Chinese companies’ books citing national security reasons. Analysts said sentiment was also hit on Thursday by a Bloomberg News report that China’s government had proposed creating a joint venture to oversee all user data harvested by the country’s tech companies. If implemented, the plan would mark a substantial escalation of a regulatory crackdown on China’s tech sector, which state media and top officials have criticised for amassing too much power and influence.

The latest round of bad news for Chinese tech groups has placed additional pressure on share prices already hit by a global shift in investor attention from high-growth companies to cheaper, out of favour stocks that have been dubbed the ‘reopening’ stocks which are expected to benefit as the global economy recovers from the Covid-19 pandemic

Andrew Patterson is Newsroom's Markets Editor and has worked for decades as a financial journalist, radio presenter and editor with Australia's ABC, Radio Live and NBR.

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