Stock Takes: Trading in NZX shares under investigation

Under investigation

Monitoring of trading in the shares of stock exchange operator NZX and its related entities has resulted in one referral to the Financial Markets Authority, while a second matter remains under review.

The issues were revealed last week as part of the annual report of the NZ Markets Disciplinary Tribunal.

The tribunal has a special division set up specifically to regulate the listing of NZX and related entities, which include NZX Wealth Technologies and Smartshares.

NZ RegCo market surveillance referred 111 alerts from its software and other abnormal trading activity to the special division last year, up from 42 in 2019.

It attributed this increase in alerts to volatility in both global and New Zealand markets, as a result of the uncertainty caused by the Covid-19 pandemic.

While the vast majority did not raise any concerns or warrant further investigation, some did require more action.

One case was an alert raised on February 25, 2020, involving trading in NZX shares, which has been referred to the FMA.

Asked what the referral related to, an FMA spokesman said: “The FMA generally does not comment on inquiries, including referrals from NZ RegCo.”

A second alert on November 11, also relating to trading in NZX shares, remains under review.

An NZX spokesman said it was none the wiser about the issue. “With regard to issues involving trading in NZX shares (referenced in the NZMDT annual report), NZX does not have any information on the matter, and this is not unexpected given that the trading in question could be by any investor buying or selling NZX shares.

“This is not a matter that NZX would necessarily be aware of.”

Handing over control

Fisher Funds founder Carmel Fisher will drop her last management ties to the business from August 6, after she steps down as director of its three NZX-listed funds: Marlin Global, Kingfish and Barramundi.

Fisher and husband Hugh Fisher founded the investment firm in 1998 but sold out in August 2017 to TSB Community Trust, the owner of TSB Bank.

Fisher left the board of Fisher Funds itself in July 2018.

In a statement to the exchange this week, Fisher said she was proud to have launched and overseen management of the three funds.

“It has been my privilege to work with an outstanding team of people, both at the manager, Fisher Funds, and with my fellow directors. Kingfish, Barramundi and Marlin do not rely on individuals, rather they achieve their long-term success through a balance of structure, people and culture.

“While I have decided that it is time for me to move on after many years of direct involvement, I have full confidence in the board and manager and look forward to enjoying their continued success as a significant shareholder in all three companies.”

Chair Alistair Ryan said Fisher’s leadership, inspiration, strong oversight and wealth of experience, as one of New Zealand’s pre-eminent investment professionals, would be sorely missed by all involved in and invested in the three companies.

“Carmel’s departure will leave a significant gap to be filled in our board dynamic, but we are confident that a seamless transition can be achieved in the time available prior to Carmel’s retirement in August and that a highly suitable replacement will be able to be recruited ahead of this year’s sequence of annual meetings.”

Carmel and Hugh Fisher were last listed on the NBR Rich List as having a fortune of $90 million. In 2019 a company they owned bought a rural clifftop peninsula north of Auckland for $12 million and Carmel Fisher said she was planning to build a lodge there.

BlackRock sell-down

As a result of last week’s index adjustment, BlackRock’s holding in Contact Energy has dropped from 14.3 per cent to 4.88 per cent. Meanwhile, BlackRock’s holding in Meridian is now 3.33 per cent, down from 7.09 per cent.

The changes result from last week’s re-weighting of the S&P Dow Jones Global Clean Energy Index, which resulted in huge volumes of shares in both companies trading on the NZX.

The exchange extended its trading hours by 45 minutes on Friday to accommodate transactions arising from the rebalancing.

BlackRock – the world’s biggest asset manager – has two iShares clean energy exchange-traded funds (ETFs) which had amassed big stakes in Meridian and Contact, largely because of the environmentally conscious Joe Biden winning the US presidential election.

Before the rebalancing, the index had 30 stocks. It now has 81.

Skellerup on the up

Skellerup’s upbeat profit forecast has prompted analysts to upgrade their expectations for the company’s share price.

Jarden has increased its target price from $4.35 to $4.55, while Forsyth Barr has bumped up its target from $4.50 to $4.75.

Skellerup increased its annual net profit range to $37 million-$39m, up from previous guidance of $33m-$37m, due to stronger than expected earnings and sales over the third quarter.

The latest guidance from the industrial rubber products manufacturer compares to a 2020 net profit of $29.1m.

Jarden analysts Christian Bell and Adrian Allbon said factoring in the updated guidance had prompted them to adjust forecast net profit for 2021 up 7 per cent and for 2022 and 2023 up by 4 per cent each.

“As a result and including time value of money, our DCF [discounted cashflow]-based 12-month TP [target price] increases +5 per cent to $4.55 and we maintain our overweight rating.

“We continue to like the portfolio of growth options for Skellerup, management track record on execution and additional upside potential from merger and acquisitions, which is inherent in Skellerup’s track record and growth strategy.”

The Jarden analysts said the key downside risks were competition, the New Zealand dollar and confidence in the dairy industry.

Forsyth Barr’s Guy Hooper adjusted his net profit expectation upwards by 1.6 per cent to $38.1m and his forecast for 2023 and 2024 up 2.8 per cent and 2.3 per cent respectively to $42.1m and $43.8m.

Hooper said Skellerup’s performance had been broad-based, with both its industrial and agri divisions delivering earnings growth.

“Skellerup has illustrated strong earnings momentum with a robust pipeline of further growth opportunities. On a 21x 12 month forward PE, it trades at a -12 per cent discount to the market while offering a superior growth profile. We continue to see value and reiterate [our] outperform [rating].”

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