PGG Wrightson a stand-out on NZX 50 slides 1.2% to kick-off earnings season

The S&P/NZX 50 index dropped 1.18% to 12,759.68 points on Tuesday as earnings season kicked off with PGG Wrightson's full-year result. Across the market, 46.4 million shares worth more than $168.1m traded.

The rural services firm’s share price lifted 4.07% to $2.56 after it reported operating revenue had climbed 6% to $975.3m. It reported a net profit after tax (npat) of $10.7m, up $7.6m on the prior year.

Harbour Asset Management portfolio manager, Shane Solly, called the result "a ripper" and highlighted that PGG Wrightson (PGW) traded at $1.53 as recently as December last year.

"Well done. Those guys have been through a tough time. We know that PGW is a cyclical business and they've been doing a lot of work to improve that," he said. "There is a reason to own these businesses at low points in the cycle. Today is one of them."

Three announcements

Solly flagged a couple of "interesting" corporate announcements that dropped on the exchange throughout the day.

Spark shares dropped 2.5% to $2.54 after it announced it had sold a 75% stake in its datacentre business to Australian private equity fund Pacific Equity Partners (PEP).

Spark anticipates receiving about $486m in cash upon completion, with a further $98m possible if specific performance targets are met by the end of 2027. The funds will be used to reduce the company’s net debt.
Solly said the market likes the transaction but is still looking for more details around costs, land and commitments to capital expenditure.

"But otherwise, people have been anxious about the debt levels within Spark. This helps resolve that," he said.

Gentrack also dipped after it released a presentation it gave at a Canaccord Genuity conference in Boston.

"The management team have come out and confirmed previous indications in terms of revenue and margins, and that's in itself helpful," Solly said.

He added there was still "weariness" surrounding Gentrack associated with the rapid rate of technological change, and what that means for software companies.

The stock tumbled 5.08% to $9.35 after trading at nearly $13 as recently as early July.

Travelling in the other direction was SkyCity Entertainment Group, which lifted 2.06% to 99 cents, after an Australian commissioner concluded that SkyCity Adelaide is suitable to hold the SkyCity Adelaide casino licence.

The market had been anticipating that SkyCity would get approved as a suitable operator, Solly said, but there was always a risk.

Fisher & Paykel Healthcare led the market in volumes, with over $14m in value traded. The index's largest constituent lost 0.33% to $36.78.

Last week, analysts at Craigs Investment Partners upgraded the stock to 'Overweight' and raised their 12-month target price to $39.90.

Stats incoming

Speaking before the Reserve Bank of Australia issued its decision to cut interest rates by 25 basis points, Solly said it was almost a given and that the market would respond favourably to it.

Shortly afterwards, the S&P/ASX 200 rose to an all-time high of 8,880.2 points. At 5pm, the Australian benchmark had dipped slightly and was trading up 0.3%.

Solly said that investors would also be looking towards the United States consumer price index (CPI) release, which will occur overnight.

"The markets are anticipating the number comes in at 0.2% which takes you to an annualised number of around 2.8%.

"The Federal Reserve has been on hold since December, with [President Donald] Trump and others really putting pressure on them to cut, so that is perhaps holding the markets back at the moment."

Trump removed the head of the US Bureau of Labor Statistics earlier in August, accusing her of manipulating job numbers.