Market News 31 March 2025

Johnny Lee writes:

Contact Energy’s takeover of Manawa Energy has been delayed once again, with the Commerce Commission indicating it requires yet another 6 weeks to make its decision. The new decision date is 9 May.

This is not the first deadline extension. The decision was initially expected back in November, before being delayed to December, then March.

The price of Manawa had lagged the takeover value for some time, suggesting most were growing pessimistic regarding the chances of this progressing. 

Hopefully, 9 May will provide certainty for shareholders.

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Meridian Energy has confirmed it intends to push ahead with the Ruakaka Solar and Battery farm, with the project expected to be completed within two years.

The solar farm will include 250,000 panels, producing around 230GWh per year, equivalent to about half the needs of Northland’s homes. The battery storage system, located next to the site, is expected to be fully operational this year.

The Ruakaka Energy Park follows a number of announcements from Meridian, including consent for its new Mt Munro wind farm in Eketahuna and a joint venture to build the Rahui Solar Farm at Rangitaiki. The company intends to invest $3 billion in new development over the next five years, with a billion earmarked for projects this year alone. 

Contact Energy, by contrast, had another setback after the consent application for its Southland Wind Farm was declined. Contact Energy intends to appeal the decision.

The panel was not satisfied that adverse effects on indigenous vegetation were properly accounted for, and could not be adequately offset.

This comes a month after the Bledisloe North Wharf extension, submitted by Port of Auckland, was rejected due to the lack of detail in its Little Penguin Management Plan. Port of Auckland later resubmitted further details on its plan to relocate the Korora. 

The electricity sector is investing significantly into electricity generation and plans to invest further still. Navigating the consent process is part of this and is introducing challenges for some. 

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Argosy has published its investor update, providing an update to shareholders on the current market conditions, its latest development updates, and a brief insight to the company’s internal outlook.

Conditions are improving. Falling interest rates are having the desired effect on asset prices, with Argosy noting that capital values are beginning to improve. Occupancy lease enquiry is improving and another new lease has been signed. 

The strategy of pivoting more of the portfolio from commercial towards industrial continues. The portfolio is currently 52% industrial, with hopes to move this to 60% over the coming years. Part of this shift will come about from the development of the Mt Richmond site, which is already subject to a ten year lease agreement. 

The focus on sustainability remains. The Mt Richmond site will include a range of measures to ensure it qualifies for the 6-star rating, including solar panels, water management tools, smart LED lighting and low carbon concrete. Argosy will also purchase carbon credits to account for the emissions generated from the construction. 

Dividends were discussed. In recent years, the company has occasionally paid dividends outside of its policy band – 85% to 100% of Adjusted Funds From Operations – in order to maintain dividend levels for its unitholders. Rental growth should bring this back into the band, while the reintroduction of the dividend reinvestment plan should reduce the cash spend of the dividend.

Overall, the outlook was modestly positive. The company is enjoying low levels of arrears and is replacing lost tenants with higher value rental levels. The company sees no need to adjust its dividend for now, and is hopeful that it can continue to provide the same level of income to its unitholders going forward.

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New Zealand mid-cap Smartpay has received two competing, indicative takeover offers, as corporate merger and acquisition (M&A) activity continues to ramp up.

Neither proposal is unconditional, with both described as being in the preliminary stage. One of the two offers, from Tyro in Australia, was priced at a value equivalent to around $1 per share

This marks the fifth takeover offer of the year, following offers on Millennium Copthorne, IkeGPS, New Zealand Windfarms and Marsden Maritime Holdings. 

Smartpay operate many of our nations EFTPOS devices, leasing and servicing these products to shops all around our country. Virtually every owner of an EFTPOS or credit card has interacted with one of its products over time. Across New Zealand and Australia, the company services over 50,000 such terminals to around 40,000 merchants. 

The company was previously known as Cube Capital, before entering the payments solution sector in 2006 following a reverse takeover and then renaming itself to Smartpay Holdings. 

Revenue has been growing for many years, with some periods of modest profitability. Smartpay has used these profits to reduce bank debt, but is yet to pay a dividend. Its market capitalisation of $200 million puts it alongside the likes of E-ROAD or Michael Hill.

The share price has endured lengthy periods of underperformance, but its decline over the last two years has clearly caught the eye of its peers.

It has been an exciting start to the year for many of our small and mid cap stocks. It is clear that many are being priced (or perhaps mispriced) at levels that are attracting the eyes of overseas investors. 

For Smartpay investors, it is now a waiting game. If the indicative offers advance beyond the preliminary stage, into formal offers for the company, the board will then provide more details to shareholders.

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We visited the site of the Santana Minerals’ Cromwell gold mine last week, as the company gears up for its next stage of development.

The mining permit application has now been lodged. This is a separate process from the resource consent. The resource consent for the project is not yet lodged.

The next year will be one of enormous change for Santana, should the consent be approved. The company will transform from a few dozen employees to a few hundred, with the company hoping to source this growth from nearby towns.

The town of Cromwell will transform, too. The introduction of new, well paying jobs will be a boon to the service sector of Cromwell.

It is clear that the people at Santana care deeply about the area. Community drop-in sessions are occurring regularly – one is scheduled for tonight – and the feedback is shaping the process going forward.

It is also apparent that the team understands the broader implications for mining throughout New Zealand. Santana’s success – both economic and environmental – will do much to foster confidence in the sector, both for investors and the public at large. 

Our sincere gratitude to Damian, Polly, Alex, Paul and the rest of the team at Santana for hosting our group.

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Travel

Christchurch – 15 April – Fraser Hunter

Ashburton – 16 April – Fraser Hunter

Timaru – 17 April – Fraser Hunter

Tauranga – 15 April – Johnny Lee

Hamilton – 17 April – Johnny Lee

Lower Hutt – 29 April – Fraser Hunter

Auckland (Ellerslie)– 1 May – Edward Lee

Auckland (Albany) – 2 May – Edward Lee

Christchurch – 7 May – Johnny Lee

Please contact us if you would like to make an appointment to see any of our advisers.

Chris Lee & Partners