Market News 21 September 2026

Johnny Lee writes:

Infratil has lifted its guidance for the year, following its investor update last week. It continues a trend of successive guidance upgrades as the company benefits from relentless demand in the data centre sector. Much of the update was dedicated to its data centre business and the data centre industry in general.

Demand is quite clearly not an issue for the sector. Growth in demand for AI models simply continues to rise, as more students, workers, businesses and systems utilise the new technology.

Instead, Infratil highlighted the current challenges in supplying the market, particularly around physical components. Significant backlogs now exist, from memory chips and resource consent to construction capacity and power supply.

This latter point is proving increasingly relevant to decision-making. US studies are now anticipating a growing shortfall in firm power supply for the data centre sector, as auxiliary sectors run into their own supply chain delays.

This, of course, has ramifications for Infratil’s US energy business, Longroad. Infratil is expecting growth to accelerate throughout the decade, although it highlighted the impact of rising interest rates on the company.

On the balance sheet side, Infratil flagged its intention to pursue further hybrid issues, similar to the IFT380 issued back in June.

These capital bonds carry a long maturity date - June 2057, in this instance - with an option for Infratil to repay them in 2032. If Infratil elects not to repay in 2032, it faces a margin penalty, incentivising it to repay and issue a new bond. 

The hybrid model has been used extensively of late. Issuers will be well aware that meeting investor expectations is mutually beneficial, ensuring future access to funding.

The balance sheet will also be bolstered by Infratil’s divestment plans. Infratil has recently reduced its Contact Energy holding and has placed Australian medical imaging business Qscan on the market. Contact Energy’s status as a listed company makes it an easy option, should Infratil seek to reduce further.

The strength seen in the demand for AI “compute” has kept Infratil busy and led to yet another earnings upgrade. However, challenges still exist in the supply chain and may persist for some years. Infratil’s position as an incumbent affords some advantage, with relationships and reputation already developed. 

For now, Infratil’s focus is on meeting this demand and positioning all its businesses to leverage off the current economic conditions.

Briscoes

Briscoes has provided its half-year results, as the retail stocks begin their own September reporting season.

Net profit fell around 5% for the half year, with net profit of $27.6 million reported. The dividend of 10 cents was maintained.

While sales hit another new record, weakening margins caused by increased promotional activity (sales) meant that the overall result was a modest decrease from the previous year.

Overall, the board was pleased with the result, acknowledging the difficult economic environment and the resulting cautiousness from households. 

Sporting goods, sold through the Rebel Sports brand, outperformed homewares. A number of high-profile sporting events, including the FIFA world cup, led to strong demand from consumers. 

Homewares sales were more sluggish, with the company highlighting weak demand for heating products and luggage sales, due to a milder start to the New Zealand winter and a drop-off in demand for international travel.

Perhaps the most interesting development was the decision to sublet some of its existing shop space to Chemist Warehouse. The long-term sub-leasing deal takes advantage of Briscoes’ national footprint, sharing the benefits of a strong geographical presence with other retailers.

With businesses moving increasingly online, and distribution centres becoming increasingly effective at meeting customer demand, the question then falls on how best to optimise existing floor space. In-store storage requirements have declined and are intended to be reduced further.

Indeed, Briscoes itself stated: “A key strategic objective is to reduce the amount of stock held in stores by holding more inventory centrally and replenishing stores more frequently.”

One wonders if this trend will continue, as a natural consequence of a consumer that is comfortable shopping online, greater use of warehousing, and businesses that are becoming increasingly conscious of floor space utilisation.

With a strong balance sheet and a strategy towards greater efficiency, the missing piece now is the return of consumer confidence. With inflation climbing and interest rates following, this may take longer than initially anticipated.

Seeka

Seeka Limited has also taken the opportunity to lift its guidance, providing a brief update to shareholders last week.

Guidance has been lifted from a midpoint of $41 million of profit before tax for the full year, to $43 million.

The uplift has been attributed to strong trading conditions, continued focus on margins and a growing contribution from its citrus business. 

The original figure was provided as recently as late August, perhaps highlighting the challenges surrounding forecasting at the moment. August’s guidance was itself an increase on the previous guidance. 

Seeka has proven an exceptionally strong performer over the past two years, although the two years prior were particularly poor. Primary sector stocks can see these sorts of swings, as commodity pricing, weather conditions and interest rates fluctuate. 

In Seeka’s case, its focus on net debt reduction over the past few years will shield them from the impacts of rising interest rates. It has decreased its net debt by $50 million over the last two years, while paying strong dividends in between.

With guidance lifted, the company looks well placed to continue this strategy in the short-term.

Precinct Property

Good news for holders of the Precinct Property convertible notes, PCTHB.

Precinct has confirmed its intention to repay in cash, albeit slightly shy of par value ($0.9999). Repayment occurs today (21 September). Repayment in cash provides a simple solution for noteholders and avoids a disorderly secondary market in Precinct shares.

Overall, it was a good deal for investors in the notes. Noteholders ended up receiving an interest rate of 7.56% for three years, before being repaid, virtually in full. 

The repayment of PCTHB leaves one other such instrument listed on the exchange, being PCTHC. These were issued at the same time as the PCTHB and offered investors the choice of a three or four-year term.

The repayment comes at a time when interest rates sit at two-year highs, buoyed by the strong oil price. Reinvestment options have begun to emerge, as borrowers grow increasingly concerned that rates will head higher still.

Holders of PCTHC should not yet assume a cash repayment in 2027. Precinct does retain the right to convert these notes to Precinct shares and will make its decision based on the economic conditions at the time. Indeed, the initial series of these convertible notes, PCTHA, were converted into shares.

Overall, the product was a success, paying a high rate of return before repaying almost all of the initial principal. 

Clients wishing to discuss reinvestment options are welcome to contact us.

Auckland Seminar

Our last seminar will be held this week in Auckland.

The seminar is open to both existing clients, friends, families this year and other investors.

The Auckland seminar will be held at Fairway Events Centre, North Shore, at 11:00am on Wednesday, 23 September.

We will discuss the current investment environment, recent developments across New Zealand and international markets, risk management, and some of the companies and sectors we are currently watching closely.

If you would like to attend the seminar, please contact us by email to reserve a place.

Bond issues

KiwiBank has announced a new five-year senior fixed rate note. This offer will likely offer around 5.00% per annum. Investors interested in this offer are welcome to contact us. Please note that Kiwibank will not be paying the transaction costs for this offer, accordingly, clients will be charged brokerage.

Metlifecare has opened a new 6-year senior secured bond, with a minimum interest rate of 6.00% per annum.

We have loaded the investment statement and presentation onto our website. For those that would like a FIRM allocation, please contact us no later than 11am on Thursday.

Contact Energy is expected to issue a new subordinated capital bond in October. We expect the bond to have a term of around 6 years, with an interest rate of at least 6.00% per annum. Investors who are interested in this potential bond are welcome to contact us with their CSN and an indication of the amount they may wish to invest. We will then contact them once the final terms and further details are available.

Travel

Our advisors have an extensive travel schedule coming up over the next quarter, including the following dates:

24 September – Ellerslie, Auckland – Chris Lee – limited appointments left

25 September – Ellerslie, Auckland (AM only) – Chris Lee - limited appointments left

25 September – Palmerston North – David & Gavin

5 October – Napier (Havelock North) – Edward Lee

5 October – Nelson – Chris Lee

6 October – Napier (Mission Estate) – Edward Lee

6 October – Blenheim – Chris Lee

9 October – Wellington – Gavin Parkes

21 October – Auckland (Albany) – Edward Lee

22 October – Auckland (Ellerslie) – Edward Lee

29 October – Christchurch – Johnny Lee

We will also visit Christchurch, Wellington and Lower Hutt in November. Dates to be confirmed.

Please contact us if you would like us to visit your area or would like an appointment.

Chris Lee & Partners Ltd