Market News 12 October 2026

Johnny Lee writes:

The final quarter of 2026 is shaping up as a busy one for investors, with the imminent listing of Lodestone Energy and several new bonds said to be in the pipeline.

Lodestone will begin trading next Thursday, 22 October. It will use the ticker code LOD.

In the bond market, Kiwi Property Group has confirmed it is considering a bond offer, while Contact Energy has previously announced its intention to redeem its CEN060 bonds, and “issue a replacement in line with market expectations”. There are several other bonds maturing this year, some of which may lead to new offers late in the year.

On the maturing side, well over a billion dollars’ worth of bonds are expected to be repaid by the end of the year. There will be no shortage of funds looking for a home.

Both bond and equity pricing have been volatile in recent months, with the oil price having an undue impact on underlying interest rates. With interest rates elevated and no solution on the short-term horizon – attention instead turning to renaming the Pacific Ocean – companies may need to accept these higher rates when looking to extend their balance sheets for now.

These higher rates have proved a boon for bond investors, who are now achieving rates well in excess of those observed only three months ago. Unfortunately, this has also meant borrowing costs for households have spiked, leading to some preferring short-term debt for now.

On the equity side, higher rates have seen a shift out of shares towards bonds, particularly in the yield space. Yield stocks have struggled over the last month or two, as investors rebalance to take advantage of these higher rates.

New equity listings are expected in 2027. While the usual suspects are said to be eyeing an entry (or re-entry) to the NZX, it may become a question of valuation. Globally, IPOs are being postponed or cancelled due to the widening gap between sellers’ expectations and buyers’ valuations. Firmus, the Australian AI infrastructure provider, cancelled its planned “mega IPO” early this month.

Despite all the volatility of late, 2026 should see a strong close for new issuance. Next year, with luck, will see some new options emerge on the share market too, helping provide new choices for New Zealand investors.

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SkyCity Entertainment has provided an update to its ongoing restructure programme, as the company continues its “asset monetisation programme”. This programme may conclude with a number of assets sold, including the now unconditional sale of its investment properties and the sale of the Grand Hotel.

Next on the chopping block may be the Adelaide business, with SkyCity stating it will begin a formal sale process “shortly”. Its Adelaide business has been in the news for all the wrong reasons of late, following settlements with the various regulators. 

Despite this, the 2026 result in August saw a modest profit. SkyCity confirmed a challenging trading environment, with the increased cost of fuel impacting visitation and consumer spending. In the face of this, the company responded by prioritising cost control and debt management. 

Hanging over its head, of course, is the existing SKC050 bonds. Due to mature in May 2027, the $175 million of bonds issued represent a significant part of its balance sheet. These were issued in 2021 at 3.02%, when the Official Cash Rate was only 0.25%. With significant headroom in place with its banks, SkyCity has some flexibility with the timing of its asset sales.

Alongside these bonds is the USPP issuance added over the last decade or so. The company’s net debt was reduced over the 2026 financial year from $756 million to $590 million, and SkyCity remains committed to seeing this fall lower still. Once the company is “right sized”, the company can then address shareholder returns.

The broader question may be the role of casinos in society and the changing way that people interact with the gambling industry going forward.

SkyCity’s foray into online gambling is perhaps a reflection of this. The company is currently bidding for an online gambling licence, hoping to be one of the 15 selected on Wednesday to hold such a licence in New Zealand. 

While gambling is often seen on “exclusion” lists from retail clients, demand is still readily apparent. SkyCity views the online gambling sector as a billion-dollar market, and while the exact shape of this industry within New Zealand is not yet clear, SkyCity will play a key role in building it. 

The International Convention Centre (ICC) also looks to be an exciting opportunity for the business going forward. After eight months of operation, reviews have been positive and the pipeline for 2027 looks strong. The ICC is targeting breakeven within two years, while benefits across the other assets within SkyCity’s portfolio have already been observed.

These two assets - the Auckland precinct and the online business - may be the assets of the future, in amongst all the ongoing asset sales and strategic reviews.

However, the reality is that SkyCity shareholders have seen a significant decline in value, with the share price falling year on year for five consecutive years. No dividend has been paid for two and a half years, and multiple compliance failures have led to ongoing issues with the regulators.

Now, it seems international buyers have taken an interest and may view the company as undervalued. SkyCity has received multiple bids for the company, and while these have not yet eventuated in a formal offer to take the company private, there is clearly an interest in the company at its current valuation.

With asset sales a core part of SkyCity’s strategic plan, the business will become smaller, simpler, and less indebted, which may make the business easier to value and package for such a new owner.

SkyCity is a profitable business, with assets (for now) in Auckland, Adelaide, Hamilton and Queenstown. The board’s focus now is “maximising value for all SkyCity shareholders”, which may include further asset sales in the short-term. 

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Insurer Tower Group has lifted its guidance for the year, following the conclusion of its financial year. Tower confirmed it had not required the full $45 million set aside as part of its “large event allowance”, allowing it to adjust its formal guidance.

Tower has been one of the best performers over the last two years, almost quadrupling in value while returning to strong dividends. Relatively benign weather and the absence of any major catastrophic event have helped the company recover some of the value lost over the preceding decade.

Net profit guidance now sits at a midpoint of $74 million, up from $60 million. This $14 million difference is the after-tax benefit of the $20 million unused allowance. The underlying business is still seeing modest growth. Customer numbers increased by 8%, and efforts continue to derisk itself from weather-related impacts.

The full year result is expected to be announced on 26 November.

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New Investment Opportunities

Lodestone Energy 

Lodestone Energy has confirmed that the IPO price is $2.25 per share.

Lodestone owns a portfolio of five solar farms across New Zealand, with plans to build another 10 solar farms using the funds raised from this IPO, essentially tripling the size of the business over the next 5-years.

The company is seeking to raise between $75 million and $100 million, with no existing shareholders selling shares as part of the IPO. The new capital will be used to support Lodestone’s continued expansion across New Zealand.

For advised clients, we have prepared a research piece on Lodestone Energy, which is available in the private area of our website. If you would prefer a copy to be emailed to you, please contact us and we would be happy to send it through.

Investors can find the investment statement on our website and if you would like an allocation for these shares, please contact our office with an amount and your CSN and we will send through a contract note.

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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 a possible interest rate of around 6.00% per annum. 

Kiwi Property Group has announced it is considering an offer of 7-year, fixed rate, senior, secured green bonds. We expect it will offer an interest rate of around 6.00% per annum. The offer opens 19 October. 

Investors who are interested in either of these potential bonds 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 further details are available.

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Travel

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

21 October – Auckland (Albany) – Edward Lee

22 October – Auckland (Ellerslie) – Edward Lee

29 October – Christchurch – Johnny Lee (FULL)