Pushpay shares soar 24% as potential suitors emerge; NZX 50 slips

Tuesday, 26 April 2022

The sharemarket resumed trading after the long weekend with the news that potential suitors are stalking tech stock Pushpay, sending its shares soaring 24%.

The benchmark S&P/NZX 50 Index fell 0.8%, or 95.218 points, to 11,813.18 on Tuesday as investors fretted about the impact of a slowdown in the Chinese economy and rising interest rates. The market was closed on Monday for the Anzac Day public holiday.

Pushpay recorded the biggest gain, rising 25 cents to $1.28 after the digital payment service for churches said it had appointed Goldman Sachs to advise it on unsolicited approaches from third parties looking to acquire the company. No bid has yet been made.

Shares in tech stocks have been under pressure this year as rising interest rates prompt investors to re-evaluate the prospects of high-growth companies.

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Still, brokers noted that well-run companies like Pushpay with strong cashflows and a dominant position were attractive for acquirers.

“The strong cashflow that it generates is attractive to any suitor that it is looking to take it over,” said Peter McIntrye, an investment adviser at Craigs Investment Partners. “Companies that are generating what are seen to be good cashflow means that those that are acquiring them are able to use debt against that acquisition and pay from those strong cashflows, and that’s certainly the case for Pushpay.”

Pushpay didn’t comment on the value of its shares. American investment firm Sixth Street paid $1.85 for 173 million shares in March last year, taking its holding to almost 18 per cent.

The news of a potential takeover buoyed other tech stocks, with cinema software company Vista Group up 1.7% to $1.80, and travel software company Serko up 0.8% to $4.84.

“What we are seeing with Pushpay today does push up that whole sector, on the back of suspecting that if there is interest in Pushpay, potentially there could be interest in other stocks as well,” McIntyre said.

Sentiment towards tech stocks was also boosted by news Twitter had agreed to sell itself to Tesla chief executive and tweeter extraordinaire Elon Musk. Shares in Twitter jumped 5.7% while the tech-heavy Nasdaq composite rallied 1.3%.

Vulcan Steel upgraded its forecast for full-year earnings, pushing its shares up 3.6% to $10.33. The company said it expected profit would be about 25 per cent higher than its previous guidance following stronger than expected trading.

McIntyre noted it was the company’s third earnings upgrade.

“They have been able to increase their margin and increase their profitability and it has certainly given Steel & Tube a bit of a lift today as well,” he said.

Steel & Tube rose 5.4% to $1.56.

Wine company Marlborough Wine Estates advanced 2.1% to 24 cents after saying its 2022 harvest volume was 12% ahead of expectations. The company said it expects to post an annual profit of between $300,000 and $400,000, compared with a loss of $600,000 last year.

Shares in consumer staples fell, amid concern about the Chinese economy. Specialty milk marketer The a2 Milk Company dropped 2.6% to $4.90, milk processor Synlait Milk fell 2 per cent to $3.38, agribusiness Scales fell 1.8% to $4.80, seafood company Sanford fell 1.1% to $4.50 and the Fonterra Shareholders’ Fund slid 2.5% to $3.10.

Companies influenced by discretionary consumer spending declined. Casino company SkyCity Entertainment slipped 0.7% to $2.85 and fast-food company Restaurant Brands dropped 2.9% to $12.62.

Healthcare stocks were weaker. Fisher & Paykel Healthcare, the biggest stock on the market, fell 1.7% to $21.91. Ebos slid 0.8% to $42.91 while Pacific Edge fell 2.2% to 90 cents.

Retirement village operators fell, with Ryman Healthcare down 1.4% to $9.07, Arvida down 1.2% to $1.64, Summerset down 0.3% to $11.52 and Oceania Healthcare down 1% to $1.04.

Asian shares were mostly higher on Tuesday. Tokyo, Hong Kong, Seoul and Shanghai advanced while Sydney declined. Oil prices rose and US futures also were higher.

- With AP