Chorus shares rise strongly in debut

Thursday, 24 November 2011

GREAT START: Chorus chief executive Mark Ratcliffe said he was pleased with the volumes of stock traded on its opening day. The stock rose 27 cents, or 9.22 per cent, to $3.21.

Telecom shareholders looking to shed Chorus stock may have kept a lid on its debut share price, says an analyst.

The stock opened at $2.94 on the New Zealand stock exchange yesterday, which was at the lower end of expectations – although in line with its debut in Australia.

Despite its low-key entrance, Chorus stock finished on a strong note – up 27 cents, or 9.22 per cent, to $3.21, on 239 trades.

Adviser Grant Samuel, which produced a report on Telecom's split – which becomes official next Wednesday – had attributed a value of $2.92 to $4.61 to Chorus shares, while some analysts had valued the stock as high as $5.

Greg Main, of First NZ Capital, said it had valued Chorus shares at $3.95.

'There's a bit of pressure over the initial trading period, because obviously you've got some shareholders in Telecom who follow an international index that Chorus won't be in and some will have to sell, and others will look to exit.

'That is part of the reason why Chorus is trading at $3. People said there could be a lot of stock around.'

It would take a little while for the stock to settle, he said.

Chorus, which faced potential longer-term issues around its ultrafast broadband capital expenditure and its relationship with the government's investment vehicle Crown Fibre, would suit longer-term yield-based investors.

The strength of Telecom's share performance – closing at $2.02 after opening at an ex-Chorus adjusted price of $1.94 – had been more surprising, Main said.

The retail company still faced issues around cost savings and competition, but had a relatively strong position in the market, was now free of regulatory distractions and had a reasonably strong balance sheet.

A Wellington broker speculated Chorus could quickly seek fresh equity from shareholders to fund some of the upfront costs of building its $2.5 billion share of the ultrafast broadband network.

But Chorus spokesman Robin Kelly said the company had promised not to raise additional capital for at least three months from when Telecom issued the 'scheme booklet' on its proposed split in September.

'Beyond that, it is nothing for us to speculate on, and in any event it would require consideration by the new Chorus board,' he said.

Chorus chief executive Mark Ratcliffe said he was pleased with the volumes traded.