Paul Robertshawe, chief investment officer at Octagon Asset Management, said investors were looking through the short-term weakness to the longer-term run rate.
“The company is expecting a strong second half in the 2027 financial year, and everything is back on track going into 2028. This gave the market some relief.
“The management is trying to be conservative with its guidance, and they have turned around the company in the face of tough challenges – they are not promising something they can’t deliver.”
Broker Forsyth Barr said if a2 Milk could successfully execute its China-label (infant formula) recovery strategy, the building blocks were in place for strong earnings growth from full-year 2028, off a reset full-year 2027 earnings base, but this was far from risk-free.
”The broker reduced its target share price for a2 Milk to $9.05, from $9.54. Morningstar has a target price of $9.50.”
Mercury gained 17c, or 2.56%, to $6.81 after reporting record annual ebitdaf of $1.068 billion, up 36% from $786m a year earlier. Net profit rose to $321m from $1m, while operating cashflow increased 58% to $762m. The company declared a fully imputed final dividend of 17c a share, taking the full-year payout to 27c, up 13%The result was supported by higher hydro generation, new renewables production and lower operating costs. Mercury reinvested $710m of its ebitdaf into new and existing renewable generation assets.
Vector was up 5c to $4.93 after reporting an 8.3% increase in revenue to $1.19b and a 55.2% rise in net profit to $240.1m for the 12 months ending June. It is paying a final dividend of 13.5c a share on Sept 21.
Vector said it invested a record $512m in the Auckland electricity network, set a 10kW solar export limit to help more owners maximise their solar investment, and connected 13,017 new homes and businesses to the electricity network.
The company forecast ebitda of $540m-$560m and capital expenditure of $605m-$635m for the 2027 financial year.
Other stocks
Ebos Group was up 48c or 2.25% to $21.80; Hallenstein Glasson 55c or 5.39% to $10.75; Briscoe gained 10c or 2.22% to $4.60; KMD Brands increased 6c or 3.59% to $1.73; and Vista Group added 7c or 2.61% to $2.75.
In the property sector, Stride was up 2c or 1.79% to $1.14; and Investore increased 3.5c or 3.37% to $1.07.
Port companies: Tauranga gained 10c to $8.30, and Napier was up 7c, or 1.92%, to $3.72.
Mainfreight was up 59c to $69; Scales Corp gained 15c or 2.24% to $6.84; and Turners Automotive increased 23c or 2.87% to $8.24; while Colonial Motor was down 17c or 2.37% to $7.
Freightways was up 11c to $13.53 following its cautious outlook. Forsyth Barr said, “We still believe Freightways can grow profits at well above long-term trend levels over the next 12 months, but consensus earnings expectations are likely to moderate in the absence of further favourable mergers and acquisitions. The broker set a target share price of $16.20.’
Scott Technology rose 20c or 7.66% to $2.81 after gaining another $20m worth of materials handling and logistics contracts involving a major project with a North American frozen potato producer and two extension projects with European customers in the snack food and fresh produce sectors.
Infratil was down 11c to $14.95 after holding its annual meeting. The company said it had been asked if it might reduce any potential concentration risk in the CDC Data Centres stake – “We remain comfortable with its position and scale in the portfolio today.”
Spark, up 3c to $1.95, announced former Mercury and Trustpower chief executive Vince Hawksworth will take over as chair to replace Justine Smyth following the annual meeting on Nov 6.
Robertshawe said the Aged Care Ministerial Advisory Group’s recommendations would benefit retirement stocks, particularly in Oceania, which has the most care beds relative to total assets.
Oceania Healthcare was unchanged at 79.5c, Radius Residential Care increased 1.5c or 3.23% to 48c, and Ryman Healthcare gained 3c to $2.11.
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