South Island Index sees second straight quarterly decline
South Island listed firms experience setback after recent record highs
The Deloitte South Island Index experienced its second quarterly decline in a row – the first consecutive decline since the beginning of 2009 – after a remarkable run of seven consecutive positive quarters.
Despite a modest gain for the month of September, the 27th edition of the Index saw it fall by $117.6 million (1.0%) in terms of market capitalisation for the quarter to 30 September 2014.
But Scott McClay, a corporate finance partner in Deloitte’s Christchurch office, says that there is still room for optimism.
“During the Deloitte South Island Index’ remarkable run of seven straight quarterly increases it was the performance of the largest companies, particularly Ryman Healthcare and EBOS Group, which largely drove the Index’ appreciation. In this latest quarter, after taking out the results of the three largest companies, the remaining 28 companies grew the Index by a collective 3.4% during the period,” says Mr McClay.
“The silver lining is that the smaller companies are stepping up and providing strength to the Index as they rally to help weather any storm.”
The Deloitte South Island Index’ 1.0% quarterly loss was not the worst among international benchmark indices as the ASX All Ords declined 1.6% in the quarter. However, both the Dow Jones and the NZX 50 had positive results, gaining a modest 1.3% and 2.2% respectively during the quarter to 30 September 2014.
During the year to 30 September 2014, the Deloitte South Island Index increased by $1.23 billion (12.2%). This outperformed yearly increases of 1.5% for the ASX All Ords and 11.0% for the NZX 50. However, the South Island Index was just beaten by the Dow Jones, which increased its market capitalisation by 12.6% during the twelve month period.
The Index’ top performer for the quarter, in terms of the dollar value of their market capitalisation, was Meridian Energy. Meridian grew by $238.5 million (15.3%) during the quarter to 30 September 2014 after National’s election result removed any immediate regulatory fears that investors may have held.
Moa Group had the largest percentage growth during the quarter at 49.6%, or $6.5 million in market capitalisation, following an oversubscribed rights issue in August.
The biggest decline for the quarter came from Ryman Healthcare, which experienced its worst quarterly performance in dollar terms since the inception of the Index. Ryman dropped $370.0 million (8.7%) in market capitalisation after the company’s share price fell $0.74 to $7.81 per share during the quarter ending 30 September 2014.
“During the quarter Ryman announced a number of positive milestones. There doesn’t appear to be any prominent reason for the decrease in their share price, and investors may be crystallising their significant gains over the past 11 quarters,” says Mr. McClay.
EBOS Group also had a disappointing quarter, falling $124.9 million (8.3%) in market capitalisation. The major decline for EBOS occurred in early August, coinciding with a global share sell-off as rising geo-political tensions and falling dairy prices took confidence out of the market.
Five of the eight industry sectors in the Deloitte South Island Index posted positive movements in the quarter to 30 September 2014. The Port sector was the leading performer with 25.4% growth, while the Biotechnology sector also had a robust quarter with growth of 19.7%.
Both the Property sector and the Manufacturing & Distribution sector declined during the quarter to 30 September 2014. The Property sector fell 8.5% while the Manufacturing & Distribution sector fell 8.4% on the backs of the quarterly falls of Ryman Healthcare and EBOS Group respectively.