The Metlifecare Limited [NZX:MET] share price has plunged over 19% this morning after sell-off activity appears to be ramping up. This is in spite of government stimulus packages and sharp rebounds in the NZX 50 and other market indexes.

Metlifecare is one of New Zealand’s largest retirement village operators. The company’s share price previously reached a high of nearly $7.

Today it sits around $3.90.

The company had previously entered into a Scheme Implementation Agreement (SIA) with Asia Pacific Village Group Limited to buy Metlife at $7 a share.

It appears that Asia Pacific has termination rights in the event of a ‘material adverse change’.

Asia Pacific has advised they’re monitoring the pandemic ‘and the implication of it in New Zealand’. The group continues to assess the implications of COVID-19 and ‘reserves all of its rights under the SIA and at law ’.

Why has the Metlifecare share price fallen?

Although, according to the company, they are an essential service under COVID-19 rules, there are a number of factors that may be driving a sell-off.

The company advised to the market today:

‘In line with other operators in the sector, the company’s sales and settlements are expected to be significantly restricted during the Level 4 lockdown with a consequential adverse impact on new sales and resales revenues in the next quarter.’

Investors appear concerned with new and multiple risks:

  • Earnings may be significantly downgraded due to the coronavirus impact.
  • Analysts are concerned that New Zealand’s 43,000 retirement village residents are at high risk of coronavirus infection.
  • New development work-and-sales activity has been put on hold during the lockdown period.
  • The coronavirus shock may change demand patterns in future for retirement village living.
  • Asia Pacific could possibly use the termination clause to step back from the takeover deal.

 Where could [NZX:MET] go from here?

Metlifecare is among many New Zealand businesses operating near the front line of this COVID-19 risk event.

Movement in the share price now depends heavily on the impact.

  • To what degree will sales and earnings get hit over the next quarter?
  • Will the lockdown end in 4 weeks
  • Can development and sales activity resume?
  • Are there coronavirus cases within the operator’s villages?
  • How long will it take for demand for retirement units to kick-start again?
  • Will the $1.49b Asia Pacific takeover deal continue as planned?

For now, the outlook for Metlifecare is one of heightened risk and uncertainty.

Whether this will drive further sell-off or attract a flurry of bargain hunters remains to be seen as events and announcements unfold.

 

Regards,

Simon Angelo

Editor, WealthMorning.com

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