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MARKET CLOSE: NZX 50 rises to record; F&P Healthcare result adds to upbeat NZ Inc sentiment

Friday 27th May 2016

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New Zealand shares rose as better-than-expected full-year earnings from Fisher & Paykel Healthcare added to upbeat sentiment for the local market. Mainfreight, which reported yesterday, and Vital Healthcare Property Trust were among leading gainers.

The S&P/NZX 50 Index gained 44.66 points, or 0.6 percent, to 6,992.54, a record-high close. Within the index, 33 shares rose, 10 fell and seven were unchanged. Turnover was $145 million.

F&P Healthcare climbed about 1 percent to $10.30 and has gained about 15 percent this year. The maker of breathing masks and respirators today posted a 27 percent gain in full-year profit to a record $143.4 million, beating its guidance and market estimates, and said it expects to achieve both record earnings and sale in the current year.

"Healthcare has been the biggest outperformer versus forecast" this earnings season, said David Price, a broker at Forsyth Barr. "They trade at an extremely high multiple but people have been prepared to pay up for that growth and they have delivered."

He said offshore buying has been evident across many of the bigger stocks on the market, with the outlook for the domestic economy relatively benign. "All in all, we're missing out on dairy but getting it in tourism - things are not to bad." Expectations for an interest rate cut in June has also dissipated given the relatively sturdy performance of the economy, he said.

Mainfreight rose 2.6 percent $17.36. The transport and logistics group yesterday reported a 6.3 percent gain in full-year profit as improved trading in New Zealand, Asia and Europe was offset by weaker results in Australia and the Americas.

Price said the result was in line with expectations, which had caused some people to "breathe a sigh of relief."

"The market improved in their second half and they got costs under control," Price said, adding that Forsyth Barr has an 'outperform' rating and $18.45 price target on the stock.

Freightways rose 2.1 percent to $6.89.

Air New Zealand rose 1.9 percent to $2.13. the stock sank to its lowest level since late 2014 this week on concern about increased competition and the likelihood that Virgin Australia will need recapitalising before it can be sold. Price said bankers advising on the sale had come out and said there was a lot of interest in Virgin Australia.

"I'm sure there are buyers at the right price," he said, but there was still a question of how much was needed for the recapitalisation.

Vital Healthcare rose about 3 percent to $2.245 and Xero gained 2.9 percent to $17.50. Genesis Energy climbed 2.2 percent to $2.065, Kiwi Property Group climbed about 2 percent to $1.545 and Trade Me Group rose about 2 percent to $4.71.

Ebos Group rose 1.7 percent to $16.33 and Steel & Tube Holdings gained 1.5 percent to $2.04.

Warehouse Group was the biggest decliner, falling 1.5 percent to $2.71, and Kathmandu fell 1.3 percent to $1.53. Tower dropped 1 percent to $1.465.

Outside the benchmark index, Abano Healthcare rose 1.3 percent to $7.85 after saying its sale of a half stake in Bay International had gone unconditional after it got a waiver from the NZX. Trilogy International fell 0.7 percent to $4.20 after saying it more than doubled annual profit as sales of its skincare and home fragrance products soared and it benefited from the acquisition of cosmetics and fragrance distributor CS Company.

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