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MARKET CLOSE: NZ shares fall as Fletcher rights issue takes focus; AIA, A2, Comvita drop

Tuesday 17th April 2018

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New Zealand shares fell as investors weighed up the impact of Fletcher Building's deeply discounted rights issue soaking up demand from the broader market. Auckland International Airport and exporters A2 Milk Co and Comvita dropped. 


The S&P/NZX 50 Index declined 61.83 points, or 0.7 percent, to 8,344.52. Within the index, 26 stocks fell, 13 gained and 11 were unchanged. Turnover was a smaller-than-usual $82 million, with trading in Fletcher shares halted for the capital raise. 


Fletcher today announced a $750 million rights issue at a 23 percent discount to the last trading price of $6.27, with an institutional offer running until Thursday, and trading of the shares halted until Friday. The capital raise is part of a $1.25 billion refinancing plan shoring up the construction company's balance sheet having drawn $280 million in the first three months of this year alone. Fletcher also announced plans to sell Formica and its steel roofing tiles business. 


"Fletcher building's capital raising's taken a lot of attention of the market," said Shane Solly, director portfolio manager at Harbour Asset Management. "I think it's going to keep the focus for a few more days yet." 


Auckland International Airport led the market lower, falling 2.7 percent to $6.215, while exporters A2 Milk declined 2.3 percent to $12.19 and Comvita dropped 1.9 percent to $6.88. A2 yesterday signed up an exclusive distribution deal in South Korea, while the honey products maker yesterday cut earnings guidance over a poor honey season and said it was subject to due diligence by a potential suitor. 


Mercury NZ fell 1.7 percent to $3.25 after the electricity generator-retailer raised annual earnings guidance as favourable rainfall continued to bolster its hydro schemes. 


Harbour Asset's Solly said Fletcher's capital raising had the potential to keep the building products and construction firm in the MSCI index, which put Mercury's spot in jeopardy. 


Power companies' March metrics showed favourable rainfall for the entire sector on the generation side, although retail remained tough. Meridian Energy fell 1 percent to $2.87, Genesis Energy declined 0.9 percent to $2.28, Contact Energy decreased 0.2 percent to $5.23 and Trustpower was unchanged at $5.75. 


The government announced the member of its interim climate change committee, which has been tasked with determining how agricultural emissions should be brought into the Emissions Trading Scheme and to start planning for the transition to renewable generation by 2035 in normal circumstance. 


Primary industries stocks Fonterra Shareholders' Fund units and PGG Wrightson were both unchanged at $5.75 and 62 cents respectively, livestock broker Allied Farmers fell 6.3 percent to 8.9 cents, while transport fuels firm Z Energy fell 1.2 percent to $7.18, and wind farm developer Tilt Renewables slipped 0.5 percent to $1.95. 


NZX was the best performer on the index, up 1.9 percent to $1.10. The stock market operator held its annual meeting last week where it outlined plans to introduce a new primary sector index, and elaborated on its dairy derivatives expansion plans.


Restaurant Brands NZ fell 0.8 percent to $7.08 after reporting a 37 percent increase in annual profit and signalling plans to keep expanding in Australia and the US. 


Summerset Group Holdings increased 0.1 percent to $7.05 and Metlifecare fell 0.7 percent to $5.70 after each acquired land for new villages. Ryman Healthcare slipped 0.1 percent to $10.65 and Arvida Group climbed 1.7 percent to $1.20. 


Spark New Zealand fell 1 percent to $3.425 and Fisher & Paykel Healthcare dropped 1.3 percent to $12.55. 


Outside the benchmark index, Smiths City Group sank 11 percent to 48 cents after downgrading its earnings outlook on soft trading and a $4.8 million impairment charge on unprofitable stores. 



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