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MARKET CLOSE: NZ shares fall as SkyCity resumes trading after bookbuild; Xero gains

Monday 16th May 2016

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New Zealand shares fell, led by SkyCity Entertainment Group, which resumed trading after completing the institutional component of its capital raising. Xero extended its gains after reducing its cash burn and saying it won't need more capital to get to breakeven.

The S&P/NZX50 Index fell 2.45 points, or 0.04 percent, to 6914.12. Within the index, 24 stocks gained, 15 fell and 11 were unchanged. Turnover was $113.5 million.

SkyCity fell 3.1 percent to $4.80 after coming off a trading halt. The casino and hotel company said it raised $180 million of the $263 million it is targeting in the institutional component of its share sale at $4.40 a share, with the shortfall mopped up at $4.85 a share. The company will begin the retail part of the one-for-10 capital raise tomorrow.  SkyCity is raising the funds to enable it to keep debt in check and maintain its credit rating while funding expansion in Auckland and Adelaide.

David Price, a broker at Forsyth Barr, said large institutions had used the offer to top up their holdings and there was less demand for the shares on the market today as a result.

"If you did want to get set in the stock, that was a good way of doing it," Price said. "This is like a liquidity event what we've seen today." He didn't expect a major selloff in the stock from here, with support likely to come back at around current levels. 

Spark New Zealand declined 1.8 percent to $3.605 and Precinct Properties New Zealand fell 1.5 percent to $1.28. Among other property investors, Kiwi Property Group was unchanged at $1.495 after reporting an 118 percent jump in full-year profit to a record $250.8 million on an increase in its portfolio value, higher rental returns, and lower costs including interest charges. Kiwi forecast a 6.75 cents per share dividend for 2017 from 6.6 cents for 2016 and separately announced it would purchase only a half share in Hamilton's The Base shopping centre from Waikato-Tainui.

Vital Healthcare Property Trust fell 0.7 percent to $2.13 and Property for Industry dropped 0.6 percent to $1.65.

Genesis Energy fell 1.4 percent to $2.115 and Contact Energy declined 0.8 percent to $5.29 ahead of an Electricity Authority briefing tomorrow on its transmission pricing decision.

Xero rose 5.3 percent to $17.42, extending its 7.3 percent gain on Friday when the cloud-based accounting software company posted a 67 percent gain in revenue to $207 million while its net loss widened to $82.5 million. The company said it burned through $86 million in the latest year, down from $88 million a year earlier, and its cash holdings stood at $184 million at March 31, meaning it had enough left to reach breakeven without having to raise more capital.

"People are taking that quite favourably," Price said. "In terms of non-profit growth stocks, the path to profitability needs to be articulated."

Fonterra Shareholders' Fund rose 0.7 percent to $5.77. Fonterra today said milk collection is down in New Zealand and Australia, its two largest markets, in the first 11 months of the season during a period of weak dairy prices. The market had expected an increase in Fonterra's guidance for earnings per share, which didn't eventuate, Price said.

ERoad fell 3 percent to $2.55 after the logistics and fleet management company cut its 2016 earnings guidance for the second time to a loss in the range of $1.3 million to $1.6 million compared with a prospectus forecast of a $5.5 million profit. Chief executive Steve Newman said the company had to expense more research and development costs than was forecast which impacted on earnings. Other costs including unrealised foreign exchange movements also weighed on earnings.

Livestock Improvement Corp was unchanged at $2.11 after the farmer-owned cooperative that focuses on dairy herd genetics, farm software, and automation, proposed splitting into two businesses and allowing outside shareholders to invest for the first time.

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