MARKET CLOSE: NZ shares fall led Spark, SkyCity, Xero pace decline

Tuesday 19th May 2015

New Zealand shares fell, led by Spark New Zealand and paced by Sky City Entertainment Group and Xero, ahead of the March 31 earnings season. Infratil rose.

The NZX 50 Index fell 15.548 points, or 0.3 percent, to 5757.162. Within the index, 23 stocks fell, 20 rose and seven were unchanged. Turnover was $xx million.

Spark, which was formerly Telecom Corp and is the midst of trying to drive revenue into its data and cloud based service, fell 2.4 percent to $2.82 and has retreated 20 percent from its eight-year high of $3.535 in February. The stock is held by offshore investors for its liquidity and relatively high dividend yield.

"I think everyone believed that it was fully priced and then some, but it was chased by yield," said Rickey Ward, NZ equity manager at JB Were. "I don't think it can grow its dividend to any great extent but I don't think they're not going to pay it. If you're a US-based investor your own economy is starting to show signs of improvement so you've got an alternative now."

The benchmark index has climbed to record levels this year, pushed higher by international and domestic investors hunting for income paying investments in a globally low interest rate environment. Traders are now looking towards the upcoming earnings season for companies with a March 31 balance dare to justify share prices. Sky City, the casino operator, declined 1.9 percent to $4.18. Xero, the cloud-based accounting firm, fell 1.7 percent to $20.01.

"We're heading into a period where you really are looking for continuation of improvement in corporate earnings to justify the prices we've been paying for them, so I think there's a lot of nervous apprehension as we head into it," Ward said. "You don't want to see a big correction, but actually I don't think there is enough to justify further rallies."

Infratil advanced 1.8 percent to $3.185. The infrastructure portfolio investor announced a second special dividend payment of 6.4 cents per share on top of its 8 cent per share ordinary dividend, as it anticipates less capital investment in the year ahead and high prices for potential acquisitions make the company cautious. The company posted an annual net parent surplus of $384 million in the year ended March 31, compared with $199 million the previous year, reflecting the combined impacts of divestments and strong earnings from Trustpower.

"It's just further confirmation that the company is doing all the right things that you as investor really want to hear," Ward said.

Units Fonterra Shareholders' Fund, which give holders access to Fonterra Cooperative Group's dividend stream, dropped 1 percent to a record low of $4.87.

MightyRiverPower, the state-controlled energy company, rose 3.1 percent to $2.97. A2 Milk Co, the milk marketing business, gained 2 percent to 52 cents.

Outside the benchmark index, Rubicon, the forestry biotech company spun out of Fletcher Challenge, was unchanged at 31 cents after it said it has extended its financing arrangements with ANZ Bank New Zealand and issued US$7 million in notes to its major shareholder David Knott and its board members.

BusinessDesk.co.nz

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