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MARKET CLOSE: NZ shares rise to record high

Thursday 3rd March 2016

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New Zealand shares rose to a record today, with Auckland International Airport, Coats Group and Fletcher Building leading the rise, while Z Energy dropped.

The S&P/NZX 50 Index gained 67.8 points, or 1.1 percent, to 6380.87, surpassing the previous record, seen on Dec. 31 2015. Within the index, 34 shares rose, 12 fell and four were unchanged. Turnover was $200 million.

Auckland International Airport led the index, rising 4.3 percent to $6.65, the highest level since the company split its shares in 2005. The shares in the country’s largest airport have gained nearly 13 percent since it reported a 25 percent lift in first-half profit due to increasing passenger numbers caused largely by rising tourism numbers. It plans to spend up to $260 million this financial year to expand its facilities.

"It is continuing to run following its minor profit upgrade, despite regulatory risks around the rate of return on the regulated component of their asset base," said Matthew Goodson, managing director at Salt Funds Management.

NZX-listed, UK-based thread-maker Coats Group gained 3.5 percent to 59 cents, a four-month high. In November, Coats announced plans to quit the ASX and NZX as Australasian investors now make up less than a fifth of its ownership and it wants to cut the cost of multiple listings. Coats also holds a London Stock Exchange listing.

"It appears they're seeking outcomes to their pension fund impasse, which has dogged them for several years, potentially without a regulator," Goodson said. "The problem for them has been (that) with the collapse in bond yields in the UK, the net present value of the liabilities in the pension scheme has gone through the roof. That has been a real issue for them, but in recent days bond yields have risen somewhat, so what had been a confluence of very negative factors for them has become more positive."

Fletcher Building climbed 3.3 percent to $7.27. The listed building supplies and construction group posted a 51 percent gain in first-half profit on Feb. 19, reflecting changes in one-time items from the year-earlier period and a modest increase in revenue. The stock has gained as people work their way through the earnings and outlook, Goodson said. A management restructuring is understood to be close to fruition, following a review by a change team from global consultancy McKinsey.

Genesis Energy rose 3.1 percent to $2.02, Ebos Group gained 2.9 percent to $16.47, and Spark New Zealand advanced 2.9 percent to $3.53.

Sky Network Television rose 2.6 percent to $4.34. The stock has suffered since last Friday when the pay-TV operator posted a 5.8 percent decline in first-half profit, as the cost of securing content rose in an increasingly competitive market. 

"Sky's been sold down post result. It bounced back today on decent volumes," Goodson said. "It's a battle between those who worry about structural change in the industry and those who see value based on current metrics."

Tower rose 0.3 percent to $1.595. The New Zealand general insurer has updated its estimated potential net loss in Fiji from damage caused by Cyclone Winston to between $4 million to $7 million, less than the $10 million excess under the insurer's main catastrophe reinsurance programme. 

Z Energy fell furthest on the index today, down 4.5 percent to $6.35. The transport fuels distributor chain didn't report earnings in February as it has a March balance date, but had rallied about 6 percent since Feb. 29. Today's fall reflected some profit taking following that strong run, Goodson said.

Trade Me Group fell 1.3 percent to $4.49, while Chorus dipped 1.1 percent to $3.905 and Orion Health Group fell 1 percent to $3.10. 

Outside the benchmark index, Wynyard Group gained 5.7 percent to $1 per share. The crime-fighting and security software developer has signed a $3.3 million contract with an unidentified consulting and risk management firm for its advanced cyber threat analytics software (ACTA), its third multi-million dollar deal inked so far this year.

Wynyard has had difficulty with plans to raise $30 million in new capital, which it will now seek by selling discounted shares in a rights offer to meet its working capital requirements beyond the end of the month after a placement on more favourable terms was scuppered by heightened volatility in global markets.

"Clearly they've been in the wars of late, with a number of difficulties managing their cash flows," Goodson said. "They're winning these contracts and the costs of implementing them starts immediately, but the cash flows come in over different periods. They've been through a period of clear growing pain. It's just making sure they have sufficient cash to fund the implementation of their contracts until they actually get paid."

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