MARKET CLOSE: NZ shares fall, breaking 12-session streak; Xero, Genesis drop, SkyCity and Sky TV gain

Wednesday 16th March 2016

New Zealand shares fell, snapping a 12-session streak of rises as Xero dropped while SkyCity Entertainment Group and Sky Network Television gained.

The S&P/NZX 50 Index fell 14.9 points, or 0.2 percent, to 6,562.96. Within the index, 22 stocks declined, 18 rose and 10 were unchanged. Turnover was $209 million.

"It's just a random walk," said Matthew Goodson, managing director at Salt Funds Management. "At the moment, the quest for yield goes on. Even though on valuation multiples the New Zealand market is extraordinarily expensive relative to historical norms, it is a high yielding market in a world that has very little yield."

Xero led the index lower, losing 3.2 percent to $15.49. The volatile stock has fallen 19 percent so far this year, hitting a six-month low in mid-February when global sentiment collapsed amidst turbulence on oil prices and Chinese economic data.

Genesis Energy dropped 2.8 percent to $2.07. The electricity generator-retailer is looking to raise up to $100 million in six-year bonds at 4.14 percent, less than the 7.65 percent it's been paying on a note that matures next week.

Nuplex Industries shed 2.1 percent to $5.05. It's the subject of a takeover proposal from US-based Allnex Begium SA, which was granted a period of exclusivity for six weeks to negotiate terms in the middle of February.

Spark New Zealand lost 1.9 percent to $3.53, and Metro Performance Glass declined 1.8 percent to $1.62

SkyCity was the best performer on the index, up 3.6 percent to $4.90. An article in the Australian Financial Review suggesting Star Entertainment Group, which owns Sydney's Star casino, may be looking to make a bid for SkyCity has pushed that growth, Goodson said.

"It's that speculation which has driven the move today," he said. "Star isn't hugely over-geared although they do have a reasonable capital expenditure cycle ahead of them, SkyCity conversely is reasonably fully geared and has significant capex ahead of it. Auckland's been travelling very well for SkyCity, but they have been struggling in Adelaide and Darwin."

A2 Milk rose 2.2 percent to $1.86, with non-NZX 50 stock Synlait Milk lifting 1 percent to $2.93. Global dairy prices sank at the fortnightly auction overnight, with lower milk prices meaning lower costs for the milk-buying companies.

Port of Tauranga gained 1.4 percent to $18.50, and Steel & Tube Holdings advanced 1.2 percent to $5.06.

Sky TV increased 1.2 percent to $5.06. The stock's risen 11 percent so far this week, on what Goodson described as a "remarkable run."

"There's considerable market talk they may be included in a new global index or exchange traded fund, but that's really just speculation," he said. "Volumes have been very large behind the price move, so clearly non-fundamental factors at play there."

Outside the main index, Scales Corp lifted 1.5 percent to $2.71. China Resources Ng Fung yesterday acquired 15 percent of Scales, which is New Zealand's biggest apple exporter, for about $55.9 million from Direct Capital Investments. The Hong Kong-based company today entered into an arrangement to buy the shares at $2.60 apiece.

"The deal gives Scales access to the owner of the largest chain of supermarkets in China," Goodson said. "In the future, as Scales look to grow and develop, that could become very valuable indeed."

BusinessDesk.co.nz

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