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MARKET CLOSE: NZ shares rise; Tegel gains on Australian outlook, Port of Tauranga drops

Friday 19th August 2016

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New Zealand shares rose, led by Tegel Group on prospects for growth in Australia while Port of Tauranga dropped following broker downgrades. 

The S&P/NZX 50 Index gained 20.14 points, or 0.3 percent, to 7,405.26. Within the index, 24 stocks rose, 21 fell and six were unchanged. Turnover was $162 million.

Tegel Group led the index, up 2.9 percent to $1.78. The shares have gained 8.5 percent since an announcement yesterday that it will be able to export raw poultry to Australia for the first time. In a statement to the NZX, Tegel told investors that previously exports had been limited to fully cooked chicken, but work alongside the Ministry for Primary Industries had secured changed access conditions to the market across the Tasman.

"It's probably one of the highlights - clearly investors are beginning to factor in potential export growth for the business," said Matt Goodson, managing director at Salt Funds Management. "It will be very interesting to see in the future if they can take advantage of that. It had been a little bit stuck post-IPO a little bit above the IPO price, and certainly there had appeared to be some quite intense pricing competition in chicken, but this announcement potentially opens up a very large export market. They're obviously yet to prove that they can export to Australia and make satisfactory profits but clearly the expectation is that they will."

A2 Milk Co gained 2.8 percent to $2.18, Meridian Energy rose 2.3 percent to $2.90, and Heartland Bank advanced 2 percent to $1.50.

New Zealand Refining Co was the worst performer, down 2.7 percent to $2.54. Mercury NZ dropped 2.3 percent to $3 and Sky Network Television fell 2 percent to $4.88.

Port of Tauranga dropped 1.2 percent to $19.10. New Zealand's biggest port company posted a 2.3 percent decline in full-year profit yesterday, missing some estimates, while announcing plans to return $140 million to shareholders over four years and a five-for-one share split to boost liquidity. It declared a fully imputed special dividend of $34 million, or 25 cents a share, as the first step in a capital return proposal that chairman David Pilkington says will still allow for a conservatively geared balance sheet and an investment grade credit rating. 

"The result itself was certainly a little bit soft and I think perhaps yesterday that was overlooked a touch given the modest special dividend and the intention to split their shares," Goodson said. "The fact was, the results were a little soft and several brokers have cut their calls to a sell on valuation grounds."

According to Reuters, Port of Tauranga is rated a sell across two broker recommendations with a mean target price of $17.08.

Outside the main index, Michael Hill International was unchanged at $1.56. The jewellery chain business posted a 30 percent decline in annual profit  to A$19.6 million as it accounted for tax adjustments. The jewellery retailer grew revenue and earnings before interest and tax across its key Australian, New Zealand and Canadian markets.

Insurance Australia Group's New Zealand division posted a 38 percent slide in annual profit as rampant competition for commercial customers drove down prices and as the country's biggest general insurer faced a higher risk margin on the Canterbury earthquakes. The ASX-listed shares recently traded at A$5.80 and have dropped 0.9 percent today.

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