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MARKET CLOSE: NZ shares dip as CBL Corp suspended, Fletcher in halt ahead of downgrade

Thursday 8th February 2018

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New Zealand shares dipped as heightened global volatility continued to subside, while insurer CBL Corp was suspended pending regulatory investigations and Fletcher Building signalled another profit warning.

The S&P/NZX50 Index fell 17.59 points, or 0.2 percent, to 8,177.14. Within the index, 23 stocks fell, 19 rose and eight were unchanged. Turnover was $109 million.

"The market has calmed down a little bit since Monday, but I don't know if we're out of the woods in terms of volatility," said Grant Davies, investment adviser at Hamilton Hindin Greene. "The New Zealand market is pretty flat today and trading is lighter, people are being a bit cautious and letting the dust settle."

The biggest news stories of the day were two stocks which couldn't trade: Fletcher Building and CBL Corp.

NZX Regulation suspended CBL due to concerns over its continuous disclosure obligations following engagement between it, CBL, the Financial Markets Authority, the Reserve Bank, and a number of overseas regulators with prudential oversight of CBL’s international insurance business. The suspension will continue until NZXR is satisfied that all material information has been released to the market and that the information is complete and accurate, with the regulator unable to confirm how long that will last, it said. CBL had been in a trading halt at $3.17 since Monday.

Fletcher Building shares were halted at $7.77, pending a review of key projects at its building and interiors (B+I) unit as it prepares its first-half accounts. The company expects to breach its debt covenants because of further "material losses" at its business.

"They will be frantically negotiating over the weekend to see if they can get their bankers onside, and if not they'll be trying to come up with a way to shore up their balance sheet," Davies said. "Obviously they've been through this a few times now, and you'd expect, after they got audited by KPMG in October, that they would have picked up on most of it, although they admittedly only focused on the major projects. We'll have to wait and see what the bankers say. There's a question of how they raise the money - asset sales, capital raising, banks give them a short-term waiver." 

The worst performer today was Metro Performance Glass, down 2.2 percent to 89 cents, with Scales Corp falling 1.9 percent to $4.61 and Mainfreight down 1.6 percent to $25.40.

New Zealand Refining Co was the best performer, up 1.6 percent to $2.49, with Trade Me Group rising 1.6 percent to $4.47.

SkyCity Entertainment Group rose 0.8 percent to $4.03 ahead of reporting its annual result tomorrow. 

Outside the benchmark index, ERoad declined 6.1 percent to $3.38. It has opened a share purchase plan for existing shareholders which is larger than initially indicated, following its $15.5 million capital raising last year. In December, the company announced its plan to raise at least $18 million of new capital, with at least $4 million of that coming from an SPP.

Today, it said that has increased to $6 million "given the strong interest that investors have shown in the SPP and ERoad’s desire to provide its loyal retail shareholder base with an opportunity to participate in the SPP", bringing its total raise to $21.5 million. The maximum price for the plan is $3.04.

Michael Hill International dropped 7.3 percent to $1.27, and fell 7.5 percent to A$1.115 on the ASX. It expects first-half earnings will more than halve with A$20 million coming from the jewellery chain's exit from the US and scaling back its Emma & Roe branded store footprint. 

The Brisbane-based company said earnings before interest and tax was about A$20 million in the six months ended Dec. 31, down from A$40 million a year earlier. Of that, about A$8.4 million arises from onerous lease provisions and another A$11.4 million from impairment charges on property, plant and equipment, it said in a statement. 


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