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MARKET CLOSE: NZ shares up, Tourism Holdings and Fletcher Building gain while CBL drops

Friday 18th August 2017

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New Zealand shares inched up, defying global market trends, with Tourism Holdings and Fletcher Building gaining while CBL Corp plunged.

The S&P/NZX50 Index gained 3.49 points, or 0.04 percent, to 7,873.55. Within the index, 24 stocks fell, 16 rose and 10 were unchanged. Turnover was $132 million. 

"The market is having a good day in general, when you consider the weakness we've seen overnight from offshore markets," said James Smalley, senior advisor at Hamilton Hindin Greene. Overnight, the S&P 500 dropped 1.5 percent while the Dow Jones Index fell 1.2 percent. This afternoon, trading on Australia's S&P/ASX 200 was down 0.7 percent.

 "We've got one of the highest dividend paying markets in the world, and so far this reporting season companies have been matching and perhaps exceeding expectations with their dividends," Smalley said. "Guidance going forward hasn't been too pessimistic either. Investors are more focused on the domestic, on the micro than on the macro."

Tourism Holdings was the best performer, up 2.1 percent to $4.45, while Meridian Energy rose 1.5 percent to $2.96 and Air New Zealand gained 1.2 percent to $3.39.

Fletcher Building gained 0.6 percent to $8.47, a three-month high. Today's rise marks the sixth consecutive session of gains for the country's biggest construction company, which yesterday reported a 23 percent fall in operating earnings, weighed down by unprofitable building contracts that it's still working through but in line with warnings it had already given the market.

"Investors have perhaps put the abrupt departure of the CEO behind them, they maybe think the work that the company is doing to try to stop a repeat of some of the blowouts is working - starting to give the benefit of the doubt again," Smalley said.

Spark New Zealand was unchanged at $3.92. The country's biggest telecommunications company boosted annual profit 13 percent to $418 million as it eked out small sales growth and continued its focus on stripping out costs, while signalling a changing of the guard with chairman Mark Verbiest planning to stand down in November. 

Earnings before interest, tax, depreciation and amortisation rose 3 percent to $1.02 billion on a 3.3 percent gain in revenue to $3.61 billion. That was in line with First NZ Capital's forecast for ebitda of $1.01 billion. 

"The market pretty much got that right, it had a reasonable run ahead of the result," Smalley said. "It went from lows around $3.30 to up around $3.90 basically just before the result. It's maybe a bit of the old 'buy the rumour, sell the fact'. Spark is really benefiting from people making that switch from copper to fibre, and the ability to upsell on that shift."

CBL Corp was the worst performer, down 9.8 percent to $3.40 after the company said first-half operating earnings fell 36 percent, largely due to a $16.5 million increase in CBL Insurance's reserves to cover future claims, although revenue growth was still strong. 

Internal operating profit was $22.5 million in the six months to June 30, down from $35.1 million in the same period a year earlier, and $17.5 million below expectations, Auckland-based CBL said in a release to the NZX ahead of its first-half results on Aug. 24. CBL has previously projected annual earnings of between $89.9 million and $93 million for calendar 2017. 

"It looks like the actuaries have been a bit more conservative than what the market had anticipated, it's obviously come as a bit of a surprise," Smalley said. "The stock has done very very well since the IPO. It's not a large component of the NZX so it probably hasn't had a huge impact overall." 

Vista Group International dropped 3.5 percent to $5.52 and NZX fell 2.4 percent to $1.20.

Outside the benchmark index, Steel & Tube was unchanged at $2.30 posted a 22 percent drop in annual profit after the year-earlier earnings were boosted by a property sale. It reduced its dividend payment and said business performance hadn't met its expectations.

Net profit dropped to $20 million in the 12 months ended June 30, from $25.8 million a year earlier, as revenue slipped 1 percent to $511.4 million, the Wellington-based company said in a statement. The year-earlier profit was boosted by a $6.3 million gain on the sale of the company's Bowden Road property in Auckland. It expects to provide an outlook on 2018 earnings at its annual meeting in November.

IkeGPS dropped 3.1 percent to 31 cents. The laser measurement toolmaker said it has raised $3.7 million in an oversubscribed placement to Australian and New Zealand institutional and wholesale investors.

The share placement, which Ike announced earlier this week, was priced at 29 cents per share, a 9 percent discount to where the shares were trading before they were halted on Aug. 15. The stock has shed 51 percent over the past 12 months.

The company said it intends to offer New Zealand shareholders a share purchase plan to raise up to another $1.3 million at the same price, with details to come once it has been finalised and approved by NZX. 

Abano Health dipped 0.4 percent to $9.30. Dissident shareholders Peter and Anya Hutson and James Reeves have sold their collective 19 percent stake in the medical specialist investor for about $36.7 million. 

In recent years the Hutsons and Reeves have found themselves at odds with Abano's board and management over the company's direction, resulting in multiple takeover tilts and an attempt to spill the board. The most recent dispute has seen them arguing over the costs arising from the latest failed takeover bid. 


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