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MARKET CLOSE: NZ shares fall a second day; Wrightson drops on forecast

Wednesday 24th June 2009

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New Zealand shares fell for a second day in light trade after PGG Wrightson cut its profit forecast a week before the year end and amid perceptions equities have become pricier after a three-month rally.

The NZX 50 fell 22.20, or 0.8%, to 2739.80, the lowest level in almost a month. Within the index, 28 stocks fell, 12 rose and 10 were unchanged. Turnover was $58.6 million.

PGG Wrightson (NZX: PGW ) fell 6.7% to $1.12 after New Zealand’s biggest rural services company cut its full-year profit forecast for a second time, reflecting a downturn in dairy activity and a reluctance of sheep and beef farmers to spend more as trading improves. Net operating earnings may be $30 million to $32 million in the year ending June 30, down from last year’s $39.2 million, it said.

The benchmark index had climbed about 16% from its low in March before its two-day slide. Auckland International Airport (NZX: AIA ) fell 1.9% to $1.57. At today’s price, the nation’s biggest gateway is trading at 26 times earnings. The stock is rated ‘outperform,’ based on the estimates of nine analysts compiled by Reuters.

“The market is not all that cheap on current fundamentals,” said Alan Moore, who helps manage $250 million at Milford Asset Management. Added to that are increased calls on investors’ cash from new share issues and top-ups, he said.

Telecom Corp. (NZX: TEL ), the biggest company on the index, fell 1.5% to $2.58, while Tourism Holdings (NZX: THL ), which exits the NZX 50 at the end of the month, sank 2.2% to 45 cents.

Sky City Entertainment Group (NZX: SKC ), the hotel and casino operator, fell about 3% to $2.62, and is trading at about 13 times earnings. Australian casino operator Crown Ltd. is trading on a P/E of just 1.3.

Restaurant Brands New Zealand (NZX: RBD ) rose 1% to $1.02 after the fast-food company signed a 10-year agreement to continue with its Pizza Hut franchise while it sells down its stores to owner-operators. The agreement with Yum! Brands Inc. “provides a framework for the progressive sell down of stores to individual owner operators” with up to 10 stores earmarked for sale in the first year, Restaurant Brands said in a statement. Pizza Hut returns to sales growth in the latest quarter after four years of declines.

Small-cap investor Kingfish Ltd (NZX: KFL ) fell 1.4% to 73 cents as it announced plans to offer quarterly dividend payments to investors, with the first return likely to be made in September. The new long-term distribution policy will pay 8% of its average net asset value over four quarters, and will allow investors to access a portion of their investment every year, said chairman Rob Challinor in a statement.  

Investors are awaiting key data this week on the first-quarter balance of payments and gross domestic product, amid optimism they’ll show a shrinking current account deficit and a smaller contraction in the economy.

The economy probably shrank 0.7% in the first three months of the year after a 0.9% contraction in the fourth quarter, according to a Reuters survey, while the current account gap may have eased to 8.4% of GDP from 8.9%.

Consumer confidence bounced back strongly in the three months to June, as fears of a deeper world recession eased, according to the latest Westpac-McDermott Miller Consumer Confidence Index. The index climbed to an 18-month high of 106 in June, from 96.0 in March.

Skellerup Holdings (NZX: SKL ) rose 3.6% to 58 cents, leading gainers on the NZX 50 today. Jeweller Michael Hill International (NZX: MHI ) climbed 3% to 68 cents and Fisher & Paykel Healthcare (NZX: FPH ) rose 1.1% to $2.87.

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