MARKET CLOSE: NZ shares fall; ANZ Bank down after placement, Contact sinks, Fonterra gains

Friday 7th August 2015

New Zealand shares fell, with Australia & New Zealand Banking Group down on its A$3 billion equity raising, while Contact Energy declined in another day of heavy trading following Origin Energy's exit. Fonterra Shareholders' Fund gained after the dairy giant lifted its dividend forecast.

The S&P/NZX 50 Index dropped 60.03 points, or 1 percent, to 5868.66. Within the index, 37 stocks fell, eight rose and five were unchanged. Turnover was $322 million, compared to a daily average in July of $142 million, and included $196 million of Contact.

Fonterra Shareholders' Fund, whose units are entitled to the dividends from Fonterra's ordinary shares, rose 5.2 percent to $4.90 after the dairy company cut its farmgate milk payout forecast as expected, while offering financial support to its farmers and flagging a higher dividend.

"The earnings per share was upgraded to a range of between 40 cents and 50 cents per share from market expectations of 36 cents, implying a dividend of about 31.5 cents," said Rickey Ward, JBWere's NZ equity manager. "On the current price at the time it gives you a dividend yield of above 6 percent, so it starts to look like a really high dividend stock with the upgrade."

Contact fell 1.3 percent to $5.15, the first decline since Origin sold its controlling stake for $4.65 a share earlier this week, vastly boosting the liquidity and market weighting of the stock. Some 32 million shares changed hands today.

ANZ Bank fell 6.8 percent to $34.13. The bank followed National Australia Bank in raising equity capital requirements to satisfy regulatory requirements in Australia. Westpac Banking Corp fell 1.9 percent to $36.60.

"All of the other banks look set to follow now one would expect, all because there's a requirement to have a certain amount of capital on their balance sheet as part of the regulatory requirement," Ward said. "They've chosen to do it through an equity raising and get it resolved now."

Kathmandu Holdings fell 0.6 percent to $1.74 after Briscoe Group controlling shareholder Rod Duke said his takeover offer, at an implied price of $1.80, "fully reflects the value of Kathmandu shares."

“Our offer remains on the table and is open for acceptance until the 17th of September, unless extended in accordance with the Takeovers Code," Duke said. "We believe that Kathmandu is a great brand and has good products, but by its own admission is failing to execute basic retailing fundamentals."

Briscoe stock, which is illiquid because Duke owns about 80 percent, was unchanged at $2.96.

Kathmandu "is only up here because Rod's made a bid for it, and if he walks away it'll be interesting to see what happens to the share price," Ward said. "At face value it's only at this level because a bid's been made for the company. Had a bid not been made, people would still be scratching their head on expected earnings."

Gentrack Group rose 1 percent to $2.04 after the utility software developer cut earnings guidance after it completed one of two contracts that kept a question mark over its forecasts. The Auckland-based company expects earnings before interest, tax, depreciation and amortisation will come in near the bottom of the $13 million to $15 million range it gave for the 12 months ending Sept. 30.

Smiths City rose 1.9 percent to 53 cents after the retailer entered into a sale and leaseback agreement for its Colombo St site in Christchurch, where it will sell the property for $20 million plus GST, and sign up to a long-term paying annual rent of $1.4 million plus GST and outgoings.

ERoad increased 0.9 percent to $3.68 after the electronic road user charges and transport services firm said first-quarter profit was in line with expectations, and it was ramping up its North American expansion plans where it sees additional capacity for growth.

Air New Zealand fell 0.6 percent to $2.675 after ASX-listed Virgin Airlines confirmed an annual loss of $162.7 million, and said it plans to increase the number of trans-Tasman flights from October. New Zealand's national carrier owns about 26 percent of Virgin.

T&G Global fell 2.5 percent to $1.95 after the fruit marketer owned by Germany's BayWa lifted first-half profit 18 percent to $12.1 million on sales of $371 million as it benefited from a strong pipfruit performance and the inclusion of its Apollo Apples acquisition.

BusinessDesk.co.nz

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