MARKET CLOSE: NZ shares rise, led by Comvita on China deal; Air NZ, Mercury gain

Monday 5th September 2016

New Zealand shares rose, led by Comvita on the back of its plans to take control of its Chinese distribution, while Air New Zealand and Mercury NZ also gained.

The S&P/NZX 50 Index rose 65.73 points, or 0.9 percent, to 7,491.84. Within the index, 36 stocks rose, 10 were unchanged and five fell. Turnover was $182 million.

Comvita was the best performer on the index, up 6 percent to $10.60. The New Zealand manuka honey products company plans to acquire 51 percent of its Chinese distributor in a $30 million all-stock deal that will see the owners of Shenzhen Comvita Natural Food Co lift their holding in Comvita to more than 11 percent. The deal is expected to be earnings accretive for Comvita in the first year, excluding one-time costs.

Air New Zealand gained 3.3 percent to $2.35.

"It's creeping back up, people are just maybe buying ahead of the dividend, or they're thinking that tourism numbers are going to stay pretty robust, and that's good for Air New Zealand - once tourists get here, generally they travel around, and their domestic routes are something like 3 times more profitable than their international flights," said James Smalley, director at Hamilton Hindin Greene. "Their earnings are a bit more consistent as well, on the back of that demand."

Steel & Tube Holdings will drop out of the S&P/NZX50 benchmark index on Sep 16, along with rubber goods company Skellerup.

Agribusiness group Scales Corporation and cinema software developer Vista will replace them. Vista more the doubled its profit in the first half of its financial year due to increased revenue from acquisitions, while Scales saw net profit rise 3% to $33.8 million in its first half. Vista rose 2.9 percent to $6.80 and Scales rose 3.1 percent to $3.33.

Steel & Tube shares gained 1.4 percent to $2.22 today, while Skellerup was unchanged at $1.36. Steel & Tube shares are bouncing back after being sold off following media reports of issues with the steel and possible lawsuits, Smalley said.

Mercury NZ climbed 2.6 percent to $3.32, Tower rose 2.6 percent to $1.37, and Spark New Zealand advanced 2.4 percent to $3.885.

Contact Energy was the worst performer, down 2.5 percent to $5.05, while Z Energy dropped 0.5 percent to $8.30.

Orion Health Group dipped 0.2 percent to $4.08.

"It has only had three or four up days out of the last 20 trading days," Smalley said. "Investors may be a little concerned as there's been no further news about deal flow - it's on pretty thin volumes though. It could be a bit of extreme profit taking off a very very strong bounce."

Outside the main index, Wynyard Group dropped 4.2 percent to 23 cents. It's down 87 percent this year.

"It's a classic scenario of cash burn," Smalley said. "They're obviously trying to stem the flood, they had a very good news flow but, in reality, you've got to walk the walk. They botched the capital raising earlier in the year, and it becomes a little bit of a downward spiral. The existing board is trying to do their best but really at the moment they've lost credibility in the market."

BusinessDesk.co.nz

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