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MARKET CLOSE: NZ shares flatline in light trading; Fonterra sinks after dropping dividend

Tuesday 13th August 2019

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(Aug. 12, 5:53 PM) New Zealand shares barely budged in relatively light trading as Contact Energy met earnings expectations in kicking off the reporting season. Fonterra Shareholders' Fund units sank as the dairy giant dashed hopes for a dividend this year. 

The S&P/NZX 50 Index decreased 0.47 of a point, or 0.004 percent, to 10,872.74. Within the index, 25 stocks rose, 18 fell and seven were unchanged. Turnover was $92.2 million, with five companies trading on volumes of more than a million shares. 

Contact decreased 0.5 percent to $8.26 on a volume of 1.3 million shares after reporting a 12 percent increase in operating earnings and met expectations with a final dividend of 23 cents per share. 

"It was a reasonable result and in line with what the market was expecting as well," said Peter McIntyre, an investment advisor at Craigs Investment Partners. "There was a bit of talk about margin pressure with regards to the retail side of business, but every gen-tailer is finding that." 

Fonterra Shareholders' Fund units led the market lower, down 5.1 percent at $3.57 on a volume of 411,000, more than twice its 90-day average of 175,000. Fonterra Cooperative Group said it will report an annual loss of up to $675 million after booking more than $800 million on assets worldwide, including its New Zealand consumer business.

The dairy exporter's board decided not to pay a dividend for the financial year, subordinating the interests of unitholders to protect farmgate returns for farmer-shareholders. The cooperative's farmer-owned shares were also down 5.1 percent at $3.57, valuing the company at $5.75 billion. 

McIntyre said he wouldn't be surprised if the price tests the $3 level, with most institutional and retail investors having already quit the stock. "It just hasn't worked," he said. 

A number of stocks trading near year-highs gave up some of those gains, including Kiwi Property Group, down 1.5 percent at $1.635 on a volume of 1.2 million shares. Argosy Property declined 1.4 percent to $1.44, Stride Property fell 1.3 percent to $2.30 and Infratil decreased 1.1 percent to $4.875. 

Summerset Group was the most traded stock on a volume of 2.1 million shares, more than four times its 481,000 average. It was unchanged at $5.84 ahead of tomorrow's first-half result. Of other companies reporting tomorrow, NZX increased 0.8 percent to $1.20 and PGG Wrightson remained in a trading halt pending a 1-for-10 share consolidation. 

Spark New Zealand decreased 0.7 percent to $4.10 with 1.4 million shares changing hands, less than half its 3.1 million average. Meridian Energy was unchanged at $5 on a volume of 1.3 million. 

Gentrack Group rose 4.4 percent to $5.50 on a volume of 287,000 shares, more than twice its 90-day average of 113,000. McIntyre said the stock was upgraded in a broker's report, which noted that the software developer's services had helped some utilities in the UK lift their market share. 

Tourism Holdings rose 1.3 percent to $3.96 on a volume of 74,000, less than half its average, after saying a tax benefit in the US meant it comfortably beat the top end of earnings guidance. Even without that tailwind, it said earnings would be at the top end, or slightly above, its twice downgraded forecasts. 

Outside the benchmark index, Hallenstein Glasson rose 5.7 percent to $5.60 after the clothing retailer said annual profit was up by about 2 percent, with sales growth across its Glassons womenswear chain in New Zealand and Australia. 

McIntyre said investors don't expect double-digit returns on retail stocks given the tough trading environment, and are satisfied with any level of expansion. 

Metro Performance Glass was unchanged at 37 cents after announcing the exit of chief financial officer John Fraser-Mackenzie at the end of the year. He joined the glassmaker in 2015, almost a year after it went public. 

Chorus's 2021 bonds paying annual interest of 4.12 percent were the most traded debt security with a volume of 505,000. The notes closed at a yield of 2.1 percent, down 9 basis points. 

ASB Bank announced the details of its offer to sell up to $100 million of five-year bonds, with unlimited oversubscriptions. The indicative margin was set at 0.85-0.88 percent, implying an interest rate of 1.83-1.86 percent. 


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