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MARKET CLOSE: Synlait, Restaurant Brands hit fresh highs while A2 Milk drops on profit-taking

Friday 29th September 2017

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New Zealand shares gained, led by Synlait Milk and Restaurant Brands that each hit record highs while A2 Milk was the worst performer as investors took profits from the stock's meteoric gains.

The S&P/NZX50 Index gained 16.78 points, or 0.2 percent, to 7,930.4. Within the index, 29 stocks rose, 12 fell and nine were unchanged. Turnover was $227 million. 

Synlait Milk was the best performer for the second day in a row, up 6.1 percent to a record $6.63. Yesterday, Synlait announced it has received manufacturer registration for a2 Milk's Chinese label infant formula, meaning the products will continue to have market access in 2018 when China tightens its rules. A2 Milk led the index lower, down 1.7 percent to $6.43, having reached a record $6.54 yesterday and jumped as high as $7.05 immediately after yesterday's announcement.

Grant Williamson, director at Hamilton Hindin Greene, said Synlait had caught investors' imaginations and was going from strength to strength, while A2 - which is the best performing stock on the index, up 207 percent this year - was taking a breather.

"It gained over the first four days of the week but we are now starting to see some profit taking, which in my opinion is a little bit overdue as it's had such a fantastic run," Williamson said. "There was no real big surprise [in the announcement]. A2 does trade a lot on the grey market, this does open doors but investors had pretty much twigged that was going to happen."

Williamson noted that the 7.3 percent gains made by A2 this week had helped drive the NZX50's 1.5 percent weekly gain, with the company now worth $4.7 billion meaning its movements have a strong effect on the index.

Restaurant Brands, which has gained 30.9 percent this year, had another strong day, up 2.6 percent to a record $6.82. Figures released last Thursday showed its sales in the first half of the year were up 51 percent to $386.1 million, after the fast-food operator expanded its footprint through Australia and Hawaii.

"It's a fantastic growth story in New Zealand, and investors are starting to catch on that it is much more than a New Zealand focussed company - it is international," Williamson said. "The market is gaining a lot of respect for that CEO, he has chipped away and now seems to be putting his foot on the accelerator a bit."

Xero gained 2.5 percent to $30.90, Property for Industry rose 2.1 per cent to $1.69 and CBL Corp gained 2 percent to $3.14.

Contact Energy dropped 1.3 percent to $5.50 and Spark New Zealand fell 1.2 percent to $3.65.

Outside the benchmark index, New Zealand Oil and Gas was unchanged at 74 cents. The company's board has refrained from making a recommendation to shareholders at the upcoming annual meeting where rival suitors are seeking directorships. 

Zeta Resources is seeking 42 percent of NZOG's fully and partly paid shares it doesn't already own, subject to scaling, lobbing in an offer of 72 cents per share, while OG Oil & Gas has thrown in a counter-offer of 77 cents a share for a maximum 70 percent stake in the Wellington-based company.

"A partial takeover offer muddies the water significantly, shareholders don't know what's going to be accepted and I don't think it does anyone any favours," Williamson said.


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