MARKET CLOSE: NZ shares fall; Steel & Tube, Fletcher down, Vital Healthcare up

Wednesday 1st June 2016

New Zealand shares fell as Steel & Tube Holdings said it was the supplier of imported Chinese steel used in a roading development, while Fletcher Building and Metro Performance Glass also declined and Vital Healthcare gained.

The S&P/NZX 50 Index shed 17.08 points, or 0.2 percent, to 7,022.33. Within the index, 28 stocks declined, 14 advanced and eight were unchanged. Turnover was $172.3 million.

"We've had a reasonably good run of late, but there's been a little bit of profit taking today after four days in a row up - you've got have a fall back from time to time," said James Smalley, director at Hamilton Hindin Greene. "It's all pretty quiet, the market's probably just bedding down a number of big portfolio changes due to the MSCI re-rating yesterday."

Steel & Tube dropped 1 percent to $1.94. The steel products distributor put out a late statement saying its earnings guidance from last week incorporated the impact of faulty Huntly bypass steel casings, after reports that Chinese steel, supplied by the company and which had been certified as strong enough to hold up four bridges, was actually too weak and the new bypass requires a serious repair job.

Last month the company cut its full-year guidance and said underlying earnings may fall 10 percent to 15 percent as margins contracted and it incurred costs related to quality issues for seismic steel mesh that wasn't independently tested.

Speaking before that announcement was made, Smalley said Steel & Tube had been "a severe underperformer in the 50" for some time. "It looks like the sellers have come into that stock. It's one of those scenarios where if you disappoint, normally you'll be treated pretty badly for quite some time."

Fletcher Building shed 1.3 percent to $8.83. Smalley said the stock had fallen on profit-taking, having gained 22 percent so far this year.

"Australia had some pretty good GDP figures out today - that's always been one side of Fletcher's business that has consistently underperformed over the last few years, and that could be behind why the stock is having the recovery it is, as barring today it has spiked up," Smalley said.

Vital Healthcare advanced 2.2 percent to $2.305. The company, which owns and develops property for hospitals and healthcare providers, plans to spend A$84 million to expand existing operations across the Tasman and make a series of new acquisitions. Vital is betting on a strong long-term outlook for the healthcare sector, buying properties on both sides of the Tasman which have similar demographics with ageing populations in need of medical services.

Metro Performance Glass was the worst performer, dropping 3.9 percent to $1.72. Trade Me Group fell 2.9 percent to $4.76, New Zealand Refining Co dipped 2.7 percent to $2.51, and Fonterra Shareholders Fund fell 2.6 percent to $5.70.

Auckland Airport, which was heavily traded yesterday in the MSCI rebalancing, dropped 0.4 percent to $6.215.

Freightways was the best performer, up 3.2 percent to $6.81, and Fisher & Paykel Healthcare rose 2.8 percent to $10.74.

Chorus gained 2.5 percent to $4.1, which Smalley said was "misleading" as it was only back around the levels it was before yesterday's rebalancing.

Outside the main index, NXT-listed Oceania Natural dropped 6.1 percent to $2.30. The food supplements maker lifted annual profit as revenue more than doubled, although it missed its earnings guidance.

Kirkcaldie & Stains was unchanged at $3.25. Its directors reiterated their recommendation that shareholders reject veteran corporate raider Ron Brierley's takeover offer after raising their estimate for the cash that will be returned once lease commitments are exited and the company wound up.

BusinessDesk.co.nz

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