MARKET CLOSE: NZ shares fall, led by Sky TV; Steel & Tube drops while Xero extends gain

Wednesday 7th June 2017

New Zealand shares dropped, led lower by Sky Network Television as the pay-TV operator sank to a nine-year low after a significant shareholder sold down while Steel & Tube Holdings fell on news of court charges over its steel mesh.

The S&P/NZX50 Index fell 27.07 points, or 0.4 percent, to 7,467.9. Within the index, 33 stocks fell, 14 rose and three were unchanged. Turnover was $159 million.

Bellwether stock Fletcher Building fell 1.4 percent to $7.54.

"There's a pullback on larger stocks such as Fletcher Building, from where it was one-and-a-half weeks ago nine of its 11 trading sessions have been down on reasonable volumes," said James Smalley, director at Hamilton Hindin Greene. "There is maybe a bit of foreign investor selling out of our market, and possibly a little concern about the Auckland housing market slowing."

Sky TV was the worst performer, down 4 percent to $3.36, the lowest close since 2008, and has dropped 8.7 percent this month. This morning, Australian investment bank UBS disclosed it had sold down about 1 percent of its stake in Sky TV, leaving it with 5.8 percent in total.

"Major investors are looking at reducing their holdings, there are concerns about recent debt, increased churn and ongoing systemic concerns about streaming," Smalley said. “When you look at Chorus and their respective share prices, Chorus would expect to benefit from increased data usage but Sky TV not so much.” Chorus rose 0.8 percent to $4.615 today, heading towards its record $4.64 reached earlier this year.

New Zealand Refining Co dropped 3.1 percent to $2.48, and Vital Healthcare Property Trust fell 2.2 percent to $2.22.

Xero rose 0.6 percent to $26.25. Of the last 13 trading sessions, the stock has risen in 12 and been flat for one. The shares began rising in mid-May when the cloud-based accounting software firm announced it was moving closer to its first ever profit as customer numbers continue to swell and its 2017 full-year net loss narrowed as revenue grew.

"Investors maybe think they've reached a tipping point in their business, volumes are up reasonably well. It has been on a bit of a tear," Smalley said. "Generally, it's a stock that will follow the market trend but even more – so for it to be going in the opposite direction from the generally weak market shows the level of buying support for that stock post announcement."

SkyCity Entertainment Group was the best performer, up 1.6 percent to $4.46, while Vector rose 1.5 percent to $3.37.

Outside the main index, Steel & Tube dropped 6.8 percent to $2.35. It is facing 29 court charges of making false and misleading representations about its steel mesh product SE62. The Commerce Commission filed the charges in the Auckland District Court under the Fair Trading Act, relating to conduct between March 1, 2012, and April 6, 2016.

"That's dented a little bit of confidence, that spectre of uncertainty about potential costs," Smalley said. "It hasn't been on massive volumes, but on a reasonable day the stock might do between 160,000 and 180,000. Investors will be watching very closely to see if that will have a material impact going forward."

Fliway Group dropped 1 percent to $1.04. The transport and logistics firm cut annual earnings guidance as growing capacity constraints squeeze its margins, even as revenue grows with rising transport volumes.

(BusinessDesk)

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