MARKET CLOSE: NZ shares rise on yield hunt; Genesis, MRP, Meridian

Friday 28th August 2015

New Zealand shares rose as investors sought dividend-paying equities in a low interest rate environment. Electricity companies Genesis Energy, Mighty River Power and Meridian Energy advanced.

The S&P/NZX 50 Index rose 35.54 points, or 0.6 percent, to 5670.48. Within the index, 30 stocks rose, 14 fell and six were unchanged. Turnover was $193 million.

The benchmark ended the week 1.4 percent lower, after a volatile week that saw the index record its biggest one day drop in four years as offshore uncertainty about the outlook for China's economy spooked investors and weighed on equities, followed by a rebound. Traders returned to the local bourse on the prospect of local and international interest rates staying lower for longer and looking for assets which will give them a better return than interest on their investment.

Yield-paying stocks, such as the government-controlled electric utility companies and property investors, rose. Genesis gained 1.7 percent to $1.82. Meridian advanced 0.5 percent to $2.20. Goodman Property Trust rose 0.8 percent to $1.23. DNZ Property Fund climbed 1.9 percent to $2.17. Kiwi Property Group gained 1.9 percent to $1.335. Spark New Zealand, formerly Telecom Corp, rose 1.4 percent to $3.27.

"The major movements we saw on the bourse throughout the week were based on macro-environments. The stocks were getting sold off as an asset class," said James Smalley, a director at Hamilton Hindin Greene. "For people who look past that they present a great buying opportunity. Particularly people shouldn't lose track of the fact that we're going to be entering an even lower interest rate environment, which is going to be good for equities."

MRP rose 1.8 percent to $2.77.The electricity generator-retailer announced a special dividend in the current earnings season, at the same time as announcing a 22 percent fall in underlying earnings after tax for the year to June 30 of $145 million. The company will spring another 2.5 cents per share special dividend for shareholders, having already declared a 5 cents special payout in December last year.

Air New Zealand dropped 1.8 percent to $2.49. The national carrier's share price has dropped 16 percent in the last three months and 5.7 percent since announcing a record $327 million net profit this week. It also indicated a significant earnings uplift for the 2016 financial year. Deutsche Bank analyst Chris Byrne said in a research note that the negative reaction to the 2015 full-year result suggested the market was disappointed no special dividend was announced and remains concerned about the airline’s ability to profitably fill capacity increases over the next year as economic activity weakens and competition increases.

Orion Health Group, the healthcare management software system, led the benchmark index higher, up 4.1 percent to $3.80.

Outside the benchmark index, Veritas Investments fell 1.6 percent to 60 cents. The food and beverage investor posted a 23 percent drop in annual profit to $3.34 million and will pay a smaller dividend to shareholders as it wrestles with integrating its Nosh Food Market and Better Beer Co acquisitions.

Fliway advanced 8.3 percent to $1.05. The transport and logistics company that listed on the NZX in April will pay a special dividend after posting annual profit 33 percent above its prospectus forecast, mainly on lower-than-expected listing costs. Net profit was $2.19 million compared to a prospectus forecast of $1.64 million, but still below last year’s $4.7 million, as expected, due to the one-off listing costs and a number of non-cash accounting adjustments, the company said in a statement.

Smiths City rose 5.8 percent to 55 cents. Veteran corporate investor Ron Brierley is sniffing out opportunities in the Christchurch-based retail chain, which has started closing down unprofitable stores to eke out a lift in earnings, snapping up a 7.2 percent stake.

BusinessDesk.co.nz

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