MARKET CLOSE: NZX 50 hits record; Meridian up on transmission charges, Ryman at all-time high

Tuesday 17th May 2016

New Zealand shares rose, pushing the S&P/NZX 50 Index to a new record on expectations Meridian Energy will be a key beneficiary of proposed changes to electricity transmission charges. Ryman Healthcare gained to an all-time high ahead of its full-year results on Friday while New Zealand Refining dropped after reporting a slimmer refining margin.

The NZX 50 rose 60.74 points, or 0.9 percent, 6974.8. Within the index, 28 stocks gained, 11 fell and 11 were unchanged. Turnover was $157 million.

Meridian, whose major customers include the Rio Tinto-controlled aluminium smelter at Tiwai Point, rose 3.7 percent to $2.82. Contact Energy rose 1.1 percent to $5.35.

The Electricity Authority released proposals to overhaul national grid charges which would yield the biggest decrease to South Island generators who would no longer be required to carry all of the $150 million a year costs of the HVDC link across Cook Strait. Consumers in the upper North Island would face the biggest increase because they got the greatest benefits from upgrades to transmission lines.

"Meridian and Contact are both firmer on that," said Grant Williamson, a director at Hamilton Hindin Greene. "Meridian is the major winner there. It's going to assist their earnings and dividend payments." For North Island-based Mighty River Power "it's slightly unfavourable."

The authority is embarking on 10 weeks of consultation over the proposed changes, aiming to have final decisions on the transmission pricing methodology (TPM) by October. It would then develop a fully operational new TPM between 2017 and 2019, with the aim to have it in place for April 1, 2019.

Mighty River Power dropped 2.3 percent to $3.01. TrustPower rose 0.9 percent to $7.84 and Genesis Energy climbed 0.2 percent to $2.12. Vector rose 0.6 percent to $3.42 even though the Electricity Authority presentation showed it would face some of the steepest increases in charges under the proposed changes.

Steel & Tube Holdings gained 3.7 percent to $2.25, leading the market higher.

Ryman rose 3.1 percent to $9.70 and has increased 11 percent this year. The retirement village operator forecast 15 percent full-year profit growth in November when it released its first-half results. In February it announced a $200 million investment to expand in Melbourne, embarking on its third retirement village in that city.

"Investors continue to pile into the stock ahead of the financial results," Williamson said. "A lot of it might come down to how Melbourne is tracking and one question is wage pressures in the sector."

Among rivals, Metlifecare gained 2.1 percent to $5.80 and Summerset Group Holdings rose 1.6 percent to $4.59.

Infratil, which also reports this week, rose 0.8 percent to $3.31. Fisher & Paykel Healthcare gained 3.4 percent to $9.97 and Xero extended its gains, rising 2.9 percent to $17.93.

Trade Me Group rose about 2 percent to $4.70 and Spark New Zealand gained 1.8 percent to $3.67.

Sky Network Television rose 1 percent to $4.04. Fairfax media reported late today that the pay-television operator plans to raise the price of its basic and sports packages.

NZ Refining fell 6.8 percent to $2.60 and was the biggest decliner on the benchmark index today. Its net refinery margin was US$1.84 a barrel in March/April, with US$2.88/barrel sliced off by the closure of its hydrocracker unit, and a further US$1/barrel caused by repair work. That’s the smallest margin since March/April 2014 when the refinery’s hydrocracker unit last faced a shutdown, producing a margin of negative US$2.84/barrel.

"Refining margins are certainly on the decline," Williamson said. "NZR had a great run up on the back of refining margins going up."

Orion Health Group fell 2.9 percent to $4.76.

BusinessDesk.co.nz

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