MARKET CLOSE: NZ shares rise; a2 Milk extends rally, Xero, Air NZ gain

Tuesday 17th November 2015

New Zealand shares rose as a2 Milk reached an all-time high, while Xero and Air New Zealand recovered from a selloff earlier in the month.

The S&P/NZX 50 Index rose 5.94 points, or 0.1 percent, to 5967.61. Within the index, 30 stocks rose, 11 fell and 9 were unchanged. Turnover was $134 million.

A2 Milk led the market, rising 6.6 percent to 97 cents. The company has gained almost 50 percent in the past twelve months, and 28 percent so far this month. Auckland-based, Sydney-headquartered a2 expects earnings before interest, tax, depreciation and amortisation of $22 million on revenue of $285 million in the year ending June 30, 2016. That's an improvement on the previous forecast for earnings of $12 million on sales of $267 million, and up from EBITDA of $4 million on revenue of $154 million in 2015.

"A2 is really going gangbusters" said Grant Williamson, director at Hamilton Hindin Greene. "We can expect to see that growth continue as investors see growth potential in infant formula."

A2 Milk cornerstone shareholder, Freedom Foods Group, sold its remaining 10.4 percent stake in the milk marketing company for A$64 million, taking advantage of a surge in the share price. Williamson said this didn't indicate that Freedom Foods thought A2 Milk shares had hit a ceiling, but rather that Freedom Foods could better use the profit it had made elsewhere.

Xero rose 2.7 percent to $19.30. The cloud-based accounting software developer's shares dropped 5.3 percent between last Thursday and yesterday. Williamson said the stock was "bouncing back a little from that loss". The company, which is foregoing profits to expand sales, posted a wider first-half loss earlier this month even as revenue increased 71 percent.

"News from the UK and US indicates investors are starting to like this story," Williamson said. "However, their cost of picking up clients is relatively high."

Air New Zealand advanced 2.2 percent to $2.80, in the face of lower fuel costs and a weak kiwi dollar.

Today's rally made up for the "knee jerk reaction the other day" when the airline fell to a one-month low of $2.65 after news of increased international competition, Williamson said. "The longer oil prices stay down, the better, where Air New Zealand is concerned. The weakening kiwi dollar is also bringing tourists into the country, which is all good for Air New Zealand."

Energy-related stocks fell today, with Z Energy the worst performer on the index, falling 2.1 percent to $6.41. MightyRiverPower fell 1 percent to $2.84, Contact Energy declined 1 percent to $4.93, and TrustPower slipped 0.9 percent to $7.71.

Williamson said there may be some profit taking on energy stocks.

Fletcher Building dropped 1.2 percent to $7.29. New Zealand's dominant building supplies company expects to boost annual earnings as strong market conditions in New Zealand offset more mixed conditions in Australia.

"There wasn't an overly positive response from investors today," Williamson said. "The market isn't too enthusiastic about Fletcher's prospects going forward at the moment."

Meridian Energy was down 0.9 percent to $2.165. Meridian subsidiary Powershop has entered a franchise licence agreement with UK-based electricity generator and supplier RWE npower. The deal will see Powershop's electricity retail platform and brand used by npower, one of the UK's 'Big Six' energy retailers with about 10 percent of Great Britain's domestic electricity market, the Wellington-based company said in a statement.

Among smaller stocks, Pushpay Holdings rose 0.6 percent to $7.85. The mobile payments app developer widened its first-half loss while revenue more than tripled, as the company ramped up spending on product development and sales in a bid to attract US churches to its system.

Augusta Capital fell 0.5 percent to 97 cents after the listed property investor and fund manager reported a 26 percent decline in first-half earnings as a year-earlier gain from a syndication deal wasn't repeated and the listed property investor and fund manager predicted volatility in funds management returns.

BusinessDesk.co.nz

Comments from our readers

No comments yet