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MARKET CLOSE: NZ shares lift as Synlait rallies on A2 stake lift, Freightways, Ebos drop

Friday 3rd August 2018

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New Zealand shares gained, led higher by Synlait Milk as A2 lifted its stake in the company while Freightways and Ebos fell.

The S&P/NZX50 Index rose 15.36 points, or 0.2 percent, to 8,864.52. Within the index, 22 stocks rose, 21 fell and seven were unchanged. Turnover was $107.7 million.

"There were reasonable offshore leads to run our market, and we started to gather a bit of strength after the Aussie market opened," said Peter McIntyre, investment adviser at Craigs Investment Partners. "We're waiting for our own earnings season and still in that void of lack of information, but compared to Asia we're tracking up well."

Synlait Milk led the index higher, up 2.8 percent to $11, while A2 Milk traded higher throughout the day but closed down 0.2 percent to $10.42. A2 will buy another 8.2 percent of Synlait Milk at a small discount, lifting its holding in the dairy processor to 17.4 percent.

The milk marketing firm will buy the shares at $10.90 apiece, down 2.3 percent from the NZX one month volume weighted average price of $11.16, for a total of $161.8 million. The shares will come from Tokyo-listed Mitsui & Co, a general trading company which invests across sectors and bought 8.4 percent of Synlait at the company's initial public offering in 2013.

"You've got interest like A2 taking a block stake in Synlait, and the way they've operated their business and wanting to increase production, the story is still pretty intact," McIntyre said. They're proving themselves to be a reliable and efficient operator as well, that's attracting the attention pretty much of everyone involved in the sector."

"Within that announcement, A2 said they're comfortable with their position. It's a key part of the business and I don't think it's any surprise they have increased the stake, but where they go from here will be interesting too."

Tourism Holdings rose 1.7 percent to $6.11, Kathmandu Holdings gained 1.3 percent to $3.14 and Pushpay Holdings advanced 1.1 percent to $3.85.

Freightways was the worst performer, down 1.3 percent to $7.85. Ebos Group dropped 1.1 percent to $20.25 and Summerset Group Holdings declined 1.1 percent to $7.56.

Outside the benchmark index, Briscoe Group was unchanged at $3.55. It lifted first-half sales 4.3 percent to $292.2 million and will report a slightly higher profit on wider margins next month. Homeware sales rose 4.5 percent and its Rebel Sport chain revenue gained 3.8 percent, while online sales accounted for 9 percent of group sales. 

"They're working hard to get what they're getting there, it's a tough sector," McIntyre said. "It's a well-run retailer but some of the numbers are borderline flat."

"The key segment for them is the sporting goods, that growth was 3.8 percent and I'd probably say that was disappointing, it has been a stellar performer for them. Online is increasing, as it is for most of the listed retailers in New Zealand, but margins are tight and the impact of minimum wages - there's a cloud over the sector generally. They tend to manage their margins well, they're efficient operators but they're eking out average growth."


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