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MARKET CLOSE: NZ shares gain as Ebos, Air NZ earnings meet expectations

Friday 23rd August 2019

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New Zealand shares rose as the domestic earnings season continued, with Ebos Group and Air New Zealand meeting investors' expectations. Spark New Zealand rose for a second day on unusually large volumes. 

The S&P/NZX 50 Index increased 15.90 points, or 0.1 percent, to 10,725.22. Within the index, 31 stocks rose, 15 fell, and four were unchanged. Turnover was $215 million, of which Spark accounted for $101 million. 

Three top-20 companies reported today, of which Air New Zealand beat earnings estimates and maintained dividend payments in the face of a slowing tourism market and more expensive jet fuel. Ebos reported flat annual earnings but signalled expectations for strong gains in the current year, while Auckland International Airport projected flat earnings as it invests more on infrastructure and copes with softer passenger growth. 

Ebos hit a record $25.60, and ended the day at $25.20, up 2.9 percent on a volume of just 65,000 shares, about two-thirds of its 90-day average of 100,000 shares. Air New Zealand increased 1.5 percent to $2.77 on a volume of 1.6 million shares, while Auckland Airport fell 2.1 percent to $9.59 on a volume of 1.3 million. 

"Ebos has been received well and that was pretty much in line," said Suzanne Kinnaird, a broker at Forsyth Barr. "The market as a whole is a wee bit buoyant today." 

Spark rose 0.8 percent to $4.225 on a volume of almost 24 million shares - about eight times its average volume - and following on from yesterday's 17.1 million volume. The country's biggest telecommunications company yesterday affirmed plans to keep paying 25 cents per share in annual dividends. That was welcomed by investors hungry for income in an environment where low interest rates deter them from using term deposits or even bonds. 

Sky Network Television sank to a record low $1.13 and ended the day down 4.1 percent at $1.18 on a volume of 1.5 million shares. The pay-TV operator dropped its final dividend while reporting a $608 million loss as it wrote down the value of goodwill and impaired other assets in an effort to preserve funds ahead of some large battles for premium sports rights. Its underlying earnings fell less than expected to $97.4 million. 

Kinnaird said the stock was under press because of the suspended dividend payment. "People are still looking for income in the current environment and they'll be exiting as a result of that." 

Heartland Group fell 2.4 percent, or 4 cents, to $1.61 after shedding rights to a 6.5 cent dividend due to be paid on Sept. 6. 

Mercury NZ led the market higher, up 3.4 percent at $5.20 on a volume of a million shares. The power company's earnings were in line with expectations earlier this week, and while it hit a record $5.22 today, it's still trading at a dividend yield of 4.28 percent. 

Fletcher Building fell 1.5 percent to $4.65 on a volume of 1.7 million as investors digested yesterday's earnings result, which was in line with expectations.

A2 Milk decreased 0.4 percent to $14.75, extending yesterday's 12 percent slump when investors were disappointed by the milk marketing firm's margin outlook. About 1.3 million shares changed hands.

"It was pretty brutal really, but that shows what the market was expecting or hoping for - if you miss that you get punished," Kinnaird said. 

Of other stocks trading on volumes of more than a million shares, Arvida Group was unchanged at $1.39, and Contact Energy rose 0.2 percent to $8.43. 

Infratil increased 0.6 percent to $4.78 after updating shareholders at its annual meeting in Auckland. 

Outside the benchmark index, Cavalier Corp sank to a record low, and ended the day at 25.5 cents, down 11 percent, after warning it will face impairment charges and writedowns of up to $9 million when it reports next week. 

The New Zealand government's 2023 bonds paying annual interest of 5.5 percent were the most traded debt instrument on a volume of 2.1 million. The notes closed at a yield of 0.75 percent, down 33 basis points. 


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