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MARKET CLOSE: NZ shares gain as Contact kicks off earnings season on a bright note

Monday 11th February 2019

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New Zealand shares rose as Contact Energy's first-half earnings delivered a better-than-expected dividend, giving investors something to cheer at the start of the domestic reporting season. Restaurant Brands New Zealand led the market higher. 

The S&P/NZX 50 index gained 33.39 points, or 0.4 percent, to 9,210. Within the index, 28 stocks rose, 13 fell and nine were unchanged. Turnover was $92.3 million, with just four companies trading on volumes of more than a million shares. 

Investors have set a relatively low bar for the local reporting season, predicting single-digit earnings growth across the majority of firms posting results. Dividends remain a key factor for investors as swap rates trade near record lows in an environment where the Australian and New Zealand central banks are considering cutting their benchmark rates to new lows. 

Contact rose 1.6 percent to a four-year high $6.32 after reporting a 28 percent gain in earnings before interest, tax, depreciation, amortisation, and changes in financial instruments as its generation arm benefited from higher wholesale electricity prices. The board also declared an interim dividend of 16 cents per share, higher than the 15 cents payment predicted by Forsyth Barr analyst Andrew Harvey-Green, and changed the policy to paying 100 percent of operating cash flow. 

"We're kicking off earnings season on a positive note," said Grant Davies, an investment adviser at Hamilton Hindin Greene. "It's was a pretty solid result and then the cherry on top is the good bump in the dividend." 

Without major capital spending programmes, the electricity retailer-generators are able to pay out all of their operating cash, which Davies said was attractive given low-interest rates. That boosted the attraction of other utilities and property stocks, which typically provide steady cash returns to investors. 

Genesis Energy rose 1.1 percent to $2.69 on a bigger-than-average volume of 551,000, Kiwi Property Group increased 1.1 percent to $1.45 with 1.4 million shares changing hands. Goodman Property Trust gained 0.9 percent at $1.62 on a volume of 238,000, about half its 90-day average. 

Trustpower increased 0.2 percent to $6.30 on light volume, after warning it may have to write down the value of its generation assets after revising its future electricity price expectations. The company also launched a bond offer to raise up to $100 million. Controlling shareholder Infratil rose 1 percent to $3.95 with 932,000 shares traded, more than twice its three-month average. 

Spark New Zealand was the most traded stock on a volume of 2.7 million, below its 3.5 million average. It fell 0.6 percent to $4.025. A2 Milk rose 2.4 percent to $13.40 on a volume of 1.2 million, while Vital Healthcare Property Trust increased 0.2 percent to $2.095 on a volume of 1.1 million, almost five times its 90-day average. 

Restaurant Brands led the market higher, up 2.8 percent at $8.84 on very light volume. The fast-food operator is under a partial takeover bid from Mexico's Finaccess Capital for $9.45 a share. 

Outside the benchmark index, Methven provided its independent adviser report on a proposed takeover by ASX-listed GWA. The $1.60 a share offer, via a scheme of arrangement, was at the top end of Grant Samuel's range, and showed the tapware maker had underperformed for years. 

Briscoe Group rose 2.8 percent to $3.33 after reporting a 5.8 percent increase in fourth-quarter sales, and flagging yet another record profit. Rival Warehouse Group fell 0.5 percent to $2.06. 

Penny-dreadful Promisia Integrative halved in value, dropping to 0.1 cents after saying the Ministry of Health has accused it of mis-selling its Arthrem product. 

Ryman Healthcare was the worst performer on the benchmark index, down 2.9 percent at $10.70 on a volume of 174,000, less than a third of its average the past three months. Tourism Holdings was down 1.9 percent at $4.60 on a volume of 234,000 shares, more than its 148,000 average. 

(BusinessDesk)

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