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MARKET CLOSE: NZ shares mixed, SkyCity drags market down while Summerset, Westpac, Tegel gain

Wednesday 28th June 2017

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New Zealand shares were mixed, with most of the market including Summerset Group Holdings and Westpac Banking Corp rising but a big trade in Sky City Entertainment tipping the index down.

The S&P/NZX 50 Index dropped 1.86 points, or 0.02 percent, to 7,624.49. Within the index, 23 stocks rose, 16 fell and 11 were unchanged. Turnover was $357 million.

Sky City Entertainment was the worst performer, dropping 4.2 percent to $4.07. Chair Chris Moller will retire from New Zealand's only listed casino company at the end of this year after nine years as a director, to be replaced by its new director Rob Campbell.

"There was a big trade this morning just after 9am, over 35 million shares at $4.05, and that's the main reason we've seen such a large amount of volume going through the market today," said Peter McIntyre, investment adviser at Craigs Investment Partners. "I don't think it's hand-in-hand with Chris Moller leaving, it just happens to coincide I think, but it's a massive trade.

"Sky City has had a difficult month, down 7.5 percent, they've really struggled," McIntyre said. "You've got the convention centre build and there are issues with Chinese high rollers which have affected parts of the casino market in Australasia - a lot of money is made from the high rollers and those issues are weighing on investors' minds. It's a bit unloved at the moment, predominately around those issues. A number of valuations sit between $4.20 and $4.30, a lot of brokers don't dislike the stock but they are pretty neutral on it."

Summerset led the index, rising 2.8 percent to $4.78. The best-performing retirement village stock in the past 12 months today said 2017 underlying earnings may rise as much as 33 percent, driven by new sales of occupation rights to its units. Underlying earnings, which exclude property revaluations, are forecast at $72 million to $75 million in calendar 2017, from $56.6 million in 2016, when profit jumped 50 percent. The company didn't provide a net profit forecast.

"They've given pretty upbeat guidance, they've been able to develop properties then sell them with good margin, that's a continuation of upgrades seen from Summerset," McIntyre said. "They have got a large development pipeline and there's obviously good demand for their units driving into earnings." 

Westpac rose 1.4 percent to $31.70, Mainfreight gained 1.3 percent to $23.50 and Comvita advanced 1.2 percent to $5.94.

Outside the benchmark index, Tegel Group, which recently left the NZX50 index, gained 7.1 percent to $1.21. Yesterday the stock fell 1.7 percent to $1.13 after the poultry company reported earnings near the bottom of already downgraded guidance.

"There's news out of Australia that there's been some consolidation in the price war between Inghams and Tegel, some price movement to the upside, so the outlook was pretty reasonable," McIntyre said. "In a market trading near all-time highs, value is getting harder to find, and Tegel probably represents some value at the current share price."

Orion Health Group dropped 1.5 percent to $1.28. The company was the subject of an NZX price inquiry after the stock gained 39 percent between June 19 and June 27, going from 97 cents to $1.35.

"These stocks have a habit of being over-bought or over-sold, so with the rights issue at 90-odd cents and the share price having fallen back below a dollar I think you've seen bargain hunters come in," McIntyre said. "Particularly because the main shareholders are participating in that rights issue as well, that's sending a signal to the market they're putting their money where their mouth is. It is a stock that has, from a value perspective, gathered interest from investors."


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