MARKET CLOSE: NZ shares rise, Stride, Warehouse Group gain; Fletcher, ANZ, Westpac drop

Monday 24th July 2017

New Zealand shares gained, led by Stride Property and Warehouse Group, while dual-listed Westpac Banking Corp and Australia & New Zealand Banking Group fell.

The S&P/NZX50 Index rose 11.43 points, or 0.1 percent, to 7,682.29. Within the index, 22 stocks rose, 17 fell and 11 were unchanged. Turnover was $147 million.

The market has defied regional trends to gain today, with Asian markets down, Matthew Goodson, managing director at Salt Funds Management, said. At 5:10pm New Zealand time, the ASX 200 was down 0.8 percent while Japan's Nikkei 400 had fallen 0.7 percent.

Stride Property led the index, up 1.8 percent to $1.71, while Auckland International Airport gained 1.7 percent to $7.13 and Genesis Energy rose 1 percent to $2.59.

Sky Network Television was the worst performer, down 2.2 percent to $3.49, with Vista Group down 0.7 percent to $5.90 and Ryman Healthcare falling 0.7 percent to $8.98.

Westpac fell 1.5 percent to $34.08 and ANZ Bank dropped 1.1 percent to $31.72, continuing to give up gains made last week when the Australian Prudential Regulation Authority (APRA) released its new "capital adequacy" targets, requiring a 150-basis-point increase in the minimum safety reserves that must be held by the big four banks there, less than what some observers feared.

Fletcher Building dipped 0.1 percent to $7.47. The stock dropped 6.2 percent last Thursday, and another 1.5 percent on Friday, after the company slashed full-year earnings guidance and flagged an impairment against Australian assets, with chief executive Mark Adamson gone immediately.

The company's operating earnings in the year ended June 30 were about $525 million, down from $682 million in 2016 and below the $610 million-to-$650 million range the company gave in March, itself a 15 percent downgrade against earlier guidance because of problems with two major construction projects.

"It has stabilised, the thing supporting Fletcher is that on simple PE ratios it appears very cheap compared to Australian competitors, unsurprisingly it has quite a lot of Australian ownership," Goodson said. "It's a bit of a battle between good forces and bad news like the state of the housing cycle in New Zealand."

Outside the benchmark index, Warehouse gained 2.2 percent to $2.28. The retailer is selling its financial services business to a subsidiary of SBS Bank for $18 million, although most of that will be offset by an impairment.

The sale to SBS's Finance Now is expected to be completed within the next five weeks, Warehouse said, adding that the deal is expected to result in a non-cash impairment of software assets of approximately $16 million in its full-year results for 2017.

In March, the company reported a 76 percent drop in first-half profit to $13.6 million after it took a $22.7 million impairment charge against the financial services unit, recognised restructuring costs and earned less from its Red Shed department stores.

"It's been tough for them for quite some time, it certainly was far from meeting the original projections, Goodson said. "The diversification strategy which didn't work, it looks like the correct strategic direction from what the share price indicates, but it was clearly a very costly foray. It leaves the Warehouse, in common with many retailers in that discount department category, having done quite a bit of expansion prior to the GFC and sales haven't come through since, though that is more of an issue overseas."

(BusinessDesk)

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