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MARKET CLOSE: NZ shares fall, led by Sky TV on earnings downgrade; Air NZ drops

Monday 9th May 2016

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New Zealand stocks fell as Sky Network Television extended its slide after last week's earnings downgrade and Air New Zealand fell after agreeing to settle a cartel lawsuit in the US.

The S&P/NZX 50 Index dropped 13.05 points, or 0.2 percent, to 6,885.06. Within the index, 28 stocks fell, 14 rose and seven were unchanged. Turnover was $136.7 million.

Sky Network Television was the worst performer, falling 7.1 percent to $4.30, a two-month low. On Friday, the shares sank 15.7 percent after the pay-TV operator said subscriber numbers are expected to fall further this financial year, causing earnings next year to miss analyst estimates. The Auckland-based company forecast it would have 830,000 subscribers at the end of its financial year on June 30. Subscriber numbers dropped 1.5 percent last year to 851,561. It expects to lose 45,000 core residential pay-TV subscribers this year and gain about 25,000 subscribers for its online services such as Neon and FanPass.

"The subscriber numbers have really given them a kick in the guts," said James Smalley, director at Hamilton Hindin Greene. "There were a few institutional investor roadshows and I think Australian investors bought in. It just goes to show how institutional investors buying in can sometimes push a stock way higher than it should be on its fundamentals. It will be interesting to see when the market decides it's had enough."

New Zealand Refining Co dropped 3.5 percent to $2.80, while Australia & New Zealand Banking Group fell 2.7 percent to $26.10.

Air New Zealand shed 2.5 percent to $2.30, an eighteen-month low. The national carrier has agreed to a US$35 million settlement in a class-action lawsuit in the US taken by freight forwarding companies who claimed airlines colluded over cargo fuel and security surcharges between 2000 and 2006.

The airline agreed to settle "rather than take the risk of a potentially very material commercial liability by continuing to defend its position," it said in a statement. It hasn't admitted being part of the alleged conspiracy as part of the settlement.

Trade Me Group fell 1.9 percent to $4.65 and Steel & Tube Holdings declined 1.8 percent to $2.18.

Restaurant Brands was the biggest gainer, up 2.9 percent to $5.35. The fast-food company has gained 7 percent since April 14, when it said 2017 earnings could rise as much as 25 percent on growth in both KFC and Pizza Hut, and its expansion into New South Wales.

Contact Energy rose 2.5 percent to $5.28 and Westpac Banking Corp advanced 1.1 percent to $33.35.

Outside the main index, APN News & Media, which abandoned plans for an initial public offering of its NZME division in February, had its shares halted on the ASX pending an announcement about a potential material transaction involving the New Zealand assets. The dual-listed shares last traded at 72 cents on the NZX, and Smalley said they were very thinly traded.  

The trading halt will remain in place until the start of trading on May 11, the date of its annual meeting unless APN requests it to be lifted sooner, the company said.

Tourism Holdings rose 0.4 percent to $2.68. Milford Asset Management became the largest single shareholder in the company after investor Sterling Grace exited its holding in the rental campervan operator. Auckland-based Milford raised its stake to 17.8 percent from 13.8 percent, after paying $2.55 a share for the stock on Thursday, according to a substantial shareholder notice to the NZX on Friday.

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