MARKET CLOSE: NZ stocks fall as Vector gas sale price disappoints, property companies drop as bond yields rise

Monday 9th November 2015

New Zealand shares extended their decline from a record high after Vector sold a gas pipeline business at a price that disappointed some investors, while Kiwi Property Group lead a drop in property companies, typically held for their relatively attractive yield, after bond yields jumped.

The S&P/NZX50 fell 21.85 points or 0.36 percent down to 6047.89 . Within the index, 18 stocks rose, 24 stocks fell, and 8 were unchanged. Turnover was $93 million.

Vector fell 2.4 percent to $3.25.The Auckland-based electricity and gas network operator sold its gas transmission and distribution assets outside Auckland in a $952.2 million sale to Australian investor First State Funds, an infrastructure investor with $7 billion of assets across Australia, New Zealand, and Europe. The sale will result in a gain for Vector of about $167 million and follows a strategic review of the company, which is increasingly focusing on growing in areas that are not subject to price regulation, such as telecommunications infrastructure.

"Vector had hopes for a very high price on that deal - it has been on the cards for a long time," said Matthew Goodson, managing director of Salt Funds Management. "The price they got was maybe just below the midpoint of investor expectations."

Stocks typically held for their dividend yield, such as property companies, fell as bond yields rose. US Treasury yields soared on Friday after unexpectedly strong US non-farm payrolls data boosted expectations the Federal Reserve will hike interest rates starting in December. In New Zealand, the yield on five-year government bonds rose to about 2.97 percent, a four-month high. Kiwi Property Group fell 1.5 percent to $1.355, Goodman Property Trust fell 1.2 percent to $1.205, and Precinct Properties New Zealand fell 1.2 percent to $1.235.

Goodson said the strong employment number out of the US, driving up bond yields, was the driver of a decline in the S&P/ASX 200 Index in Australia, which hit a one-month low, dropping 2 percent.

Australia and New Zealand Banking Group led NZ stocks lower on the NZX 50, 2.6 percent to $27.26.

Sky Network Television fell 2.6 percent to $4.56, and Trade Me Group fell 2.4 percent to $3.74.

Xero continued its upward streak, gaining 2.8 percent to $19.86. The cloud-based accounting software developer, which is foregoing profit to expand sales, reached a five-month high. On Thursday it said it will maintain its current annual cash burn through the rest of the year.

"There wasn't so much in their result which gave one great confidence they might make it in the US, which is the only way one can justify valuations up in the stratosphere," Goodson said. "Greed and fear tends to wax and wane with that stock, at the moment greed is in the ascendency."

AWF Madison Group rose 2.1 percent to $2.45. The country’s largest contract labour firm increased first-half profit 17 percent and said it expects a “satisfactory” result for the full year. Profit was $3.4 million, or 10.5 cents a year, in the six months ended Sept. 30, from $2.9 million, or 11.1 cents, in the year earlier period, the Auckland based company said in a statement. Revenue advanced 7.8 percent to $106.3 million, it said.

Methven Group finished on a four-month high, with its shares jumping 9.4 percent to $1.16. The NZX-listed tap and shower manufacturer reported a 20 percent gain in six-month profit and announced a special dividend, reassuring investors that its strategy of developing and marketing new products is paying off. Methven said profit rose about 20 percent to $3.4 million in the six months ended Sept. 30, based on its old balance date, and it will pay a fully-imputed special dividend of 3 cents a share. Sales grew 7.8 percent to $52.5 million. Methven changed its balance date to June 30 from March 31 and wasn’t expected to post first-half results until February next year.

Shares in RIS Group jumped 100 percent to 0.4 cents after John and Michael Chow, the Wellington based property developers and brothel owners, announced plans to list some assets on the NZAX market by taking over the shell company. RIS Group agreed to accept a conditional offer from trusts associated with the Chows which would see it buy the shares in the brothers’ 16 Park Avenue company on Feb. 22, 2016, for about $7 million, through the issue of shares, plus $500,000, the Wellington based shell company said in a statement. The reverse takeover would see the Chow’s company own more than 90 percent of the shares in RIS Group, it said.

BusinessDesk.co.nz

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