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MARKET CLOSE: NZ shares fall, weighed by Comvita and Tegel

Friday 5th May 2017

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New Zealand shares inched lower, led by manuka honey producer Comvita on jitters related to the discovery of a fungal plant and as Tegel Group declined on news its chairman was leaving after less than a year in the job. Gains in Air New Zealand helped offset the fall as the local market outperformed Australia. 



The S&P/NZX 50 index fell 13 points, or 0.2 percent, to 7,365.50  Within the index, 32 stocks fell, 12 gained and six were unchanged. Turnover was $113 million.



"The market has been relatively strong against a weak lead from Australia," said Brad Gordon, investment adviser for Hobson Wealth Partners.  He said the Australian market has been weighed by a slide in iron ore and oil prices. The S&P/ASX 200 index was 0.6 percent lower in late afternoon trading. Dual listed Australia & New Zealand Banking Group was down 0.8 percent to $32.94 while Westpac Banking Corp fell 0.3 percent to $36.40. 



Comvita led the market lower, falling 6.5 percent to $6.45  as investment analysts cut their valuation for the manuka honey products maker, coinciding with yet another problem out of the Te Puke-based company's control with the discovery of myrtle rust in the Far North. Comvita chief executive Scott Coulter said the company is gathering information about the myrtle rust situation and it is too soon to speculate on the potential impact on the industry.



Tegel shed 6 percent to $1.10 after the company said chairman James Ogden has unexpectedly quit the board effective immediately after less than a year overseeing the poultry company's direction as a publicly listed company, without an explanation. Ogden, who is also a director of Warehouse Group, Vista Group International, Summerset Group and Alliance Group, joined the Tegel's board ahead of its initial public offering in May last year when it raised $284 million selling shares at $1.55 apiece.



"It seems unusual, particularly when you are a company that's missed its prospectus forecasts," said Gordon. "It doesn't read well," he said. 



Outdoor clothing retailer Kathmandu Holdings shed 1.9 percent to $2.08, likely on some profit taking after it gained Thursday on an uplift in third-quarter sales.



In the other direction, Air New Zealand added 2.7 percent to $2.67. Gordon said investors were likely cheered by a recent investor update from the company when it reiterated that it was targeting 2017 earnings before taxation to be in the range of $475 million-to-$525 million, including a $22 million gain from the divestment of its remaining interest in Virgin Australia.



Oceania Healthcare ended up at 80 cents, 1.3 percent higher than its offer price of 79 cents on its first day of trading. Oceania Healthcare raised $200 million through an initial public offering last month and listed today on the New Zealand and Australian stock exchanges under the ticker OCA. It issued 253.2 million new shares under the offer, which equates to 41.5 percent of the total shares in the company at listing. 



Gordon said the result was slightly disappointing but noted that some $450 million has been raised in the sector in recent weeks, including a sell-down in Metlifecare. He also said the retirement sector, in general, has been weaker recently, possibly weighed by recent residential housing sales data that points to a potential slowdown in New Zealand's hot property market. Investors may be concerned that elderly people may have difficulty selling their homes and not have the liquidity to move into the retirement units. Metlifecare added 0.4 percent to $5.65 while Summerset shed 0.2 percent to $4.98 and Ryman Healthcare lost 0.6 percent to $8.48. 



Infratil declined 0.5 percent to $2.97. Earlier the infrastructure investor said it lost most of its bus contract with the Greater Wellington Regional Council to Masterton-based Tranzit Group, which the council says can offer the service cheaper. Gordon said the stock wasn't too badly hurt as the bus contract is a very small part of its business. 



Swings in the dollar may have impacted exporters, with Fisher & Paykel Healthcare down 0.5 percent to $9.95. The kiwi gained against both the US and the Australian dollar after data pointed to stronger inflation expectations, a key indicator for the Reserve Bank.



Looking ahead, Gordon said investors will be watching for US jobs data due later in the global trading day as well as any headlines offshore. 





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