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MARKET CLOSE: NZ shares mixed, Spark and A2 drop while NZ Refining, Fonterra gain

Thursday 12th January 2017

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New Zealand shares were mixed, with trading still quiet. Spark New Zealand and A2 Milk Co fell while New Zealand Refining and Fonterra Shareholders Fund rose.

The S&P/NZX 50 Index dropped 6 points, or 0.1 percent, to 7,063.59. Within the index, 21 stocks rose, 15 fell and 14 were unchanged. Turnover was $112.1 million.

Spark New Zealand was the worst performer on the index, down 3.4 percent to $3.57.

"It had a reasonable day yesterday but has been sold off today, most of the year it's been clipping above $10 million traded each day but it's pretty light trading today," said Peter McIntyre, investment adviser at Craigs Investment Partners. "Because there's such good liquidity running through the stock, there's obviously been some institutional realignment - it looks like some are lightening their exposure today." 

Tegel Group Holdings dropped 4 cents to $1.36. It gave up rights to a 3.45 cent dividend today. The share has traded below its listing price of $1.55 consistently since early November. Mercury New Zealand fell 1.5 percent to $3.02.

A2 Milk dropped 0.9 percent to $2.26. Its rival, ASX-listed Bellamy's Australia, slid another 17 percent following yesterday's slump when it cut its profit forecast for the second time, announced chief executive Laura McBain's exit, and tweaked the terms of its supply contract with Fonterra Cooperative Group. 

"They're holding up really well compared to what we've seen from Bellamy's, they have provided the markets with some strong updates as to their own earnings particularly their channels distribution," McIntyre said

New Zealand Refining was the best performer, up 2.6 percent to $2.72. 

"Earlier in the year they made the announcement they'd purchased the balance of Independent Petroleum Testing Labs off BP Oil, and in November they said they had stronger refining margins coming through, so on a value basis they probably do represent reasonable value," McIntyre said.

Infratil gained 1.8 percent to $2.80, Metro Performance Glass rose 1.6 percent to $1.91 and Z Energy advanced 1.6 percent to $7.60.

Fonterra Shareholders Fund rose 1.3 percent to $6.22. Milk collections by Fonterra Cooperative Group this season are continuing to track below the previous year, mainly due to lower production on the North Island. Dairy prices soared in the second half of 2016, but have since fallen back slightly. 

"They pretty much confirmed what the market had suspected, that milk collections are down because farmers have been culling non-performing stock," McIntyre said. "That's been seen as good for GlobalDairyTrade auctions as if supply is low the price may increase and that may reflect into the margin or value-added side of their business. There's been disillusionment with Fonterra's share price for a while, but there's a number of brokers with positive recommendations on the stock."

Comvita advanced 0.3 percent to $7.95. The manuka honey products company has sold its Medihoney brand to US partner Derma Sciences for about $19 million and will reap a further $11 million selling Derma shares in a takeover offer of the Nasdaq-listed company. 

"It's selling a brand, from a dollar point of view it's not hugely material, obviously they're trying to realign parts of their business - the market's in two minds whether this has been a good move or not," McIntyre said. "Whether they're getting full value is the $64 million question, more clarity will come in the next few weeks I think."

Outside the benchmark. Hellaby Holdings rose 0.3 percent to $3.55. ASX-listed Bapcor has increased its stake in Hellaby to 51.4 percent as part of its takeover of the company.

"There's a fair bit of dissonance out there, it's not plain sailing - they've had to work hard to get where they've got to," McIntyre said. "We should get some clarification next week, it's been a hard-fought interesting one."

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