MARKET CLOSE: NZ shares rise, A2 Milk hits fresh record, Tegel drops on NZX 50 exit

Friday 16th June 2017

NZ shares gained as A2 Milk Co rose to a record after upgrading its sales guidance again, and Fletcher Building advanced, while Tegel Group Holdings fell as it left the benchmark index.

The S&P/NZX 50 Index rose 36.4 points, or 0.5 percent, to 7,552.75. Within the index, 26 stocks rose, 21 fell and three were unchanged. Turnover was $279 million.

A2 Milk was the best performer, up 8.2 percent to $3.85, a record high. The Auckland-based, Sydney-headquartered milk marketer lifted annual sales guidance for the second time in as many months as it beefed up production to meet sweltering Chinese demand for infant formula. It expects revenue to be $545 million in the 12 months ending June 30, a $20 million increase from its April update which was itself an upgrade. A2 reported annual revenue of $352.8 million in 2016.

"It makes a really interesting contrast to some of their peers, look at a chart of the likes of Blackmores in Australia – obviously vitamins as opposed to milk powder but similar sales channels, similar market, and one's more than halved its highs while the other goes from strength to strength so they are clearly hitting the spot in what is a vast market," said Matt Goodson, managing director at Salt Funds Management.

Index changes around the close generated movement and interest, with the market dominated by index-following passive and quant funds, Goodson said. The NZX 50 today saw Tegel leave, replaced by CBL Corp, and some weighting changes, while movements on the FTSE Russell also created activity.

Fletcher Building rose 3.4 percent to $7.95.

"There's no particular news so perhaps flow coming out of some index changes, but obviously it's been under very heavy pressure in recent times," Goodson said. "There's concern as to whether there are any lingering issues in their construction division, and they do have a reasonable amount of housing exposure, and clearly housing sales have slowed to a crawl in the market though prices are still holding up relatively well."

Trustpower rose 3.2 percent to $5.45 and Metro Performance Glass gained 3 percent to $1.38.

Ryman Healthcare rose 0.8 percent to $8.40. The company, whose retirement village portfolio was valued at $3.66 billion as at March 31, has secured a 4.5-hectare site in Henderson, West Auckland to target retiring Westies it says are under-supplied with options.

Property For Industries gained 0.3 percent to $1.65. The New Zealand Shareholders' Association will be voting in favour of PFI's plans to buy its “very unusual” external management contract for $42 million which will cut costs for the industrial property investor and keep what's been a successful management team. The vote will be held at its annual meeting on June 22.

Vista Group International was the worst performer, down 3.5 percent to $5.75, while Sanford dropped 2.2 percent to $6.70 and SkyCity Entertainment Group fell 1.8 percent to $4.40.

Tegel dropped 0.9 percent to $1.12 and has declined 22 percent this year.

"Its exit is well known and anticipated, the fundamental story matters a lot more for Tegel. Clearly, chicken prices have been very weak for some time, on oversupply from each of the key players really. It's a question of if and when that comes to an end," Goodson said.

Outside the benchmark index, Synlait Milk gained 1.8 percent to $4.05. The NZX-listed dairy company lowered its forecast payout for its farmer suppliers the season that just ended following what it termed a “significant drop in the dairy market.” Its forecast base milk price is now $6.15 per kilogram of milk solids for the 2016-17 season versus a prior base milk price of $6.25 per kilo of milk solids.

Veritas Investments was unchanged at 25 cents, and have gained 25 percent so far this year. It has kicked off legal proceedings against the buyer of the upmarket Nosh Group supermarkets for late payments. The food and beverage investor says Gosh Holdings, since renamed itself Nosh Group, consistently failed to meet the payment schedule, breaching the sale and purchase agreement which was completed on Feb. 24, and missing $1.9 million of payments to creditors. Veritas is owed about $69,000 by Gosh Holdings.

(BusinessDesk)

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