MARKET CLOSE: NZ shares gain; Fonterra Fund rises, Pumpkin Patch at record low

Friday 25th September 2015

New Zealand shares rose, as Xero gained and the Fonterra Shareholders' Fund advanced for a second day on the dairy cooperative's improved earnings and stronger forecast milk payout. Pumpkin Patch sank to a record low after cutting guidance and saying it was in talks with its bank.

The S&P/NZX 50 Index increased 10.54 points, or 0.2 percent, to 5687.35. Within the index, 33 stocks rose, 10 fell and seven were unchanged. Turnover was $169 million.

Xero, the cloud-based accounting company, rose 1.8 percent to $14.55. The shares have fallen from as high as $26.49 in March. Milking equipment and rubber goods maker Skellerup Holdings rose 3 percent to $1.37 and Restaurant Brands New Zealand, whose fast-food outlets include KFC, gained 2.3 percent to $4. Trade Me Group climbed 2.5 percent to $3.69.

The NZX 50 has dropped about 4.6 percent from its high at the start of August, when earnings season was getting underway. Turnover on the New Zealand stock market had been "pretty appalling" for the past couple of weeks in the face of increased volatility in global markets, said David Price, a broker at Forsyth Barr.

The last earnings season hadn't provided enough impetus to drive the market higher and the global backdrop was of weaker growth, with the International Monetary Fund set to lower its global forecast next month as China's expansion slows and the Federal Reserve's reticence to hike rates point to a more sluggish US economy, he said.

Units in Fonterra Shareholders' Fund, which give holders access to Fonterra Cooperative Group's dividend stream, rose 2 percent to a six-month high close of $5.59. Higher profits for Fonterra may eventually yield bigger dividends, although the dairy company's announcement yesterday suggested farmers not unit holders would enjoy the benefits first, courtesy of a better milk payout and the offer of interest-free loans to help them cope with current low prices.

The fund is "pretty hard to analyse," said Price, adding that Forsyth Barr has an 'underperform' rating on the stock. Its relationship with the dairy company was a "townies versus farmers" dynamic, depending on whether Fonterra paid out more in dividends to the 'townie' unit holders or paid more for its milk. In the wake of yesterday's announcement, the pendulum looked to have swung to "townies subsidising farmers", he said.

Pumpkin Patch, which is too small to be on the NZX 50, tumbled 31 percent to an all-time low close of 10 cents. The children's clothing retailer today delayed the release of its 2015 results and said provisioning means it will miss earnings guidance and post a bigger net loss, which has forced it into talks with its lender, ANZ Bank New Zealand. The first $25 million tranche of its debt facility comes due at the end of this month and the remaining $50 million expires on Feb. 29 next year.

"The 'For Sale' sign has been out for quite some time," Price said. "A capital raising option I don't think would be palatable. Markets don't like uncertainty and you're seeing that in the share price."

Seeka Kiwifruit Industries fell 1.5 percent to $3.30 after Kiwifruit Vine Health reported the first confirmed case of Pseudomonas syringae pv actinadiae bacteria, or Psa-V, in Whangarei. The Psa bacteria infected 80 percent of kiwifruit orchards nationwide and is estimated to have cost the industry up to $930 million in lost exports, although volumes has since recovered, partly as a result of planting disease-resistant varieties.

Ryman Healthcare rose 1.4 percent to $7.35 and Meridian Energy gained 1.4 percent to $2.255.

Kathmandu Holdings, which rejected a takeover offer from Briscoe Group that amounted to $1.80 a share, fell 3.4 percent to $1.41. The offer subsequently lapsed and Briscoe managing director and controlling shareholder Rod Duke showed no willingness to offer more.

Spark New Zealand fell 1.9 percent to $3.11. Fletcher Building fell 1.7 percent to $6.91 and Auckland International Airport rose 1.2 percent to $5.06.

BusinessDesk.co.nz

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