MARKET CLOSE: NZ shares hit record, Air NZ and Tower gain, Steel & Tube slides

Monday 30th May 2016

New Zealand's benchmark stock index hit a record high, led by Air New Zealand and Tower, while Steel & Tube Holdings continued to decline.

The S&P/NZX 50 Index rose 27.09 points, or 0.4 percent, to 7,019.64. Within the index, 25 stocks rose, 16 fell and nine were unchanged. Turnover was $97.6 million

Air New Zealand led gainers on the index, rising 4 percent to $2.215. It sank to its lowest level since November 2014 last week on concern about increased competition and the likelihood that Virgin Australia will need recapitalising before it can be sold.

"It's continuing to consolidate after being sold off close to the $2 mark," said Peter McIntyre, investment adviser at Craigs Investment Partners. "The stock is inexpensive compared to the rest of the market and I think you're seeing investors say this has been too heavily sold off. It trades on a dividend yield above 10 percent, price-earnings of between five and 10 percent, it would seem to be reasonable value in this market."

Tower gained 3.8 percent to $1.52, bouncing off last week's tumble from $1.77 after it posted a wider first-half loss. The insurer wrote down the value of its information technology system, which it said was weighing on its ambitions and needs improving.

SkyCity Entertainment Group, the hotel and casino company, advanced 2.6 percent to $4.81 and has gained 7.1 percent this year.

"It's really a tourism-based stock and that's one of the themes running through our equity market at the moment, anything in the tourism sector is being bidded up well," McIntyre said.

TradeMe Group gained 2.1 percent to $4.81 and Fisher & Paykel Healthcare rose 1.9 percent to $10.50

Steel & Tube Holdings was the worst performer, down 2.5 percent to $1.99. The stock has suffered as the company's steel mesh came under scrutiny from the Commerce Commission, and last month Steel & Tube agreed to sell only seismic reinforcing steel mesh which has been independently tested. The commission is conducting a wider investigation into the industry, focused on possible misrepresentations on the mesh’s performance characteristics which would breach the Fair Trading Act.

"Along with that news, there's also the supply glut of cheap steel imports hitting the country - they're finding competition from all sorts at the moment," McIntyre said. "We've had a raft of broker downgrades post all these announcements from Steel & Tube, and that comes on the back of their guidance on May 18 which they revised downwards. It's a market where investors are quite happy to move if visibility on earnings is not strong."

Skellerup Holdings dropped 2.2 percent to $1.32 and Mighty River Power shed 1.3 percent to $3.02.

Outside the main index, Hellaby Holdings dropped 3.1 percent to $2.49. The diversified investment company cut its full-year guidance, saying earnings would fall because of the impact of refinery shutdowns on its resource services division, whose chief executive will step aside in favour of a new recruit.

Sealegs rose 13.6 percent to 12.5 cents. The amphibious vehicle maker turned to an annual profit after adopting a new strategy, lifting its sales and profit margin.

Net profit was $507,576 in the year ended March 31, from a loss of $2.4 million a year earlier, the Auckland-based company said in a statement. The company's newly adopted original equipment manufacturer (OEM) hull strategy, where Sealegs makes a hull fitted with its own technology which gets used by another company, letting it use an existing manufacturer's scale to reduce fixed costs, it said.

BusinessDesk.co.nz

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