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MARKET CLOSE: NZX50 firms in mixed trade: Pushpay extends gain while Trustpower falls

Friday 8th November 2019

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(Nov. 7, 5:58 PM) The key New Zealand share index was mildly stronger despite the number of its constituents falling matching those that gained. Pushpay Holdings extended its gains after reporting strong results and A2 Milk bounced back from Wednesday's sell-down.

On the negative side, Trustpower was among the biggest decliners after reporting a fall in first-half net profit and trimming its full-year guidance.

The benchmark S&P/NZX 50 Index rose 35.88 points, or 0.3 percent, to 10,795.06. Within the index, 21 stocks rose, 21 fell and eight were unchanged. Turnover was $134.5 million.

Pushpay shares rose 13 cents, or 4 percent, to $3.42 after climbing 3.8 percent yesterday when it reported a US$6.5 million net profit for the six months ended September, a turnaround from the previous first-half's US$4.4 million net loss.

The digital church collection payment app maker started generating a positive operating cash flow over the past 12 months, and that stepped up to US$8.9 million in the six months ended Sept. 30 from about US$2 million in the March period.

"That was a great result," says James Porteous, a broker at Craigs Investment Partners.

Craigs analyst Stephen Ridgewell said Pushpay is "demonstrating impressive operating leverage" and revised his 12-month target price to $4.75 from $4.25.

Ridgewell noted Pushpay is trading at a material discount to its ASX-listed peers and represents "compelling value."

Kiwi Property Group, unchanged at $1.57, was the heaviest traded stock. Almost 3.9 million shares changed hands, more than twice the average during the past three months.

Phone company Spark, often the most heavily traded stock, was second. About 3.6 million shares worth $16.1 million changed hands, up on the average of 2.9 million. The stock gained 7 cents, or 1.6 percent, to $4.45.

Index heavyweight A2 Milk bounced back after being sold down 3.6 percent yesterday, gaining 2.2 percent to $12.57 today.

"A lot of money in Australia has chased A2" but now the "hot" money is chasing other bets, Porteous says.

"We actually think it looks better – the new CEO (Jayne) Hrdlicka seems very good," he says.

A2 is relying less on the daigou – or greymarket trade in which buyers purchase A2's infant formula in Australia and New Zealand for sale in China – as it develops its own sales.

"In the long term, it’s a more solid proposition," Porteous says.

Trustpower shares fell 26 cents, or 3.2 percent, to $8.00 after reporting first-half net profit fell to $38.7 million from $64.9 million in the same six months last year after low hydro inflows and repair costs to a power station.

A number of stocks prized for their dividend yields remain under pressure from rising bond yields.

They included property securities such as units in Goodman Property Trust, down 1.2 percent at $2.11, electricity generator and retailer Meridian Energy, down 1.3 percent at $4.54, and fellow gentailer Mercury New Zealand, down 0.4 percent at $4.77.

While 10-year swaps ended the day slightly lower at a bid price of 1.4550 percent from 1.5025 percent yesterday, they have risen from 1.2850 in late October.

"The yielders have all been flattening off in the last couple of weeks as interest rates have flattened out," Porteous says.

These yield stocks have enjoyed solid support as interest rates have declined this year with the Reserve Bank cutting its official cash rate from 1.75 percent to 1 percent so far.

Meridian shares, for example, are up nearly 45 percent from a year ago and Mercury shares are up more than 38 percent while the S&P/NZX 50 is up only 24 percent over that period.


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