MARKET CLOSE: NZ shares mixed, Synlait and A2 weaker while Mercury, Trustpower gain

Wednesday 8th November 2017

New Zealand shares were mixed, with Synlait and A2 Milk dropping while Mercury New Zealand and Trustpower rose.

The S&P/NZX50 Index dipped 9.25 points, or 0.1 percent, to 8,040.42. Within the index, 23 stocks rose, 20 fell and seven were unchanged. Turnover was $137 million.

"We had a weaker lead off global markets and we're tending to trade lower," said Peter McIntyre, investment adviser at Craigs Investment Partners. The Reserve Bank is set to release the latest monetary policy statement and official cash rate tomorrow, and "the market will be keenly waiting to see what prognosis Spencer has for future cash rate moves - the market's not really pricing any in until 2019," McIntyre said.

While more stocks fell than gained by the close of trading, Synlait Milk and A2 Milk Co dragged the index lower, having each sunk as much as 10 percent in the day. Synlait was the worst performer, down 3.9 percent to $6.99, with A2 dropping 1.7 percent to $7.49.

McIntyre said Synlait's association with A2 has driven the share price higher and "it's probably gotten ahead of itself", and that association has hurt the stock today as it's dropped back due to investors lacking knowledge about A2's earnings.

"At this stage a lot of analysts are really struggling to value A2 accurately, and probably waiting to hear from the company," McIntyre said. "A lot of the current price has already got an upgrade in it. You're going to see it stay volatile - ever since it broke through $2, it has been a volatile stock to follow.

"Its market cap at the moment is over $5 billion, its current price-to-earnings ratio is about 60 times earnings. It's a high beta stock, and once investors want to leave it and the buying isn't there the share price is always going to go south."

Mercury New Zealand was the best performer, up 2.1 percent to $3.44, while Goodman Property gained 1.5 percent to $1.32.

Trustpower rose 1.5 percent to $5.96. On Monday, New Zealand's fifth-largest electricity generator said it had boosted first-half profit 80 percent as its spread of generation assets allowed it to benefit from higher prices.

"A lot of their result was based on deferred costs, I'm not sure if it was actually as good as it looked but the market has continued to like it," McIntyre said.

Tourism Holdings dropped 2.2 percent to $4.88, Comvita fell 2 percent to $8 and Xero dropped 1.9 percent to $34.05.

Vector dipped 0.3 percent to $3.40. It is planning to sell 4.2 million of its own shares it currently holds as treasury stock beginning Nov. 9 as part of ongoing capital management.

(BusinessDesk)

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