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MARKET CLOSE: NZ shares up as confidence returns; Kathmandu, CBL, A2 Milk rise

Tuesday 26th September 2017

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New Zealand shares gained, with Kathmandu up on its full-year earnings and A2 Milk at a record high, as volumes recovered from yesterday's post-election lull.

The S&P/NZX 50 Index rose 17.41 points, or 0.2 percent, to 7,887.18. Within the index, 20 stocks rose, 18 fell and 12 were unchanged. Turnover was $209 million.

"There seems to be a bit more confidence running through the market today. It's not like we haven't been here before, in this sort of political forum with MMP - everyone understands there needs to be negotiations about which party will lead, and everyone's just getting on with it," said Peter McIntyre, investment adviser at Craigs Investment Partners. 

McIntyre said Craigs has maintained its 60 percent probability that the government will be a National/New Zealand First coalition, compared to a 40 percent likelihood of a Labour-led coalition government.

Kathmandu gained 6.1 percent to $2.27. It lifted annual profit 14 percent to $38 million in 2017 as sales grew in New Zealand and Australia, while it cut its debt levels to record lows. 

"There's not a huge amount of volume trading through the stock, but the quality of the result is quite appealing to those that have invested in the company," McIntyre said. "They've been able to reduce debt and have a record full-year dividend, they've been able to be quite innovative with new products. The other key element is managing inventory and they seem to have done that very well."

"It's a pleasing result out of the retail sector which there has been doom and gloom about. They've got a good mix of developing online and store frontages, the two still go hand-in-hand even though you hear the risk of Amazon coming and wiping them out. Shoppers still enjoy going in and trying products on, even if they go away and buy it online."

CBL Corp was the best performer, up 6.3 percent to $3.03, while Sky Network Television gained 3.8 percent to $2.77. McIntyre said Sky had been sold off to the point that it was good value for some investors, with strong dividends, and there was also potential for corporate action in the stock.

A2 Milk rose 3.2 percent to $6.37, a record high. Earlier this month, the milk marketer released a presentation from an investor conference in Hong Kong. It reiterated the board is evaluating capital management alternatives and is open to a special dividend depending on progress of its planned $40 million on-market share buyback, which it will launch in the next year, and future market conditions. The shares have gained 7.8 percent since then.

"There's good volume running through that, post that Hong Kong presentation to international investors, you're still seeing a number wanting to be involved - it's a high growth area, it is probably under-owned by institutions so you're seeing a number taking a position from a global basis," McIntyre said.

New Zealand Refining gained 0.8 percent to $2.54 after it said the impact of damage to the pipeline between the refinery and the Auckland depot will be less than anticipated. Whangarei-based New Zealand Refining now expects to miss out on $8 million to $9 million of pipeline and refining income after the disruption versus a prior estimate of $10 million to $15 million. 

Arvida was the worst performer, down 1.7 percent to $1.19, while Port of Tauranga dropped 1.4 percent to $4.28 and Ryman Healthcare fell 1 percent to $9.04.


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