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MARKET CLOSE: NZ shares rise, Scales and Mercury gain while Comvita drops on earnings

Tuesday 21st February 2017

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 New Zealand shares rose as Scales and Mercury gained and Comvita dropped after its earnings report. 

The S&P/NZX 50 Index rose 16.19 points, or 0.2 percent, to 7,115.69. Within the index, 23 stocks rose, 20 fell and seven were unchanged. Turnover was $132.5 million.

Scales Corp was the best performer, up 3.7 percent to $3.63, with Sky Network Television rising 2.3 percent to $4.47 and Stride Property gaining 1.7 percent to $1.81.

Mercury NZ advanced 1 percent to $3.05. The electricity generator and distributor increased first-half profit 53 percent to $113 million, bolstered by favourable North Island hydro conditions. It lifted the full year ebitdaf guidance it gave in November to $500 million versus prior guidance of $495 million. Among other elements, the annual guidance assumes 4,250GWh of hydro production, flat operating expenditure on the year and the inclusion of $5 million from the divestment of carbon credits.

"It was pretty much in line with expectations, there were a couple of small one-offs with maintenance capex being lighter and they sold some of their carbon credits so had cashback and gain on sale, so the quality wasn't quite as good as the headline numbers," said James Lindsay, senior portfolio manager at Nikko Asset Management.

Metro Performance Glass was the worst performer, down 2.7 percent to $1.45, and Chorus declined 1.7 percent to $4.

Comvita dropped 2.2 percent to $6.75. The manuka honey company turned to a $7.1 million loss in the first half of its financial year after Chinese authorities cracked down on people selling its products through informal trading channels. The shares have lost almost a third of their value in the past six months after it warned earnings would be impacted by a weaker honey harvest and slower sales due to a clamp down on China's informal trading channels. First-half revenue fell 37 percent to $57.7 million, but it expects sales to rebound in the second half of the year due to growth in markets outside of China, and new initiatives and innovations.

"It's fair to say it was a bit soft, and you can see that in the share market reaction," said Oyvinn Rimer, director and research analyst at Harbour Asset Management. "They've had a few reports in a row that have been disappointing, so there's probably not huge investor confidence that they're going to return to former glory as quickly as they say."

"They've run into a number of different headwinds they say, one is problems with the distribution channel to China, some of the grey market channels have experienced issues, but the more recent issue is the poor harvest this year - it looks quite soft. They are diversifying the business, and I think the olive leaf extract story is much longer term before it replaces manuka honey as a key product," Rimer said.

Heartland Bank was unchanged at $1.57. The lender increased first-half profit 14 percent to $29.1 million as its loan book grew at the same time as it benefited from cheaper funding costs, with rural and business loans expanding at a faster pace than household lending. 

Tourism Holdings rose 0.3 percent to $3.89. The campervan rental company lifted first-half profit 38 percent to $11.3 million with strong tourist demand in New Zealand and Australia, and said it will at least deliver its forecast annual profit of $27 million.

Outside the benchmark index, PGG Wrightson gained 1.9 percent to 55 cents. Its profit growth stalled at $16 million in the first half, which the rural services company blamed on low prices for dairy and wool and reduced production of red meat which had made farmers more cautious about spending. Sales declined to $608 million from $623 million.

Colonial Motor Co was unchanged at $7.60. It reported a 5.2 percent drop in first half profit to $10.5 million and while it was guardedly positive about the immediate future it signaled several risks. Trading revenue dipped 0.3 percent to $437.46 million.

Energy Mad was unchanged at 2.9 cents. SuperLife, the funds management business owned by NZX, has swapped 2.25 million convertible notes for just under 70 million shares in Energy Mad, giving it 71.4 percent of the energy efficient lightbulb marketer.

 

BusinessDesk.co.nz



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