MARKET CLOSE: Shares fall, Sky City joins queue for capital

Tuesday 21st April 2009

April 21 – New Zealand shares fell as skepticism about the pace of global economic recovery drove down markets across the Asia Pacific and Sky City Entertainment joined the ranks of corporate seeking more capital.

The NZX 50 Index fell 33.94, or 1.3%, to 2664.85, the biggest decline in eight days, nudging the index’s market value below NZ$30 billion. Within the index, 27 stocks fell, 11 rose and 12 were unchanged. Turnover was a paltry NZ$54.6 million.

Australia’s S&P/ASX 200 Index dropped 2.4% to 3676.90 after the central bank said that economy is probably in recession, falling commodity prices weighed on BHP Billiton and Rio Tinto, and property trusts were hammered by expectations they will tap investors for more funds. Banks sank, joining a global drop in financials, after Bank of America increased reserves for bad loans. Japan’s Nikkei 225 Index fell 2.4%.

In New Zealand, Sky City dropped 2.7% to NZ$2.85 after the nation’s biggest casino company announced plans to raise up to $228.9 million in a share placement, share purchase scheme and top-up offer. The company forecast profit for the 12 months through March will be between NZ$99 million and NZ$106 million. Chief executive Nigel Morrison said Sky City has a sound balance sheet but it was “prudent to proactively strengthen the company’s capital structure and enhance its financial flexibility.”

Nuplex Industries dropped 7.3% to 38 cents, leading the NZX 50 lower after the worst-performing stock on the index this year said its rights issue closed 4.1% under-subscribed, with underwriter First NZ Capital set to make up the difference.

More companies are expected to follow Nuplex, Sky City, Fletcher Building, Freightways and Kiwi Income Property Trust in raising capital while interest rates are at historically unattractive levels for investors. Ricky Ward, who helps manage NZ$400 million in shares at Tyndall Investment Management, said Nuplex’s rights issue was “a huge achievement” as it showed most shareholders supported the company. The stock may have fallen today as some investors took profits, having gained the shares at the 23 cents apiece issue price. More equity raisings are probably in the wings this month, Ward said. “A lot of funds like us have been waiting on the sidelines for companies to raise equity. We’ve had cash waiting for these events,” he said. Still, as more companies offer shares, cash reserves are likely to dwindle and institutions will look to trim their holdings to participate, which may weigh on the market, he said. Fisher & Paykel Healthcare climbed about 1% to NZ$3.08, climbing above NZ$3 for the first time in almost three weeks. The stock has benefiting from the weakening New Zealand, which bought 55.60 U.S. cents today, down from 59.14 on April 13. Some 80% of F&P Healthcare’s revenue is in U.S. dollars. Also helping the company, U.S. computer chip maker Intel and General Electric announced a US$$250 million research partnership to develop innovative health care products dealing with conditions including sleep apnea. That’s helped put F&P Healthcare “on the radar as a possible target,” Tyndall’s Wards said.

Kiwi Income Property Trust fell 1.1% to 90 cents. The trust’s NZ$50 million placement is expensive “insurance” for unitholders, Stephen Ridgewell, an analyst at Macquarie Equities, said, according to the ShareChat website. The new shares will have a dilutionary effect and raise the trust’s average effective interest rate by about 20 basis points, according to the report.

Tourism Holdings gained 2.2% to 47 cents, leading the index higher and trimming its decline this year to 31%. Medical supplies distributor Ebos Group climbed 2.1% to NZ$4.90 and ING Medical gained 1.8% to NZ$1.14.

(Businesswire)

Businesswire.co.nz

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