MARKET CLOSE: NZ shares rise; Air NZ gains on Virgin sale, Sky TV falls

Friday 10th June 2016

New Zealand shares rose, led by A2 Milk Co and Air New Zealand, which has sold most of its Virgin Australia stake at a better price than the market expected, while Sky Network Television lost some of yesterday's gains

The S&P/NZX50 Index advanced 1.23 points, or 0.02 percent, to 6,971.78. Within the index, 26 stocks rose, 17 fell and seven were unchanged. Turnover was $227.7 million.

A2 Milk Co led the index, gaining 4.1 percent to $1.53. It will move onto the ASX 200 Index after the close of trading on June 17, having gained 171 percent in the past twelve months.

"It puts them on the radar of a lot more institutional investors and exchange-traded funds," said James Smalley, director at Hamilton Hindin Greene. "You probably would have expected a bit of a bounce - it has been under quite a bit of pressure recently and that has been in combination with other Chinese exporting related stocks like Blackmores."

Air New Zealand gained 2.3 percent to $2.22. The national carrier sold a 19.98 percent stake in Virgin Australia to Chinese company Nanshan Group, which owns Qingdao Airlines, and said it's considering options for its remaining 2.5 percent holding (after dilution) in Australia's second-largest domestic airline.

The Auckland-based carrier said it will sell the stake in Virgin, Australia’s second-largest domestic airline, at 33 Australian cents per share, a premium to Virgin’s last traded price on the ASX of 28 Australian cents. It’s also a premium to the 30 Australian cents paid in a share placement last week by fellow Chinese group HNA for a 13 percent stake in Virgin.

Smalley said there had been some pricing down of the stock when Virgin announced the HNA placement, but seeing Air NZ able to sell the shares at a 10 percent premium to that may have helped investor hopes for a special dividend.

Stride Property rose 1.8 percent to $2.265. It will list its wholly-owned subsidiary Investore Property after an initial public offering, where it will raise as much as $185 million, as part of its strategy to retain its portfolio investment entity (PIE) tax status. The company sold shares at 97 cents in a $45 million capital raising when it listed in 2010.

"That's been a real success story - they've gone from strength to strength, helped by falling interest rates," Smalley said. "Investors who have held on from the start have done extremely well."

Sky Network Television was the worst performer, down 3.4 percent to $5.07. The pay TV operator jumped yesterday after announcing a planned merger with Vodafone, and there had been some profit-taking today, Smalley said.

"The market is still coming to terms with what this will mean going forward," Smalley said. "Sky was almost in a bit of a grey area between looking cheap on its fundamentals but then there's the question of whether there has been a paradigm shift in media. Having such a strong global telco as Vodafone is going to give them options, and that's why investors are seeing this as an overall positive - but at the same time, the stock is still only where it was in October, November last year, and is almost a dollar down from before it announced lower subscriber numbers which shocked the market a bit."

Spark New Zealand gained 1.2 percent to $3.35, having dropped yesterday after the Sky/Vodafone announcement. Smalley said that with the stock still on a very good yield, it will always attract some buyers even with the new competitor on the scene.

Fletcher Building dropped 1.7 percent to $8.49, Meridian Energy fell 1.7 percent to $2.585, and Summerset Group dipped 1.5 percent to $4.63.

Outside the main index, Teamtalk shed 10.5 percent to 60 cents after the listed telecommunications company issued a second-half earnings downgrade.

BusinessDesk.co.nz

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