MARKET CLOSE: Tower falls 19% to hit 12-year low

Thursday 8th September 2016

New Zealand shares fell as several large cap stocks gave up dividend rights, while insurer Tower dropped to a 12-year low.

The S&P/NZX 50 Index dropped 36.39 points, or 0.5 percent, to 7,534.72. Within the index, 29 stocks fell, 17 rose and four were unchanged. Turnover was X

Tower led the index lower, down 19 percent to $1.11. The insurer warned today it expects a $16.2 million hit to its after-tax profit due to increased claims provisions for the Canterbury earthquake following greater-than-expected new claims from the Earthquake Commission and increased litigation and customer disputes. It also signalled it will review its dividend and its dividend policy at its full-year earnings result.

Tower said it has about 560 claims remaining of the almost 16,000 claims lodged. Still, it said the insurance industry has received over 800 new claims over the past six months as EQC accelerates its programme. It's estimated more than 6,000 EQC claims require remediation, and some of these will exceed the $100,000 EQC threshold, resulting in the cost being borne by insurers, and Tower said it has also experienced a greater number of disputes and extended time to reach agreements with customers.

"One hopes it's at the end of it but it's down to the tail of difficult claims and the unknown extra over-cap claims from EQC," Matt Goodson, managing director at Salt Funds Management, said. "Tower's gone from having an extraordinarily strong balance sheet to having a satisfactory balance sheet in terms of capital positioning. The underlying insurance business is still travelling well. The market's weighing up what's still a satisfactory capital position, the multiples it's trading at and any further risks that may still be there to come out of Christchurch. As there's more and more information, there's less risk of a further blowout, so we'll just have to see."

Companies giving up rights to dividends included Air New Zealand, which dropped 10 cents, the same as its final dividend payout, to $2.06. It also paid a special 25 cent dividend.

Trade Me Group shed a 9 cent dividend and declined 22.4 cents to $5.62. Sky Network Television, which gave up a 15 cent dividend, fell 12 cents to $4.92.

Orion Health Group was the best performer, up 4 percent to $4.20. It had fallen 24 percent between June and the beginning of this month, from a peak of $5.31 to $4.03.

"It's been very weak for several months so it's just bounced on light volumes, there was no news behind the decline and no news behind the bounce," Goodson said.

Freightways gained 2.2 percent to $7.05, Kathmandu Holdings rose 2 percent to $2.01, and Z Energy advanced 2 percent to $8.60.

Outside the main index, Moa Group rose 5.9 percent to 90 cents. The listed boutique brewer is to raise $4 million via a placement and rights offer at 73 cents per share, and will use the funds to expand its sales team and for working capital and expenses.

Smiths City Group was unchanged at 70 cents. Chairman Craig Boyce and fellow directors Gary Rohloff and Tony Allison have survived an attempt by Ron Brierley's Mercantile Investments to oust them from the board at today's annual meeting in Christchurch.

Pan Pacific Petroleum fell 6.3 percent to 3 cents. It has applied for voluntary delisting from the NZX due to low trading volumes, though it will stay on the ASX.

BusinessDesk.co.nz

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