Stocks to watch: Contact, Pyne Gould, Scott Technology

Monday 12th October 2009

The following stocks may be active on the New Zealand exchange after developments since the close of trading Friday.

Themes of the day: Shares on Wall Street rose on Friday, with the Dow Jones Industrial Average reaching its highest closing level this year on optimism the third-quarter earnings season will show an improvement over the second quarter. In New Zealand, retail sales are due out tomorrow, expected to show sales rebounded in August after falling in July. On October 15, Statistics New Zealand is scheduled to release the Consumers Price Index for the third quarter, which may show inflation has slowed to a tame annual rate of 1.2%. The kiwi dollar traded at around 73.37 US cents on Friday in New York.

Contact Energy (CEN): The biggest utility on the NZX 50 has slowed progress on its $250 million underground gas storage facility in Taranaki, amid reports the company’s ability to push gas back into an empty well for storage has been less successful than hoped. Contact needs to store gas it has under a take-or-pay contracts. The shares fell 7 cents to $5.91 on Friday.

PGG Wrightson (PGW): The agriculture servicing company’s ability to tap its shareholders for more equity looks shaky after meat co-operative Silver Fern Farms had an underwhelming response to its rights issue. Up to $128 million extra capital was possible through Silver Fern’s two-for-one share subscription as well as a one-for-four bonus issue, but as of Friday, only $21 million was raised. PGG Wrightson shares last traded at 61 cents.

Pyne Gould Corp. (PGC): The financier’s six-for-one $237 million rights issue poses dilemmas for current shareholders who either have to stump up with much more money to retain their value in the company, or sell their rights and head shares, says brokerage McDouall Stuart, according to the ShareChat website. Strong selling of both the rights and head shares in the first two days of trading late last week suggests many holders are seeking to exit from both security classes. The shares dropped 1 cent to 41 cents on Friday, compared with their $1 price before the extent of PGC’s capital raising was revealed, while the rights ended at 0.4 cents each.

Scott Technology (SCT): The maker of manufacturing systems for industry, gained 2% to $1.01 on Friday, after reporting a full-year profit tax of $390,000, a turnaround from last year’s loss of $1.2 million.

Smartpay (SPY): The eftpos technology company soared 21% to 3.5 cents on Friday after announcing the acquisition of the ETHOS operating system software from Cadmus Developments, in receivership. The purchase price is capped at $7.5 million over three years. With the acquisition and based on current sales forecasts “appropriate profit guidance for the SmartPay Group is expected to be in the range of $7 million to $10 million EBITDA” in the year through June, it said.

Tourism Holdings (THL): The tourism sector is becoming more optimistic that a return to global economic growth will revive inbound visitor numbers. Some 49% of companies in the sector say demand will rise in the next three months, up from 44 per cent in last month’s survey from the Ministry of Tourism and the Tourism Industry Association. The shares were unchanged at 69 cents on Friday.

Businesswire.co.nz

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