MARKET CLOSE: NZ shares up, Scales and A2 rise while Sky TV falls

Thursday 14th December 2017

New Zealand shares gained, led by Scales Corp and A2 Milk Co, while Sky Network Television dropped again.

The S&P/NZX50 Index increased 39.17 points, or 0.5 percent, to 8,323.75. Within the index, 27 stocks rose, 14 fell and nine were unchanged. Turnover was $194 million.

Scales Corp led the index, up 4.1 percent to $4.53. Last week, the company said it expects full-year earnings to be at the upper end of guidance on the performance of its horticulture division and new acquisitions, and earnings will rise in 2018.

"They gave a good set of 2017 numbers and the brief 2018 update they gave was pretty positive, and there's confidence in the management," said Peter McIntyre, investment adviser at Craigs Investment Partners. "It is probably under-owned in some parts of the market so you're seeing some funds managers top up."

A2 Milk Co rose 2.2 percent to $7.94. Managing director Geoff Babidge will retire next year and will be replaced by Jetstar chief Jayne Hrdlicka. Babidge has been in the role since 2010, and in the past two years A2's share price has jumped from around $1 at the end of 2015 to a recent record of $8.75. The shares have soared on the back of successive strong sales, with the company's infant formula attracting strong demand in China.

"A2's a marketing company, it's a company of momentum, and I think they've chosen her on the basis that she's able to keep that marketing going," McIntyre said. "She hasn't come from a commodity-based background, and that could work in their favour."

Restaurant Brands New Zealand gained 1 percent to $7. It said third-quarter sales jumped 45 percent, driven by the contribution from Taco Bell and Pizza Hut outlets acquired in Hawaii, Guam and Saipan in March and from additional KFC stores in Australia. Sales rose to $173.3 million in the 12 weeks ended Dec. 4, from $119 million a year earlier.

"That company is performing well, and that's probably leading into a pretty reasonable full year result," McIntyre said. "The acquisitions they've made have been well planned and executed, they've been earnings accretive. They've been able to maintain a pretty good rate of momentum, I think that's going to carry on for the next 12 to 24 months so the likelihood for the stock is it is going to be re-rated by analysts at some stage."

Metro Performance Glass advanced 1 percent to 99 cents. Chief executive Nigel Rigby is stepping down after five years, saying "the time is right" for new leadership. Since its initial public offering in 2014, the company has repeatedly downgraded its guidance and in October announced a strategic review of all aspects of its business with advice from First NZ Capital while trimming forecast capital expenditure for the current financial year by as much as a fifth.

"I think he has tried really hard with that business, he's pretty knowledgeable and his passion for the business was really strong, so it will be interesting to see where he goes," McIntyre said. "They have disappointed, more on the outlook statements than anything else."

Property for Industry gained 0.6 percent to $1.645. It raised annual earnings guidance as the industrial real estate investor benefited from stronger leasing since its half-year result.

"There seems to be activity running through the property sector today - the sector as a whole has had good volume through it. That was a nice announcement from PFI," McIntyre said.

Sky Network Television was the worst performer, down 3.8 percent to $2.57, while NZX dropped 2.7 percent to $1.09 and CBL fell 1.3 percent to $3.03.

Outside the benchmark index, New Zealand Oil & Gas dipped 0.7 percent to 71 cents. Chairman Rodger Finlay and director Duncan Saville have resigned following the announcement this morning that OG Oil & Gas has received approval from the Overseas Investment Office for its partial takeover bid for NZOG.

(BusinessDesk)

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