MARKET CLOSE: Nuplex leads NZX 50 lower, Pike drops

Tuesday 3rd March 2009

New Zealand's NZX 50 Index fell 2.6% to a new five-year low, led by Nuplex Industries and other companies focusing on their balance sheets, after American International Group's losses and additional aid sparked a sell-off in equities.

The NZX 50 fell 63.57 to 2417.95 and is down about 30% in the past 12 months. Within the index all but five stocks fell. Two were unchanged and three rose. Turnover was NZ$46.8 million, down from twice that a month ago. The Standard & Poor's 500 Index fell 4.7% yesterday and the FTSE 100 fell 5.3%. In Tokyo today, the Nikkei 225 Index pared its earlier decline, and was 0.6% lower at 7239.01 in early-afternoon trading.

Nuplex fell 12% to NZ$1.04 and has dropped almost 50%v in the past 10 days. It may be in breach of banking covenants, according to a statement last week. The specialty chemicals maker told analysts today it was awaiting agreement from all its banks to be in breach of its senior debt to EBITDA ratio. It was at 3.1 as at Dec. 31, adjusting for foreign exchange impact. The actual was 3.46 versus a target of below 3.

Pike River Coal dropped 10% to 72 cents after announcing an offer of shares backed by 30% owner New Zealand Oil & Gas. The funds will bolster working capital after a rock slide disrupted coal production. NZOG gained 1.6% to NZ$1.24.

Rakon slid 8.7% to 63 cents on concern demand for its products may wane in the global downturn. In the U.S., AIG posted the biggest loss in U.S. corporate history and put itself in line for a further US$30 billion of equity, cut price loans and new credit lines.

"It's pretty clear a lot of investors are sitting on the sidelines and that's exactly what they should do," said Barry Lindsay, research manager at First NZ Capital.

From its peak in July 2007, the NZX capital index has dropped 49%, almost as much as Wall Street shed in the same period.

"Why would our market be equally savaged? The problems that the U.S. has experienced have become global," Lindsay said.

On light volumes, most stocks have slumped. Fisher & Paykel Healthcare, though, has skirted the global turmoil so far, rising 1.2% to NZ$3.39 today. The company makes breathing masks and ventilators that sell into a U.S. health market where demand is rising and stands to benefit from the New Zealand dollar's steep dive to below 50 U.S. cents. Still the stock is trading on an historical PE of 38 times earnings.

"I can only see blue sky for that stock even though it is expensive," Lindsay said.

NZ Farming Systems Uruguay tumbled 10% to 45 cents. The company last month posted a net loss of US$8.9 million. Its operating cash deficit of $US15.3 million and the company said it was in talks to renew some of its loans.

Skellerup Holdings rose 1.9% to 53 cents, leading the NZX 50 higher.

Smartpay Ltd. soared 100% to 1.4 cents after the payment processing system company said it has been operating cash-flow positive for the past two months and expects to be EBITDA profitable "in the short term."

Lindsay has been one of the more bullish market participants through the slump. Today he reiterated that stocks are trading at "bargain basement prices."

"We've had a really ugly reporting season and that's given ammunition to the bears," he said.

Businesswire.co.nz

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