MARKET CLOSE: NZ shares continue record ascent; F&P Healthcare, Goodman Property, Steel & Tube

Monday 21st March 2016

New Zealand shares rose, pushing the S&P/NZX 50 Index to a record and leaving the market looking expensive relative to its earnings outlook. Fisher & Paykel Healthcare and Goodman Property Trust led the rally. Vista Group International fell after a quarter of the company was sold at a discount.

The NZX 50 rose 18.44 points, or 0.3 percent, to 6,641.94. Within the index, 23 stocks rose, 22 fell and five were unchanged. Turnover was about $160 million.

The benchmark index has gained about 9 percent in the past month as low interest rates continue to spur demand for the dividend yield on stocks. Bank term deposit rates are averaging 3.54 percent currently, according to interest.co.nz, down 100 basis points from a year ago, while the dividend yield for the NZX 50 is 4.82 percent, according to Reuters data.

F&P Healthcare rose 2.4 percent to $9.48, Goodman Property Trust rose 1.9 percent to $1.315 and Steel & Tube Holdings rose 1.8 percent to $2.30. Mainfreight gained 1.3 percent to $15.70 and SkyCity Entertainment Group rose 1.2 to $4.98.

"Right now the one-year forward price-earnings ratio for the market is around 22 times, while the long-term average is 15.5 times," said Matthew Goodson, managing director at Salt Funds Management. "The market, whichever way you cut it, does look expensive. There's still value to be found in the Kiwi market but you have to go digging now."

Trade Me Group rose 1.6 percent to $4.44 and A2 Milk gained 1.6 percent to $1.94. Infratil advanced 1.6 percent to $3.25.

Air New Zealand rose 1.1 percent to $2.87 amid two pieces of news about the airline. It will provide A$131 million as its share of a A$425 million loan to Virgin Australia, giving the Australian airline room to review its capital structure. Separately, the Australian Competition and Consumer Commission has won an air cargo cartel appeal against PT Garuda Indonesia and Air New Zealand that agreed surcharges on cargo breached that nation’s price fixing laws.

The two are the only airlines of 15 that haven’t settled with the ACCC since the Australian regulator began proceedings for price fixing on air cargo at ports outside of Australia destined for that nation. The Federal Court ruling is that the price fixing took place in a “market in Australia”.

Vista Group International fell 3.6 percent to $5.40 when it resumed trading after being halted for the sale of about a quarter of its stock. Macquarie Capital and Macquarie Securities (NZ) paid $5.25 a share in a block trade for the 26 percent stake from 20 shareholders including chief executive Murray Holdaway and director of commercial and legal Brian Cadzow, which was then sold to institutional investors and retail brokerages at $5.30 a share.

"The Vista selldown was very well received," Goodson said. "It feels very solidly supported in the market."

He said index re-weightings have had a big influence on stock movements, including significant index changes last Friday. That tended to drive exchange traded, index funds, which were becoming a bigger part of the market and causing "weird changes" in stock prices and volumes.

Warehouse Group gained 1.4 percent to $2.83 and Tower gained 1.1 percent to $1.84.

Chorus fell 1.4 percent, or 5.5 cents, to $3.98 after shedding its 8 cent interim dividend.

Snakk Media was unchanged at 70 cents after the NXT-listed mobile advertising company, said it had become the victim of an online scam that could cost as much as $215,000.

Pumpkin Patch rose 7.3 percent to 8.8 cents after the children's clothing retailer posted an 80 percent slump in first-half earnings, in line with guidance, and also said problems with its website dented online sales.

BusinessDesk.co.nz

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