MARKET CLOSE: NZ shares bounce back up, Metro Glass gains while Contact falls

Wednesday 30th August 2017

New Zealand shares gained, bouncing after yesterday's selling, with Metro Performance Glass leading the index up while Contact Energy dropped.

The S&P/NZX50 Index rose 36.86 points, or 0.5 percent, to 7,775.2. Within the index, 33 stocks rose, 11 fell and six were unchanged. Turnover was $122 million.

"The market has rebounded a little after yesterday's risk-off-the-table event with North Korea, we've seen it gradually get stronger during the day," said Peter McIntyre, investment adviser at Craigs Investment Partners. "It's a market that is quite fully valued and reliant on earnings continuing to hold values up. A number of stocks are trading cum dividend, we're going to get days when geopolitical tensions override everything and a flight to safety into cash or gold. We have got a lot of companies set to pay reasonable dividends, and that attracts a lot of investors, so I think that's going to support the market."

Metro Performance Glass was the best performer, rising 3.8 percent to $1.09. It has been sold down heavily since its result, plunging 24 percent before today's selling.

"It does reach a position where investors see some value in it, or see it as being oversold," McIntyre said. "It's not like Metro Glass hasn't got a bit of work in front of it, it's a wee bit like Fletcher Building, investors do see some value in it."

Spark New Zealand gained 1.6 percent to $3.89. The telco benefitted from today's broadband announcement, as its joint bid with Vodafone and 2degrees was awarded the $150 million tender to extend rural broadband and provide mobile coverage for black spots in locations favoured by tourists and along the state highway network.

Chorus was unchanged at $4.05. It says it will deliver ultrafast broadband to 87 percent of the country by 2022, two years ahead of schedule, and will expand its fibre rollout to 54,500 "rural premises" with a total cost of $130 million from a deal with Crown Fibre Holdings. About 60 percent of the country currently have access to fibre, the government says.

The deal will increase Chorus' peak leverage in the medium term, so it will fully underwrite its final dividend for the 2017 financial year, while it hasn't changed its 2018 guidance. Crown Fibre Holdings is funding the programme through $240 million in recycled capital from earlier stages of the UFB programme and $30 million from the telecommunications development levy.

"It's been consistently sold down post its result and probably concerns around its 2018 outlook and capital expenditure program," McIntyre said. "Essentially it's going to mean ultra fast broadband will roll out to 60,000 more customers - they're mainly copper customers but it means Chorus is able to protect its customer base, they were probably at risk of going to someone like Spark or Vodafone. There's more capital expenditure, they're able to defend their customer set and they're going to get a reasonable return on that investment."

Contact Energy was the worst performer, down 2 percent to $5.45, while Ebos Group dropped 1.3 percent to $17.07.

Outside the benchmark index, Allied Farmers dropped 6.4 percent to 8.8 cents. The rural services firm reported a 60 percent lift in net profit to $2.2 million on an improved result from its livestock division, particularly in the second half, and further cost reduction.

Pyne Gould Corp was unchanged at 24 cents. The financial services firm, controlled by managing director George Kerr, turned to an annual loss due to the 20.54 million British pounds cost of its Supreme Court-ordered payout to Wilaci Pty.

(BusinessDesk)

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