MARKET CLOSE: NZ Farming Systems gains on rating, Cavalier up

Monday 16th March 2009

Shares rose, pushing the NZX 50 Index higher for a second day, as Group of 20 finance ministers pledged to step up efforts to revive global growth, helping underpin sentiment for equities.

The NZX 50 rose 20.939, or 0.8%, to 2544.333. Within the index, 36 stocks rose, 10 fell and four were unchanged. Turnover was NZ$68 million.

NZ Farming Systems Uruguay surged 14% to 57 cents after Fitch Ratings awarded it an A- (uy) investment grade credit rating to raise debt funding in Uruguay. The rating is the first step in raising capital after its expansion plans were thwarted by the credit squeeze last year. The shares have dropped 17% this year. Carpet maker Cavalier rose 6.7% to NZ$1.44, having dropped 23% this year.

Finance chiefs from the G-20 pledged to coordinate efforts to remove toxic assets from banks' balance, signaling the world's largest economies are prepared to move quickly to tackle the root cause of the global economic slump. In Japan, the Nikkei 225 Index climbed 2.3% in early afternoon trading, led by a 17% surge for Shinsei Bank.

"There's definitely been a change of sentiment in the past week, offshore and here," said Graeme Thomas, who helps manage NZ$250 million at Milford Asset Management. In the broking community there's been slightly more activity - volumes have picked up."

Renewed interest in shares comes as declining rates for term deposits lure some investors to higher-yielding stocks. Clothing chain Hallenstein Glasson Holdings rose 4% to NZ$2.05. At today's price it has a dividend yield of 20%, based on payments in the past 12 months.

Milford's Thomas said the caveat on improved sentiment is the prospect of further capital raising by New Zealand companies as high levels of debt spur efforts at balance sheet strengthening.

Nuplex Industries today said it gained approval from its banks to amend terms of its loan covenants and announced plans to raise $110 million selling shares to help repay debt. Shares of the specialty chemicals manufacturer were halted pending the capital raising, having last traded at NZ$1.07. The stock has plummeted 64% this year.

Pike River Coal today released an investment statement for its plan to raise NZ$45 million selling shares to tide it over until coal sales start. AMP Capital Investors, New Zealand's largest fund manager and 30% owner New Zealand Oil & Gas are supporting the capital raising.

Shares of Pike River rose 1.3% to 81 cents before being halted for the capital raising and have fallen 11% this year. NZOG fell 3.5% to NZ$1.39 today and has gained 13% this year.

Pike is "quite a good longer-term story," Thomas said. "The key issue is to get to the point of production. Investors in New Zealand weren't as experienced with new mining ventures and may be overly fretful about set-backs in the production schedule, he said.

Fisher & Paykel Appliances dropped 3.9% to 49 cents, and has slumped 62% this year as investors speculate about its ability to strengthen its balance sheet.

The manufacturer, whose profit growth has stalled as debt levels rose, this week said it gained waivers from its banks and agreed to a short-term NZ$80 million loan facility. The company is considering options for capital raising.

The company "is looking at significant capital raising versus its market cap," Thomas said. There's likely to be "considerable discounts" to raise the funds and investors may demand changes to the way the company is run in return, he said.

Sky City Entertainment rose 1% to NZ$2.80 after New Zealand's biggest casino operator reported a jump in Australian revenue so far in the second half. Total group sales in January and February were "marginally ahead" of the same period last year, chief executive Nigel Morrison said in a newsletter to shareholders. Revenue from the Adelaide complex rose 20% after the company spruced up its facilities to emphasise the casino over the nightclub.

Briscoe Group was unchanged at 62 cents after the diversified retailer posted a 48% drop in full-year profit and cut its dividend as the economic downturn squeezed margins.

Businesswire.co.nz

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