MARKET CLOSE: NZ shares rise; Steel & Tube gains, Comvita, Restaurant Brands drop

Friday 22nd July 2016

New Zealand shares rose, pushing the benchmark index to a new record as continued lower interest rates nudged investors to seek better returns from equities. Steel & Tube Holdings and Fisher & Paykel Healthcare gaining while Comvita and Restaurant Brands fell.

The S&P/NZX50 Index gained 12.01 points, or 0.2 percent, to 7226.06. Within the index, 17 stocks gained, 31 fell and three were unchanged. Turnover was $108 million.

"Central banks have taken interest rates to infinity and beyond, and it's forcing people into risk assets and people are paying ever-more for them," Salt Funds Management managing director Matt Goodson said. "New Zealand superficially has a very high yield, a number of the key companies are paying out more than 100 percent of the cash flow they're generating."

With earnings season looming and school holidays nearly finished, turnover was relatively light, he said.

Steel & Tube Holdings gained 2.8 percent to $2.17. The share price has recovered from a fifteen-year low after a flow of bad news ceased.

"On the back of relatively low volumes this week it's recovered, in my view, closer to fair value, having been hammered after a long period of bad news," said James Bascand, equity analyst at Forsyth Barr. "It got to a price which appears cheap compared to what the market thinks the profitability will be and what the dividend and hence yield will be. And a month out of the spotlight of negative news probably helps as well."

Fisher & Paykel led the index, gaining 3.3 percent to $10.55.

Investore Property rose 1.8 percent to $1.67 and Spark New Zealand advanced 1.5 percent to $3.84. Both had high volumes of trading today, with 3.46 million shares traded in Investore and 2.34 million in Spark.

Summerset advanced 1.3 percent to $4.68, after Deutsche Bank raised its target price for the stock to $5.30 from $4.89 yesterday, while Ryman Healthcare gained 1.1 percent to $9.55 after Deutsche Bank also lifted its target price to $9.05 from $8.80.

Restaurant Brands fell 0.7 percent to $5.41. The fast food brands company's board today reiterated its forecast net profit after tax for the current financial year at $28 to $30 million. The Australian business was making A$100 million in revenue and A$15 million in profit when acquired, but chief executive Russel Creedy said this current year's results will be impacted by the acquisition although it is already earnings accretive.

"They reiterated guidance, interestingly they did talk more positively about Carl's Jr which had been a bit of a struggle for them, that's reasonably encouraging," Goodson said.

The dual-listed banks weakened today, having gained this week. Westpac Banking Corp dropped 1.8 percent to $32.35 while Australia & New Zealand Banking Group fell 1.4 percent to $26.83.

"Today they're down a little bit in Australia, and there's the impact of the Kiwi-Aussie which is a little bit stronger today, so that translates to a slightly weaker share price," Goodson said.

Comvita was the worst performer, down 4 percent to $10.60, and Xero fell 1.7 percent to $19.14.

BusinessDesk.co.nz

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