MARKET CLOSE: NZ shares rally to fresh 2-1/2 year high

MARKET CLOSE: NZ shares rally to fresh 2-1/2 year high; Sky Network paces gains, NZ Refining falls

by Jason Krupp

Feb. 18 (BusinessDesk) - New Zealand stocks continued to rally, reaching a fresh two-and-a-half year high to the end the week.

Sky Network Television Ltd. paced gainers after reporting interim results in line with analysts' expectation, while New Zealand Refining Co. lead decliners for a second day.

The NZX 50 Index rose 17.04 points, or 0.5%, to 3412.73. Within the index, 28 stocks rose, 13 fell, and nine were unchanged. Turnover was $74.2 million.

Sky Network, the pay TV operator, rose 3.1% to $5.85 after it reported a 19% jump in net profit to $60.4 million for the six months to Dec. 31 on the back of the success of its MySKY HDi decoder service and a rebound in advertising sales. That about met earnings expectations from brokerage Forsyth Barr.

Advertising revenue jumped 26.9% to $31.1 million in the six months ended December compared with the same six months a year earlier while MY SKY customers numbers rose 60.3% to 231,072 between December 2009 and December 2010.

That took total revenue to $398 million, up 7.8% from the previous period.

"People are looking at the balance sheet and the cash flow the business is generating and wondering what they can do with it," said Paul Harrison, who helps manage $300 million in equities for BT Funds Management.

"I don't think they have a big capex requirement in the future, so that money is likely to come back to shareholders."

Skellerup Holdings Ltd., the rubber goods and milking equipment manufacturer, rose 3.2% to $1.31, two days after it reported a 196% increase in first-half earnings. Net profit rose to $9.8 million, or 5.12 cents a share, in the six months ended Dec. 31, from $3.3 million, or 2.03 cents a year earlier. Sales rose to $96 million from $85 million.

Abano Healthcare Group, the specialist health clinic investor, continued to pare recent losses after the company's board pre-empted a "please explain" notice from the NZX, and said it had no material explanation as to why its share price had dropped 11% in February to a near a two-year low. The shares rose 2.2% to $4.65, up from a $4.40 three days ago.

Telecom Corp., the country's biggest phone company, rose 0.9% to $2.25, which Harrison said was due to foreign investors looking for high yielding New Zealand stocks that weren't in the resource or banking sector.

Fletcher Building Ltd., the country's biggest construction firm, rose 0.6% to $8.39 after it extended its takeover offer for Australia’s Crane Group by 14 days while announcing that acceptances under the offer had crept up to 27.7% of the company.

"You have to be confident that they will get it across the line now that they have adjusted the bid and Crane directors are recommending it," Harrison said. "The extension was more around the Commerce Commission wanting to take a look at the deal."

Postie Plus Group, the clothing retailer, rose 7.4% to 29 cents after it reported a 4.6% rise in half-year sales compared to the same period a year ago. Same store sales also rose by 4.6 per cent. The company remained cautious on the sales outlook for the second half of the year, which typically brings in higher revenues, citing the inconsistency of trade recently.

PGG Wrightson, the rural services group, was unchanged at 57 cents after Wool Partners Co-operative failed to reach the $55 million target it needed to proceed. It attracted nearly 40 million share subscriptions - or just 30 per cent of the strong wool clip.

Had the cooperative made it over the line, it would have taken over Wool Partners International, the current wool supply and marketing company, by buying out PGG Wrightson Ltd.'s 50% stake in the entity, a move the rural services company was backing.

NZ Refining, the company which operates New Zealand's only oil refinery, fell 2.8% to $4.86. Investors continued to sell their holdings after the company announced another round of expansion and declared a lower-than-expected dividend yesterday despite a 145% increase in net profit for the year to Dec. 31.

"People have been questioning the reason for the $400 to $500 million spend on capex expansion, and taking more of motor market when you're seeing the majors like Shell and BP shutting refineries and the excess capacity in most regions," Harrison said.

"It is a lot of money for that business relative to the market cap."

OceanaGold Corp., the Macraes and Reefton mine operator, fell 3.8% to $3.85 after it reported an 18.5% decline in net profit, as higher costs of sales, the stronger New Zealand dollar and the closing of its hedging contracts eroded gains from higher gold sales.

The miner reported a net profit of US$44.4 million for the 12-months to Dec. 31, compared with US$54.5 million in 2009. Gold sales for the period rose to US$305.6 million from US$237.1 million previously, representing 68,027 ounces of the metal at a higher cost of $596 per ounce. That left OceanaGold with revenues of US$71.8 million in 2010, up from 40.4 million.

Gains from undesignated hedges fell to US$16.2 million in 2010 compared with US$58 million in the previous year.

Vector Ltd., the lines company, fell 1.2% to $2.51, paring its recent gains after Crown Fibre Holdings, the vehicle overseeing the government’s national broadband plan, added the lines company’s Auckland bid to its priority list. Vector joins Telecom Corp., Enable Networks, the Flute joint venture and Alpine Energy Ltd. in priority bidding on the UFB project.

(BusinessDesk) 18:04:39

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