MARKET CLOSE: NZ shares rise, led by Xero, A2 Milk

MARKET CLOSE: NZ shares rise, led by Xero, A2 Milk; Coats drops on de-listing

By Sophie Boot

Nov. 18 (BusinessDesk) - New Zealand shares rose, led by Xero and A2 Milk Co on optimism about their earnings outlook. Threadmaker Coats Group dropped after announcing plans to quit the NZX.

The S&P/NZX 50 Index increased 12.2 points, or 0.2 percent, to 5979.80. Within the index, 24 stocks rose, 15 fell and 11 were unchanged. Turnover was $132 million.

Xero led the market higher, rising 3.1 percent to $19.89. This month the cloud-based accounting software company, which is foregoing profits to expand sales, reported a 71 percent increase in first-half revenue.

"On strong days like today Xero will perform very well, and on weak days Xero tends to be at the other end of the scale, it's just a bit more volatile," said Mark Lister, head of private wealth research at Craigs Investment Partners. "Xero's margins looked to have turned around a bit and are starting to go in the right direction. It has just staged a bit of a rebound, having been out of favour earlier in the year."

A2 Milk extended its rally, rising 2.1 percent to a record 99 cents. The stock has gained 30 percent so far this month yesterday raised its earnings outlook on strong demand for infant formula.

"China's revised one-child policy has put a fire under the infant formula market in New Zealand and Australia," Lister said. "They've updated their earnings, so they're obviously seeing bigger revenues and bigger profits."

Lister said a2 could be a takeover target in the future after batting away a bid earlier this year.

"It would arguably fit quite nicely into the portfolio of a larger player," he said.

Ebos Group advanced 2.7 percent to $14.07. The animal and healthcare products company this week bought New Zealand vitamin and herbal tea maker Red Seal for $80 million. The shares have gained 39.1 percent over the past 12 months.

"They did a presentation at a broker conference in Australia yesterday so maybe you're seeing a bit of positivity around the stock from people who attended that conference," Lister said. "Ebos has been a good performer. It's in the healthcare space which is a good sector to be in, and you've got the Red Seal acquisition which has been taken well."

SkyCity Entertainment Group rose 2.6 percent to $4.32, and Australia & New Zealand Banking Group rose 2.5 percent to $29.47.

Coats was the biggest decliner on the day, dropping 9.2 percent to 59 cents, a four-month low. The UK-based threadmaker plans to quit the ASX and NZX with Australasian investors making up less than a fifth of its ownership in a bid to cut down on the costs of multiple listings. The London-based company wants to de-list from the ASX and NZX in June next year, leaving its sole listing on the London Stock Exchange.

Fletcher Building dropped 2.9 percent to $7.08. The building supplies company fell 1.2 percent yesterday after announcing it expects to boost annual earnings as strong market conditions in New Zealand offset more mixed conditions in Australia.

"Fletcher is still a bit of a poor performer," Lister said. "It has been a real disappointment over the last few years, it's down 14 percent this year and the index is up 7 percent, so it has been a pretty terrible performer against a strong market backdrop and against the backdrop of a pretty strong economy."

Kiwi Property Group rose 0.4 percent to $1.37. New Zealand's largest listed property investor posted a 5.2 percent gain in distributable income, as lower interest costs made up for weaker rental income.

(BusinessDesk)

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