MARKET CLOSE: NZ shares rise; Meridian rebounds

MARKET CLOSE: NZ shares rise; Meridian rebounds; Genesis extends decline

By Suze Metherell

May 1 (BusinessDesk) - New Zealand shares rose, paced by Meridian Energy as investors returned to the stock. Tower fell after it flagged an increase in provisions for Canterbury earthquake claim costs. Genesis Energy extended its decline after saying it would miss its prospectus forecasts.

The NZX 50 Index rose 6.064 points, or 0.1 percent, to 5797.4. Within the index, 18 stocks rose, 21 fell and 11 were unchanged. Turnover was $146 million.

Meridian rose 0.6 percent to $2.525, and has gained 33 percent this week. The partially privatised energy company came under selling pressure ahead of its second installment receipt coming due, as investors sold the stock to pay for the extra 50 cents to take up the full share offer.

"It popped pretty hard yesterday didn't it?" said Rickey Ward, NZ equities manager at JB Were New Zealand. "It was weaker into that installment as investors paid partly paid shares to help fund the fully paid, and we've seen it steadily improve since then. Today is further proof the weakness was a flow driven event, rather than a fundamentals driven event."

Tower was the worst performer on the benchmark index, down 2.5 percent to $2.15. The general insurer, which came out of a trading half it placed itself in on Wednesday, said it expects claim costs in relation to the Canterbury quakes will increase by between about $20.9 million and $22.4 million after tax to a range of $388 million to $397 million. Underlying earnings in the first half were $17 million to $18 million, which would be as much as 37 percent up on last year's net profit of $13.1 million. The company said it will continue with its capital management programme, under which it expects to return $34 million via a buyback of shares.

"Insurance is often very difficult to predict. It does show the underlying business is pretty good, and I think that's why it hasn't fallen so much," Ward said. "People are disappointed but on the positive side, reconfirmation that they intend to continue that capital management via the buy back."

Genesis dropped 1.3 percent to $1.925, ending the week 12 percent lower. New Zealand's largest energy retailer cut its forecast for annual earnings to between $330 million and $345 million in the year ending June 30, lower than its $363.4 million prospectus estimate from March last year. It said it lost electricity and gas customers amid increased competition, while wholesale electricity prices declined and a slump in global oil prices weighed on earnings from the Kupe oil and gas field.

"Any company that misses prospectus is always going to get the deserved treatment," Ward said. "It's a company that was always on really high multiples, but it was always attractive for its dividend, and that was about it. The dividend isn't under question, but people are questioning the earnings now."

SkyCity Entertainment Group dropped 0.5 percent to $4.18. The casino operator is in the final stages of agreeing with government a revised plan for its international convention centre. The government is giving SkyCity gambling concessions and extending its monopoly on its Auckland casino license to 2048 in return for SkyCity developing the centre at its own cost. Last October the government baulked at further taxpayer funding when SkyCity said its initial design costs could run as high as $530 million, exceeding the initial estimate of $402 million.

"It's had a very healthy run but I think there's an element of questions coming into it again," Ward said. "Delays in the convention centre, it has to figure out the funding, it's got banking issues that it may occur in 18 months’ time, you've got these sorts of events. There's also concern, and I think it's a little bit unjustified, that maybe the convention centre gets overturned somehow. I find it hard to think that will occur."

NZX fell 1.7 percent to $1.16. The stock market operator lifted first quarter sales 9.1 percent to $16.4 million as its expanded fund management business offset a drop of it in its derivatives and agriculture operations.

Z Energy, the petrol pump chain, led the benchmark index higher, up 2.7 percent to $4.95. Fisher & Paykel Healthcare, the breathing apparatus manufacturer, rose 2.3 percent to $6.65

Spark New Zealand, formerly Telecom Corp, rose 0.3 percent to $2.98. Fletcher Building, the building supplies and construction firm, slipped 0.1 percent to $8.30.

Outside the benchmark index, Serko fell 5.3 percent to 89 cents. The online travel booking business has bought Expedia's Arnold Travel Technology for a confidential nominal sum, which it expects will boost its Australasian transaction volumes by at least a fifth. The all-cash deal is expected to increase sales by 7-to-8 percent in the six months ending Sept. 30, though isn't likely to increase earnings before interest, tax, depreciation and amortisation until the second half of the 2016 financial year.

(BusinessDesk)

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