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MARKET CLOSE: NZ shares fall, A2, Xero down on profit taking

MARKET CLOSE: NZ shares fall, A2, Xero down as investors take profit

By Sophie Boot

Nov. 25 (BusinessDesk) - New Zealand shares fell, driving the NZX 50 Index down from a record high, as investors cashed in recent gains in a2 Milk Co, which was cut to 'underperform' by an analyst, and companies including Xero.

The S&P/NZX 50 dropped 32.13 points, or 0.5 percent, to 6,069.14. Within the index, 29 stocks fell, 15 rose and six were unchanged. Turnover was $189 million.

Today's decline on the benchmark index ended a seven-day run of gains, including a record close yesterday.

A2 Milk Co dropped 9 percent to $1.11, leading the index lower. The company's shares soared 65 percent in just over two weeks, but the stock's rating was cut to 'underperform' at brokerage First NZ Capital, which said it wants evidence the milk marketer can repeat its Australian success in other markets such as China, the UK and the US. It had rallied along with Australian companies linked to infant formula and dairy products.

"A2's one of three in the sector which have done pretty well, and I think what has happened today is that anyone who was a New Zealand holder was starting to use it as an opportunity to fund their purchases," said Rickey Ward, equity manager at JBWere. "I think the fund managers have decided to take a bit of a breather and see what happens with the share price, realising that they are pretty much the only buyers."

"The market has a weak tone today, it has that feeling that people are going, look I don't know why we're here again, time to take profits," he said.

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Xero fell 4.2 percent to $20.88. The stock has risen 36 percent so far this year, which Ward said was due to a re-emergence of hunger for growth-oriented investments.

"There seems to be a global appetite for these kinds of growth stocks, particularly tech stocks, and I think Xero's fallen into that camp," Ward said. "It rallied from $12 to $20-odd and probably left a lot of people scratching their heads."

SkyCity Entertainment Group fell 2.5 percent to $4.25, while New Zealand Refining was unchanged at $3.82.

Warehouse Group fell 4.4 percent, or 12 cents, to $2.60 after shedding rights to its 5 cents per share dividend, which will be paid on Dec. 10.

Orion Health Group dropped 2.1 percent to $3.70. The healthcare system software developer posted a wider first-half loss it said was in line with expectations, while a weaker kiwi dollar and recurring revenue in North America lifted sales by 26 percent.

Units in Fonterra Shareholders Fund dropped 0.2 percent to $5.42 . Fonterra Cooperative Group today affirmed guidance for the 2016 milk payout to farmers, although chairman John Wilson said it was dependent on global dairy prices rising in the first half of next year from current unsustainable levels, while a proposal to slash the size of the board from 13 to nine was turned down by shareholders.

Metro Performance Glass was the biggest gainer on the day, rising 1.9 percent to $1.58 after announcing its first-half earnings were in line with guidance on Monday.

"People have got a better degree of comfort that numbers going forward are more realistic rather than what they delivered by missing prospectus guidance," Ward said. "This is a company that got sold quite heavily for failing to meet guidance, and now people are a bit more confident that at least they're realistic from here out."

Among smaller companies, Trilogy International rose 3.4 percent to $2.43. The skincare and home fragrance company more than tripled first-half profit as it benefited from growth across all its markets. The shares hit a new record high.

ERoad rose 1.8 percent to $2.22. The logistics and fleet management software and hardware developer turned to a first-half profit from a loss a year earlier as gains in Australia and New Zealand made up for slower growth in North America.

Smartpay Holdings dropped 6.7 percent to 14 cents. The listed payment terminal supplier reported a 90 percent slump in first half profit and is in the process of rebuilding its business after losing a major wholesale contract last year.

Hallenstein Glasson dropped 10 percent to $3.40 after it warned its margins were getting squeezed even as sales were rising.

(BusinessDesk)

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