MARKET CLOSE: NZ shares fall; A2 Milk drops

MARKET CLOSE: NZ shares fall; A2 Milk, Genesis drop, Nuplex gains as takeover backed

By Sophie Boot

April 11 (BusinessDesk) - New Zealand shares fell as investors mulled the risk of increased Chinese regulation on A2 Milk and Genesis Energy declined. Nuplex Industries gained after directors backed a takeover offer.

The S&P/NZX 50 Index dropped 5.18 points, or 0.1 percent, to 6,725. Within the index, 26 stocks fell, 19 rose and five were unchanged. Turnover was $184.4 million.

A2 Milk Co shed 2.6 percent to $1.90. The dual-listed infant formula producer, which has seen a surge in demand in China, highlighted a number of regulatory changes signalled by the Chinese government in an investor presentation in Sydney last week

"There have been changes to Chinese import regulations and tax regulations recently, and there may be further ones, and the market is grappling with the implications of that," said Matthew Goodson, managing director at Salt Funds Management. "With A2, if you go back a year or two their growth story was based around selling liquid milk into the UK, US markets - those efforts have largely been very unsuccessful, but a rainbow has appeared in the form of infant formula into China. The tax changes will clearly make that just a little harder."

Genesis Energy led the index lower, shedding 2.9 percent to $2.03 after gaining 8.3 percent this year. In February, it posted a 1.5 percent increase in first-half earnings as it grabbed more customers in a tightly contested retail market and lifted generation volumes.

NZX dropped 1.9 percent to $1.01, and Sky Network Television lost 1.9 percent to $4.56.

The biggest gainer was Nuplex Industries, which rose 3.2 percent to $5.24, a price not seen since November 2008. The resin maker's independent directors are unanimously backing Allnex Belgium SA's $1.05 billion bid after the US-based firm completed its due diligence. The companies have signed a scheme implementation agreement, which values Nuplex at $5.55 a share, including the 12 cents per share dividend payment in February

"There just had started to be the odd little wobble that due diligence was dragging on a little bit, but clearly there's nothing like that, it would appear the takeover is going ahead," Goodson said. "The share price had drifted off a little, which reflects there were some risks regarding the satisfactory completion of due diligence - it's not unknown for takeovers to fall over at that stage, but now clarity's been provided and it's all systems go."

SkyCity Entertainment Group grew 2.8 percent to $4.73, from an intraday high of $4.78. The company ran a conference call with investors and analysts which media were barred from, following the resignation of its chief executive Nigel Morrison last week, amid reports its Darwin casino is being touted to international investors.

"The stock was trading a little stronger prior to the call and did just fall away as the call was occurring," Goodson said. "There remain as many questions as answers with that company- the one thing that was interesting is SkyCity is going through a heavy investment phase, not just in New Zealand, potentially very significant Adelaide developments - and at the same time, their Darwin property has been a little disappointing. There are some questions in the market as to their balance sheet, and people have to see how things transpire with the new CEO's view on the world."

Metro Performance Glass gained 2.3 percent to $1.76, Skellerup Holdings rose 2.2 percent to $1.39, and Stride Property advanced 2 percent to $2.295.

Outside the main bourse, Wynyard Group dropped 1.2 percent to 86 cents. Chief financial officer Murray Page will leave the intelligence analytics software developer at the end of next month amid an overhaul of its sales strategy after its recent $30 million capital-raising.

"The key for Wynyard is they have agreed some very good contracts indeed, but the difficulty they have had is getting them to a point where milestone payments start to be made," Goodson said. Salt Funds Management is a substantial shareholder in Wynyard.

(BusinessDesk)

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