MARKET CLOSE: NZ shares rise as Genesis, Meridian extend gains after election
By Suze Metherell
Sept. 23 (BusinessDesk) - New Zealand shares rose as energy companies extended yesterday's gains after the incumbent National-led government's convincing general election win on Saturday, lifting the threat of further regulation for the power sector. Kathmandu Holdings fell after reporting a decline in annual earnings.
The NZX 50 Index rose 5.151 points, or 0.1 percent, to 5241.443. Within the index, 23 stocks rose, 16 fell and 11 were unchanged. Turnover was $97.1 million.
The general election delivered Prime Minister John Key and his government a third term, and the potential to govern alone, which is unusual under New Zealand's mixed member proportional electoral system. The power electricity generator-retailers extended yesterday's gains, as the election win shut down the threat of regulation, which had been a cornerstone policy for opposition parties in trying to drag down power prices for consumers.
State-controlled Genesis Energy advanced 2.1 percent to a record close $1.99. Fellow partially-privatised gentailer Meridian Energy increased 1.3 percent to $1.54. Contact Energy gained 1 percent to $5.91. TrustPower rose 0.7 percent to $7.45. Infratil, the infrastructure investor, lifted 0.5 percent to $2.79. MightyRiverPower slipped from a 16-month high, down 0.6 percent to $2.575.
The regulatory threat "had been holding the stocks back for quite some time - even though the stocks had rallied quite strongly pre-election there was some still good buying yesterday and there is still good buying today," Grant Williamson, director at Hamilton Hindin Greene said. "Investors now have the confidence to buy those stocks for their dividend yields, which are still attractive even at these higher levels."
Air New Zealand, the national carrier sold down by the government in its asset sale programme, was unchanged at $1.945.
Other companies facing regulatory threat paced gains, with telecommunications network operator Chorus up 0.9 percent to $1.785, as it faces a protracted dispute with the Commerce Commission over the pricing of its regulated copper lines network, while casino operator SkyCity Entertainment Group, the beneficiary of a deal with the National-led government to build a convention centre in Auckland, rose 0.5 percent to $3.72.
Vector, the Auckland lines company, was the worst performer on the day, declining 1.9 percent to $2.62.
Fletcher Building, New Zealand's largest listed company, fell 1.6 percent to $8.91 as $15.5 million worth of its shares changed hands.
"Fletcher had a good day yesterday, but the profit takers have come back into the stock today," Williamson said.
Kathmandu dropped 1.6 percent to $3.10. The outdoor goods retailer reported a 5.4 percent decline in annual profit to $42.2 million, in line with guidance given, as a slow start to winter crimped sales. The Christchurch-based company plans to invest $5 million to expand its business in the UK and Europe this financial year, in the first phase of a three-year strategy to build its global brand, which may dent earnings growth.
"The concern going forward is their expansion and the cost of the expansion into the UK and Europe," Williamson said. "That is starting to weigh on the share price a little bit."
OceanaGold Corp led the benchmark index higher, up 5.9 percent to $2.68.
Spark New Zealand, formerly Telecom Corp, rose 0.5 percent to $3.03.
Outside the benchmark index, SLI Systems fell 8.3 percent to a record low of $1.21. The search engine developer announced initial shareholders sold 6.8 percent of the company at the end of a 16-month lock-up period at 23 percent below last year's $1.50 offer price. Among those who sold were non-executive director and co-founder Steve Marder and vice president of business intelligence and co-founder Geoff Brash, with institutional investors the buyers.
Williamson said the release of the escrowed shares may be creating an overhang in the market, where sellers are trying to get rid of more than the market wants to buy.
On the NZ Alternative Index, GeoOp was unchanged at 62 cents, paring an 11 percent intraday drop to a record low of 56 cents, after its chief executive Leanne Graham has resigned 11 months after the small business app developer will take a new role with the company leading its push into the US.