MARKET CLOSE: Shares rise to record as investors hunt yield, led by Pacific Edge
New Zealand shares rose to a record as Pacific Edge won a contract with US healthcare provider Kaiser Permanente and Genesis Energy posted earnings that beat its prospectus adding to the appeal of a market that's luring investors in search of yield.
The NZX 50 Index rose 48.070 points, or 0.9 percent, to a record 5243.7, following on from Wall Street's S&P 500 Index closing above the 2,000 mark for the first time. Within the index, 29 stocks rose, 12 fell and nine were unchanged. Turnover was $98 million.
Pacific Edge led the benchmark index higher up 8.1 percent to a near two-month high of 80 cents after the Dunedin-based biotech company said Kaiser Permanete, which has over 9 million healthcare users in the US, would trial its non-invasive bladder cancer detecting test, Cxbladder. The company is forgoing profit as it chases $100 million in annual revenue from the US market in the next five years.
"Kaiser is really regarded as the 'gold standard' healthcare network in the US," said Matthew Goodson, managing director at Salt Funds Management. "It is a real endorsement of Pacific Edge."
Genesis Energy rose 3.1 percent to $1.815 after New Zealand's largest energy retailer posted a 53 percent drop in full-year profit to $49.2 million, beating its prospectus forecast. The decline in earnings reflected lower wholesale electricity prices, reduced electricity generation and lower retail electricity and gas sales volumes, but the company said it was on track to meet its targets for 2015 even in the face of heightened retail competition.
"It beat its prospectus numbers, although that was really on Kupe gasfield rather than the electricity business. Their guidance looks a little light, relative to market expectations but I think there is a sense that's a fairly conservative outlook," Goodson said. "The stock had been sold down aggressively, certainly relative to the other listed electricity names, ahead of its result so I think people were expecting worse than what was actually turned in."
Stocks with strong dividend yields supported the gain on the benchmark index as investor sought returns on their investments in a global market where interest rates are at historic lows. Spark New Zealand, whose shares have a dividend yield of 6.1 percent, climbed 3.4 percent to a six-year high of $3.04. Goodman Property Trust, which has a dividend yield of 5.9 percent, rose 2.3 percent to $1.13. Argosy Property, which offers a dividend yield of 5.9 percent, advanced 0.5 percent to $1.015. Vital Healthcare Property Trust, whose units offer a 5.6 dividend yield, increased 4.2 percent to a record $1.48.
"In a world of low interest rates it is people chasing yield that's what's driving Spark, and indeed what's driving the whole listed property sector," Goodson said.
Air New Zealand advanced 1.2 percent to $2.175 after the government-controlled national carrier boosted annual profit 45 percent to $262 million, on increased passenger numbers and capacity, and said it will pay out 20 cents per share this year, half of which came in an unexpected special dividend of 10 cents per share.
Ebos Group climbed 1.5 percent to $9.59 after the healthcare and animal care manufacturer trebled annual profit to $92.1 million on a full 12-month contribution from the Symbion pharmaceutical wholesaler and distributor in Australia.
Units in Fonterra Shareholders' Fund rose 0.2 percent to $6.13. Fonterra Cooperative Group announced plans to enter a joint venture with China's Beingmate that will own the dairy giant's Darnum plant in Australia and produce infant formula products for the Chinese market, for a total investment of $615 million. In a separate statement today, it said invest $555 million to build a 4.4 million litres a day drier at Lichfield in South Waikato while adding three new plants at its Edendale site in Southland boosting its production capacity. The units give holders access to the coop's dividend stream.
Outside the benchmark index, Smiths City Group climbed 8 percent to 53 cents, after a report by Edison Investment Research said the furnishing and appliance store's plans to expand to the North Island hold promise, and the stock is undervalued relative to its peers.
TeamTalk fell 4.1 percent to $1.63 after the listed telecommunications company posted a full-year loss of $8.3 million, from a year earlier profit of $3.6 million, after writing down goodwill on its Farmside rural unit, a charge that required the cooperation of its lender to avoid a covenant breach.
On the NZ Alternative Index, Snakk Media jumped 21 percent to 9.3 cents after the company, which matches advertisers with mobile users, said first quarter sales rose 67 percent to $2 million and it has hired an Australian consultancy firm as it mulls an ASX listing.