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MARKET CLOSE: Shares rise on Steel & Tube full year earnings; Xero drops

New Zealand shares rose, led by Steel & Tube Holdings after it boosted annual profit 15 percent. Xero plunged to a 10-month low as investors weighed its valuation against its growth, while ERoad debuted at a premium on the NZX.

The NZX 50 Index rose 15.67 points, or 0.3 percent, to 5078.081. Within the index, 28 stocks rose, 10 fell and 12 were unchanged. Turnover was $77.4 million.

Local earning season is well underway, with nine benchmark index consitutents reporting earnings this week. Investors have been looking to justify the 7.2 percent gain the NZX 50 has made this year, and a reason to keep their investment in equities as the New Zealand economy picks up pace and the Reserve Bank raises interest rates, making other investments potentially more attractive.

"It's early stages but we're probably seeing confirmation that the companies that have reported so far have reported within cooee or have maintained their dividend, which is very important for investors in the current climate," said Peter McIntyre, an investment adviser at Craigs Investment Partners. "We're yet to see the real barometers of the economy, the likes of Freightways and Mainfreight, turn up and give their evidence of what's happening but at this early stage it seems quite promising."

Steel & Tube, which manufacturers steel building products, advanced 4.8 percent to $3.04 after it lifted annual profit 15 percent to $17.9 million. Sales were boosted from its $28.1 million Tata Steel (Australasia) acquisition in April, the local division of the Indian manufacturer now renamed S&T Stainless, increasing its market share of stainless, engineering steel and floor decking products in New Zealand.

"Steel & Tube really confirmed today that their business is still operating well and their recent acquisition of the stainless operation has proved to be beneficial," McIntyre said."Based on where their earnings are they definitely deserve to be trading above $3 and that's what we've seen."

Nuplex Industries, which twice lowered its earnings guidance in the past year, rose 3.4 percent to $3.06, after it posted annual profit growth of 18 percent to $52.4 million yesterday, exceeding market expectations. The chemicals manufacturer fattened its margin on coating resins in Asia and Europe.

Xero was the worst performer on the bourse after it dropped 6.2 percent to a 10-month low of $20.17 and has shed some 44 percent over the past nine months after surging more than 300 percent last year.

"Several analysts have captured the essence of what's been going on over a period of time here with technology stocks broadly globally having peaked in March this year," Andrew Bascand, managing director for Harbour Asset Management said. "Then investors just started to asking questions regarding the business models of a number of tech stocks and how much cash they've got on their balance sheets and what their timeline is to becoming profitable and therefore the valuation of these stocks."

Guinness Peat Group dropped 4.8 percent to a 10-month low of 59 cents and has declined some 16 percent since announcing on Wednesday it is still grappling with its UK pension liability, while its sole investment, the Coats threadmaker unit, reported a near trebling of first-half profit.

SkyCity Entertainment Group rose 1.9 percent to $3.79. Fletcher Building advanced 0.6 percent to $9.03. Spark New Zealand, formerly known as Telecom Corp, climbed 1.1 percent to $2.88.

Outside the benchmark index, ERoad jumped 13 percent to $3.40 in its NZX debut from its offer price $3, as a cautious market looked for tech-exposure from companies with solid track records.

The logistics and fleet management business is the ninth company to list on the bourse this year, and follows cinema software and analytics firm Vista International Group's debut on Monday. Vista was unchanged at $2.60, some 11 percent above its $2.35 listing price. The NZX has experienced a flurry of tech-based listings, which has been a mixed bag for investors, and ERoad's gain tips the balance in favour of recently listed stocks above their initial public offer price.

"Although it might be considered in the tech side of things, it's a business that fundamentally is relatively easy to understand as a lay person," said James Smalley, director at Hamilton Hindin Greene. "The market is taking a bit of a cautious approach. Both these new listings, the Vista and ERoad, already established pretty good track records before they then came to the market - they're still at the growth stage, but they have pretty solid market share and existing, successful business models."

Turners Group NZ, which this month changed its name from Turners Auctions, rose 1.6 percent to $3.10, after it lifted first-half profit 5.9 percent to $2.27 million as a strong New Zealand dollar lowered the cost of imported cars, helping attract customers with cheaper prices. The company said it anticipates good trading conditions for the rest of the year.

Michael Hill International fell 2.3 percent to $1.27, after the jewelery chain that bears the name of its founder posted a 22 percent drop in annual profit to A$25 million as its profit margin declined and it paid a settlement to the Australian Tax Office.

(BusinessDesk)