MARKET WRAP: NZ shares fall as market digests A2 update

Greg Smith says A2 Milk’s fall was the talk of the day.

Fat Prophets head of research Greg Smith says A2's fall must be taken in context.

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A volatile price for A2 Milk saw New Zealand shares fall today, with the S&P NZX 50 index down 153 points (1.76%) to 8555, on turnover of $254 million.

Fat Prophets head of research Greg Smith says A2's tumble was the talk of the day. 

Its shares fell 13.74% to $11.30 after it provided an update on its trading performance for the nine months to March 31, 2018.

The fall, he says, must be taken in context.

“If you look at the rampant run the shares have had, a lot of the growth has been extrapolated. No share is a one-way upward bet.”

Today A2 said sales rose to $660m and it expects annual revenue will be $900-920m.

The company, which also reported a 70% increase in sales to $434.7m for the six months ended December, says this performance reflects continued sales growth in both nutritional products and liquid milk.

But, clearly, the market took it as bad news, with the shares plunging more than 21% to as low as $10.25 earlier today.

Yesterday A2 was added to the MSCI index which means large institutional investors which track the index must hold a certain amount of its shares. 

Synlait down, Sky up
Milk supplier Synlait was a casualty of A2’s fall, its shares dropped 4.19% to $10.30.

Sky Network Television had something to smile about, but has had a “horrid few years”, Mr Smith says. Its share price rose 4.52% to $2.31.

He thinks it would take a brave person to pick the bottom in Sky’s shares.

Mercury shares gained 1.13% to $3.15 after last week’s announcement it paid $144 million cash for a 20% stake in wind power company Tilt Renewables, with an option to buy a further 6.8% in the next six months.

The shares were acquired off-market from Tauranga Energy Consumer Trust at $2.30 per share, a 24% premium to Friday’s closing price.

Tilt shares also gained 0.49% to $2.04.

Mr Smith says if there are no major curveballs in the budget released tomorrow it will be business as usual for the stock exchange.

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In relation to Sky TV there is an old market saying that goes something like - ‘ you attempt to pick bottoms you may get smelly fingers’

Wonder if the billion plus of goodwill on their balance sheet is still good?

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