MARKET WRAP: NZ shares up, Tilt boosted by Mercury share purchase

New Zealand shares gained slightly today, led by strong gains for Tilt Renewables.

The S&P NZX 50 index was up 36 points to 8713, on turnover of $242 million.

Harbour Asset Management analyst Shane Solly says Mercury’s share purchase was a surprise for many.

The power generator and retailer 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 closed below that today, gaining 8.11% to $2.00.

Mercury’s share price dropped slightly today due to investors' disappointment that the Tilt investment removes the potential for a special dividend, Mr Solly says.

Mercury Energy shares ended last week at $3.18, valuing the company at nearly $4.4b. Today, however, its shares dipped 0.79% to $3.15.

A2 Milk was up again, this time on the back of positive infant formula sales.

The company is widely expected to join the New Zealand MSCI index, which Mr Solly says will see “good global investment” in the company.

A2 shares jumped 2.62% to $13.30.

Vista signed an agreement with Japan’s largest cinema chain, Aeon Entertainment, on Friday.

Its shares gained 2.64% to $3.50 as a result.

Ryman Healthcare also led the market higher, gaining 0.44% to $11.40 ahead of its annual results announcement next Friday.

Trademe announced its operating figures were up 5% year-on-year but that wasn’t enough to keep it above water today. Its shares dropped 0.63% to $4.75.

Fletcher Building shares dropped slightly, reflecting a “softening” in expectations and residential activity, Mr Solly says.

The Real Estate Institute’s house price index shows house prices nationally rose 3.8% in the year ended April and by 6.6%, excluding Auckland, where prices rose just 0.9% in the year.

Fletcher shares fell 0.31% to $6.37.

Sharemarket watchers are keenly awaiting the announcement early tomorrow of the weightings of the stocks within key MSCI indices.

If A2 Milk joins the index, either Fletcher Building or Mercury Energy is likely to be removed, Mr Solly says. There’s also a chance Xero will join the Australian MSCI index.

The main local focus in the week ahead will be the government budget on Thursday but the global focus will be on business activity in China and US reports on retail sales, housing starts and industrial production.