Market close: NZ shares drop, led by Telecom, Sky TV

BUSINESSDESK: New Zealand shares fell, led by Telecom and Sky Network Television, which were punished for disappointing earnings after being bid up ahead of their results.

Warehouse Group, the biggest retailer on the bourse, gained after rival retailers reported sturdier results.

The NZX 50 Index dropped 40.75 points, or 1.1%, to 3622.59. Within the index, 21 shares fell, 17 rose gained and 12 were unchanged. Turnover was $165 million, about a third higher than the usual average benchmark of about $100 million.

Telecom tumbled 8.5% to a month-low of $2.52 after reporting earnings and sales that lagged behind analyst expectations. The stock has soared 34% this year. Pro-forma pre-tax earnings for 2013 would be flat or have a single-digit percentage decline, it says.

Fund manager Harbour Asset Management said Telecom has been priced on its current yield, which is 10.7%, which made it "relatively expensive".

"The market reacted very negatively to commentary regarding the competitive telco market place, pricing pressures and the likelihood that future profits may be lower than those of today."

Sky TV, the nation’s dominant pay-TV company, dropped 4.8% to $5. Annual profit rose to $123.7 million, from 120 million a year earlier. Sales rose to $843 million from $797 million.

Reported profit of $122.8 million on sales of $852.3 million was forecast, based on the consensus of analysts.

“Both of these share prices were valued up on the hope of good results,” says Grant Williamson, a director at Hamilton Hindin Greene.

“Telecom did miss most estimates and its forward guidance is not flash. Investors are taking the growth premium out of the share price and seeing it as a yield play.”

Warehouse rose 4.7% to $2.89. Mr Williamson says the stock is being re-rated “based very much on what some of the other retailers in the market have come out with”.

Earlier this month, Briscoe Group, the homeware and sporting goods retailer, posted a 26% gain in first-half profit, saying it has enjoyed "strong sales and margin performance".

Briscoe was unchanged at $1.97 today and has climbed 46% this year.

Kathmandu, the outdoor equipment retailer, gained 2.3% to $1.77. Fletcher Building, the nation’s biggest construction firm, rose 1.6% to $6.47.

Vital Healthcare Property Trust rose 0.4% to $1.255 after reporting it boosted annual profit 22% to $9 million, on acquisitions and completed development projects, the manager says.

Net distributable income rose 28% to $23.3 million for the year ended June 30, or 8 cents per unit, down from 8.2 cents the previous year. The property trust’s manager is forecasting net distributable income in 2013 will be between 7.7 cents per unit and 7.9 cents.

Guinness Peat Group, the investment company winding down its portfolio to return fund to shareholders, fell about 1% to 52 cents. A private investment fund linked to billionaire investor George Soros has appeared on the register.

Quantum Strategic Partners, a fund managed by Soros Fund Management, has raised its stake in GPG to 7.9%, or 128.2 million shares, GPG said in a statement to the London Stock Exchange.

Contact Energy, the biggest power company on the NZX 50, fell 2.2% to $4.81 after shedding its 12 cents-a-share final dividend.

Rakon, which makes crystal oscillators used in smart phones and navigation systems, tumbled about 13% to 41 cents.

The company says 2013 earnings will be an improvement on last year’s results, when a high kiwi dollar compounded the impact of lukewarm demand from the telecommunications sector.

Earnings before interest, tax, depreciation and amortisation are expected to be $14 million to $16 million in the year ending March 31, 2013, managing director Brent Robinson says. That would compare with $13.1 million last year, which was about half the 2011 result.

Northland Port Corp, which owns a half stake in the region’s Marsden Pt port operator Northport, climbed 5.3% to $2 after posting a 61% gain in full-year profit on a surge in log exports and a one-time revaluation gain on its property portfolio.

Net profit rose to $7.6 million, or 18.47 cents a share, in the 12 months ended June 30, from $4.7 million, or 11.45 cents, a year earlier, the Whangarei-based company says.

Sales rose to $8.2 million from $6.69 million. Most of the profit came from its 50% share of the surplus from Northport and a $1.5 million revaluation gain on its property assets surrounding the port.