MARKET CLOSE: NZ shares fall led by Air NZ, Xero while SkyTV rally continues

New Zealand shares fell, not maintaining yesterday's gains as Air New Zealand, Xero and Skellerup dropped though Sky Network Television gained.

The S&P/NZX 50 Index dropped 18.5 points, or 0.3 percent, to 6,824.49. Within the index, 28 stocks fell, 17 rose and four were unchanged. Turnover was $177.3 million

Air New Zealand fell furthest, down 5.4 percent to $2.47. It gained 4 percent yesterday after releasing a presentation for an investor briefing indicating 2017 earnings won't match the $800 million it has forecast for 2016, as it faces increased competition and gets less benefit from foreign exchange hedging.

Air New Zealand said it was "well-positioned to compete and win in a dynamic marketplace" and had "significant opportunity" to generate sustainable shareholder returns. The company is halfway through a programme to refurbish its fleet, reducing both the average age and range of models it puts in the air.

"The guidance they gave yesterday was largely as per their existing forecast, but the thing about Air New Zealand is there's so much operational and financial leverage in an airline that very small changes can lead to very big differences in earnings," said Matt Goodson, managing director at Salt Funds Management. "It's one which does trade in a volatile fashion."

Xero dipped 3.5 percent to $15.49, a one-month low.

"The plethora of minor tinkering with various tax rates in Australia yesterday is actually very positive for MYOB and Xero, because it makes people's old installed software out of date and perhaps acts as a spur for them to upgrade to the more expensive monthly payment model," Goodson said.

Skellerup Holdings fell 2.3 percent to $1.27 and Port of Tauranga dropped 1.9 percent to $18.55.

Orion Health Group was the biggest gainer, up 2.9 percent to $4.29, and Metlifecare rose 2.1 percent to $5.32.

Sky Network Television advanced 1.8 percent to $5.55, a nine-month high. The stock fell as low as $4.12 earlier in the year amidst concerns about competitors such as Netflix and Lightbox, but has recovered steadily since mid-April and is up 18.7 percent for the year.

"It has continued a very strong run, fundamentally nothing's changed since the share price was down," Goodson said. "Those worries remain but there's a lot of anticipation being built in ahead of their capital review. Whether they pay a special dividend or not isn't value-adding in any sense but some investors have really driven that up very hard."

Fletcher Building rose 1.2 percent to $8.36.

Outside the main index, Tegel Group gained 3.1 percent to $1.68. It closed at $1.63 on its debut day yesterday, a 5.2 percent gain on its initial public offering price of $1.55. Some 29 million shares in the poultry group changed hands.

"It's had a bit of a bounce today - it closed on its lows yesterday but it's a good solid listing," Goodson said. "It probably wasn't an easy decision to price it at the bottom of the range but clearly they made the right call, because if it had gone a step up it would have struggled."

IkeGPS rose 29 percent to 85 cents after the company said it expects to reach cash breakeven in 2017 on improved sales from its new cloud-based product and was investigating a NASDAQ listing.

"It's rebounding, it's still below that IPO price," said Peter McIntyre, investment adviser at Craigs Investment Partners. "There will be a number of investors thinking 'at long last'."

(BusinessDesk)