MARKET CLOSE: NZ shares rise

New Zealand shares rose, led by Air New Zealand and Spark New Zealand while Sky Network Television fell to its lowest level in almost eight years after its merger with Vodafone was disallowed by the Commerce Commission.

The S&P/NZX50 Index gained 27.04 points, or 0.4%, to 7,089.52. Within the index, 28 stocks rose, 14 fell and eight were unchanged. Turnover was $186.3 million.

Sky TV dropped 13% to $3.78, making it the biggest decliner on the day and reaching the lowest level since June 2009. The shares tumbled when trading opened on the New Zealand stock exchange this morning, with investors wiping $293 million off the value of the pay-TV provider after the regulator rejected its proposed merger with the New Zealand operations of the global telecommunications giant, Vodafone.

"The market was erring on the side of the ComCom approving the deal, as can be seen by the sharp price reaction," said Matt Goodson, managing director at Salt Funds Management.

"It's perhaps a bit surprising the ComCom hasn't considered new entrants, which are obviously rampant in the telco media space - it'll be very interesting down the road when it comes to bidding for sports rights," he said. "Thanks to Netflix and a lesser degree Lightbox, they are losing subscribers so it places them in a reasonably difficult position. From here, the question will be what strategies Sky TV undertakes to try to compete - do they go down some other bundled path, or do they stick purely to television?"

Spark NZ, which opposed the merger, gained 1.2% to $3.53.

Air New Zealand was the best performer, up 4.7% to $2.25. It posted a 24% fall in first-half pretax profit in the face of increasing competition both at home and abroad but fared better than analysts expected. Pretax earnings fell to $349 million in the six months ended Dec. 31 from $457 million in the same period a year earlier, with net profit in the first half down 24% to $256 million. Operating revenue was $2.6 billion versus $2.7 billion in the prior year.

New Zealand's national carrier was forecast to post a 45% decline in first-half earnings to $186.5 million on a 2.6% decline in revenue to $2.63 billion, according to Forsyth Barr analyst Andy Bowley.

"Stronger cost controls than expected appears to be the key driver there, the bottom-line profit is always a small residual left over after vast revenues and costs, and huge operational and financial leverage, but it appears to be a little better than expected," Goodson said.

Summerset Group gained 3.1% to $5.06 and Z Energy dropped 2.3% to $7.16.

A2 Milk Co bounced 1.7% to $2.37. It dropped 4.5% yesterday after the milk marketer's chief executive and chair sold down their stakes.

"It's extremely volatile and hasn't taken kindly to the chairman and CEO selling stock. The problem is visibility – they've executed extremely well compared to Australian peers, but it's hard from the outside looking in to have visibility as to whether that's continuing or not, so it takes on a bit more significance even if it may be perfectly reasonable to take a bit off the table," Goodson said.

Fletcher Building rose 1.2% to $9.80. The second biggest stock by market cap led the index lower yesterday, down 5.2%, after it posted a 2% gain in first-half profit to $176 million that included unexpectedly weak earnings from its construction division, especially given its $2.7 billion backlog of work. The shares had soared 54% in the past 12 months on optimism it would benefit from a boom in Auckland residential construction.

"It's bouncing back after yesterday's sharp fall. The key disappointment was the one-off loss in the contracting business, but the stock had obviously had a tremendous run through 2016," Goodson said. "It really did have to deliver given that. I think the market is reassessing, considering probably ten times the value of that contract was wiped off the market cap yesterday. It has been a very whippy results season in terms of price reaction."

Warehouse Group rose 1.1% to $2.66. It expects to shed a net 130 jobs, or about 1.1% of its workforce, in an effort to save up to $20 million a year after slimming down the structure of its retail model to try to strip out duplication.

Vital Healthcare Property Trust gained 0.7% to $2.075. Te Auckland-based hospital and healthcare property developer and investor said its first-half net distributable income rose 87% to $35.5 million as acquisitions and developments helped drive rental income growth. Net profit fell to $45.5 million from about $59 million in the previous year, when it had a $45 million revaluation gain compared with $13 million in the latest half.

Port of Tauranga advanced 0.2% to $4.43. It posted an 8.5% gain in first-half profit to $41.9 million and raised its full-year guidance, saying both exports and import cargo volumes rose, including a rebound in the outbound log trade. Revenue climbed 2.8% to $125 million.

Outside the benchmark index, SLI Systems plunged 24% to 34c. The Christchurch-based e-commerce software seller more than doubled its first-half loss to $1.28 million as a strong New Zealand dollar and the loss of three major customers at the end of the 2016 financial year continued to weigh on earnings. Revenue declined 12% to $15.7 million. Its preferred measure of growth, annualised recurring revenue, dropped 13% to $31.1 million.

Intueri Education Group was unchanged at 1.6 cents. It halved its full-year loss to $23.3 after taking a smaller charge on impairments, offsetting a 14% decline in revenue. Impairments were $15 million, down from $59.8 million in the previous year. Revenue fell to $78.9 million from $91.6 million.

Gentrack Group rose 3.3% to $3.43. It expects first-half sales to rise about a fifth as a number of projects came on stream in the period, making up for any headwinds from a strong New Zealand dollar.

(BusinessDesk)