MARKET CLOSE: NZ shares rise, Kathmandu gains on guidance, A2 Milk advances

New Zealand shares gained after Kathmandu Holdings affirmed earnings would rise in line with its guidance. A2 Milk also advanced.

The S&P/NZX 50 index rose 20.69 points, or 0.3%, to 7,298.09. Within the index, 24 stocks rose, 21 fell and six were unchanged. Turnover was $155.8 million.

Kathmandu Holdings led the index, up 5.8% to $1.83, a 19n-month high. The retailer said annual profit was between $33 million and $34 million, a gain of as much as 67%, as better-run promotions widened its margins. The profit is within Kathmandu's upgraded June guidance of between $32 million and $35 million, which highlighted the retailer's better margins.

Kathmandu's annual profit halved last year as a build-up of inventory forced it into aggressive discounting at lower margins to rid itself of excess stock. Under the management of Xavier Simonet, who was appointed to the role in January 2015, the company is taking a more cautious approach to sales and keeping expenses under control.

A2 Milk gained 2% to $2.02. Stuart Williams, head of equities at Nikko Asset Management, which holds A2 Milk stock, said the milk marketer "still has the potential to have some pretty decent earnings numbers come out."

"It's not as mature as some of the other things we're looking at, and assuming management is successful at navigating some of the particular issues like China and labelling over the next few years, they still have very good growth prospects," Mr Williams said. "People will be interested to hear from the company about the next phase given how much regulation talk there is – it's got quite good potential growth still coming."

Fletcher Building rose 1.8% to $9.59. The stock has gained 28% this year, with construction expectations stoking investor appetite.

"Regardless of what you think about things like the Auckland Unitary Plan, there's reasonable momentum behind it and it is liquid, so if you like that story you can get stock in that name," Mr Williams said.

Vector gained 1.7% to $3.50 and Precinct Properties New Zealand rose 1.2% to $1.27.

Ebos Group advanced 0.4% to $16.56. It plans to beef up its Australian retail pharmacy exposure by selling its 270-store Chemmart business to Terry White Group and taking a 50% stake in the enlarged pharmacy chain.

The company transformed itself in 2013 with the purchase of Australian pharmaceutical wholesaler and distributor Symbion, and has since bought New Zealand vitamin and herbal tea maker Red Seal, pharmaceuticals firm Zest, Australian pharmacy retailer Good Price Pharmacy Warehouse and the BlackHawk Premium Pet Care pet food business.

Heartland Bank was the worst performer, down 1.5% to $1.35. Ryman Healthcare dropped 1.4% to $9.22 and Air New Zealand fell 1.3% to $2.275.

Outside the NZX, Suncorp's ASX-listed shares traded at A$13.34 at 5:30 local time, having gained 8.8% so far this year.

Suncorp Group's New Zealand general insurance units Vero and AA Insurance lifted annual earnings as they benefited from growth in more profitable motor business, although the local group is still focused on stripping out costs. The NZ insurance business's profit rose 12% to $178 million on a 3.2% increase in gross written premium to $1.34 billion in the 12 months ended June 30, Suncorp said in a statement to the ASX.

(BusinessDesk)