MARKET CLOSE: Shares drop, led by Orion Health, Summerset while Tower gains

New Zealand shares declined as Orion Health Group extended its slide following its first-half results, while Tower rose.

The S&P/NZX 50 Index dropped 20.59 points, or 0.3%, to 6,889.77. Within the index, 23 stocks fell, 21 gained and seven were unchanged. Turnover was $165.4 million.

Orion Health Group led the index lower, down 5.7% to $1.65. The stock plummeted 19% when it reported its first-half results last week, and is down 34% since then.

The health software developer narrowed its first-half loss to $18 million and said it would make a profit in 2018, while sales rose to $104.2 million from $101.7 million.

"It's a continuation from the slide that started with its results at the end of November," said Robert Garden, investment adviser at Craigs Investment Partners.

"Obviously the concern around it is the cash balance its got and the amount of cash it is burning through at the moment. It could raise some capital if revenues don't come through to what its forecasting in the near term, it could get a bit squeezed."

Mr Garden said markets may be "in a bit of a holding pattern" now that the excitement of the US election has died down, and may remain there "until Mr Trump gets his feet under the desk and we'll see how we move from there. The market's not prepared to take as much risk on with some clouds over the next few months."

Summerset Group dropped 4% to $4.60, Scales Corp fell 2.6% to $3.40 and Trustpower declined 1.8% to $4.36.

Units in Fonterra Shareholders Fund dipped 0.5% to $5.93. Fonterra is expected to lift its farmgate milk price payout to farmers after a further gain in global dairy auction prices overnight.

Fonterra hiked its milk price forecast last month to $6 per kilogram of milk solids for the season, compared with $3.90/kgMS last season, and analysts in a survey expect it will raise the price further as dairy prices continue to lift on the GlobalDairyTrade auction platform. Analysts are now expecting the payout to be between $6 and $6.50/kgMS.

Tower was the best performer, up 4.1% to 77c. The stock has rise 4.8% since November 29, when the insurer said it will separate its liabilities and receivables from the Canterbury earthquakes into a separate “bad bank” structure and "aggressively pursue" recoveries from the EQC and reinsurer Peak Re that amount to about $101 million. It's down 61.1% this year, dragged lower by investor concerns over the long tail of earthquake costs.

Sky Network Television gained 2% to $4.67, while Vital Healthcare Property Trust rose 1.3% to $2.015.

On the Unlisted market, Zespri Group was unchanged at $3.20. The kiwifruit exporter plans to start construction next year on a $42.8 million head office to create a hub for the expanding kiwifruit industry.

The three-storey complex designed by architects Warren & Mahoney will be built on Zespri's site in Mount Maunganui, with work scheduled to start in the first quarter of next year and slated for completion by the end of 2018, the company said in a statement. Its current 1970s brick building will eventually be demolished and replaced with parkland.

(BusinessDesk)