MARKET CLOSE: Shares fall ahead of earnings season; Air NZ falls to 3-month low

 New Zealand stocks fell, snapping six days of gains, as investors mulled stock valuations ahead of earnings season. National carrier Air New Zealand dropped to a three-month low, pacing the decline.

The NZX 50 Index fell 7.126 points, or 0.1 percent, to 5187.142, from a six-week high close on Friday. Within the index 19 stocks fell, 21 rose and 10 were unchanged. Turnover was $82.3 million.

The benchmark index reached an all-time record in the first-half of 2014 and has advanced 9.5 percent this year, leading some investors to question whether the market is fully priced and to seek validation for the high stock prices as earnings season kicks into full-swing next month. Air New Zealand dropped 2.6 percent to $1.87, its lowest since March. The airline is due to report full-year earnings next month, and Forsyth Barr analysts expect the company to lift profit 29 percent.

"All eyes are very closely focused on the earnings season, and particularly the outlook," said Rickey Ward, New Zealand equity manager at JBWere New Zealand Equities. "People are saying you're trading on a multiple which we're not used to and, secondly we need to earnings to come through to justify that multiple we're not convinced the earnings will justify that multiple."

Telecom fell 0.3 percent to $2.94, from the highest level its been since it demerged with network operator Chorus in November 2011. New Zealand's largest telecommunications provider has gained some 28 percent this year making it the second best performer on the benchmark Index. As one of the larger companies on the bourse, Telecom typically attracts interest from foreign investors seeking exposure to New Zealand's markets. Fletcher Building, the country's biggest listed company, fell 0.7 percent to $9.19. Ryman Healthcare slipped 0.3 percent to $8.04.

JBWere's Ward said an improving world economy was seeing some foreign investors repatriating funds back to their economies while local interest rate hikes had domestic investors eyeing alternative asset classes with a potentially better yield and some were raising funds ahead of upcoming initial public offers.

Pacific Edge led the benchmark index lower, dropping 5.4 percent to 70 cents.

Units in Fonterra Shareholders' Fund were unchanged at $6.00. Tomorrow Fonterra Cooperative Group's board meets and is largely expected to cut its forecast 2015 milk price payout after a 38 percent drop in dairy prices this year. Economists at ASB expect Fonterra to revise down its milk price payout for the 2014/15 season to about $6.20 per kilogram of milk solids, from its initial estimate of $7/kgMS. The fund's units give holders access to the dairy exporter's dividend stream.

Outside the benchmark index, Abano Healthcare, the medical investor which earlier this year fended off a hostile takeover from its biggest shareholder, rose 1.5 percent to $6.15 after it posted a 75 percent jump in full-year profit to $6.1 million in the year ended May 31, beating guidance and allowing it to maintain dividend payments for a sixth straight year. Sales climbed 2 percent to $274 million.

Dorchester Pacific rose 6.8 percent to 23.5 cents after it said it plans to offer $3 a share in cash, shares and notes for Turners Auctions, valuing the auction company at $82 million, after winning support from chairman and major shareholder Michael Dossor. Turners climbed 11 percent to $3.05, above the offer price.

Acurity Health Group soared 25 percent to $6.58, after the three biggest shareholders launched a cash takeover bid, offering $6.50 per share, for the 29 percent they don't own, valuing the private hospital operator at $112.2 million, saying the firm faces a big struggle lifting its flagship Wellington hospital up to earthquake code.

"Balance sheets are pretty healthy, so if you struggle to get organic growth you tend to look for acquisitive growth, and I think it is nothing more complicated than that." Ward said of the two takeovers.

SLI Systems, the search engine software developer, rose 6.9 percent to $1.39 after it said full-year revenue missed its prospectus forecast, using its preferred measure, although it will report a smaller loss because of delays in building a sales team. Annualised recurring revenue rose about 29 percent to $25 million in the 12 months ended June 30, compared to a forecast in last year's offer documents of $25.9 million. The company is due to report its audited earnings on Aug. 26.

(BusinessDesk)