MARKET CLOSE: Shares rise as Contact gains on $100m buyback; Trade Me advances after AGM

New Zealand shares rose as Contact Energy $100 million capital return through a share buyback stoked investor demand for the electricity generator and retailer. Trade Me Group, Auckland International Airport and Air New Zealand gained.

The S&P/NZX 50 Index advanced 48.57 points, or 0.9 precent, to 5775.7. Within the index, 31 stocks rose, 13 fell and six were unchanged. Turnover was $162.6 million.

Contact, whose former cornerstone investor Origin Energy sold out in August, climbed 3.5 percent to $5.07 after announcing plans to buy back 25 million shares, or about 3.4 percent of its stock, through the rest of the financial year as a lack of large capital projects frees up cash for investors. The power company signalled it would look at a capital return earlier this year after ditching plans to invest in geothermal projects overseas.

"The $100 million buyback is on the lack of really anything else to do with the money - they're not looking to do any near-term or large capital investments at the moment so at this point in time they think the best thing to do is return some funds back to shareholders," said Robert Garden, investment adviser at Craigs Investment Partners. "It's obviously a bit of a change from what we've seen over the last 12 months, there had been mixed guidance and expectations around Contact in terms of the strength of the balance sheet and the ability to be able to return some funds to shareholders."

Rival utility companies advanced. MightyRiverPower rose 2 percent to $2.54. Meridian Energy gained 1.9 percent to $2.16. Genesis Energy increased 0.6 percent to $1.805.

Trade Me, New Zealand's largest online auction site, led the benchmark index higher, up 4.1 percent to $3.85. Yesterday at its annual meeting it affirmed the guidance for sales and earnings growth to be broadly similar in 2016. Sales rose 11 percent to about $200 million in the year ended June 30, while earnings before interest, tax, depreciation and amortisation increased 4.4 percent to $134.4 million.

Auckland International Airport, the nation's busiest gateway, gained 1.8 percent to $5. Air New Zealand, the national carrier, climbed 1.8 percent to $2.825.

Ebos Group, the animal and healthcare products firm, climbed 1.5 percent to a fresh record close of $13.50.

A2 Milk Company, the milk marketing firm, was the worst performer on the benchmark index, down 2.6 percent to 76 cents.

Units in Fonterra Shareholders' Fund, which give holders access to Fonterra Cooperative Group's dividend stream, declined 1.5 percent to $5.40. Rating agency Standard & Poor's yesterday cut the dairy exporter's long-term credit rating cut one notch because the company's peak capital expenditure and rising debt levels coincided with a high level of volatility in the global dairy market, weakening its financial risk profile.

Outside the benchmark index, ikeGPS was unchanged at 65 cents after saying first half sales more than doubled to $4.5 million, and affirmed its forecast for annual revenue of $14.3 million.

(BusinessDesk)