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MARKET CLOSE: shares rise as Telecom sells AAPT, power companies bounce

Wed, 11 Jul 2018

New Zealand shares rose after Telecom announced the sale of its AAPT unit in Australia at a higher price than expected and Contact Energy led gains among power companies beaten up by fears of a Labour-Greens government next year.

The NZX 50 Index rose 4.783 points, or 0.1 percent, to 4718.306. Within the index, 20 stocks rose, 22 fell and eight were unchanged. Turnover was $115 million.

Telecom gained about 2 percent to $2.33 after saying it had sold its AAPT unit to ASX-listed TPG Telecom for A$450 million, beating price expectations that have swirled since it flagged the business was for sale in October. AAPT has been a black hole for much of its life under Telecom, which acquired it more than a decade ago for some $2 billion and took charges against the company of about as much.

"It was a great deal for Telecom," said Mark Warminger, portfolio manager at Milford Asset Management. "The AAPT price was a lot better than expected - we were looking at around $350 million."

The sale is relatively small given the overall size of Telecom though it underlines the change of strategy under chief executive Simon Moutter, he said. TPG Telecom jumped 12 percent to A$4.60 today on the ASX as the company said AAPT's earnings have surged so far in financial 2014, on a run rate basis.

Among other companies recovering from a sharp selloff, Diligent Board member Services gained 6.5 percent to $3.60. Xero rose 5.8 percent to $32.

Contact Energy, which touched a decade-low last week, rose 3.1 percent to $5.05 today. MightyRiverPower, which has languished from an IPO price of $2.50, gained 1.8 percent to $2.025. Meridian Energy was unchanged at 92 cents, TrustPower didn't budge at $6.50, and Vector was unchanged at $2.60.

"The power companies have really been driven down so far on a risk adjusted basis they're starting to price in 100 percent of the value loss of a Labour-Greens government," Warminger said. "And that's not a done deal."

Freightways was unchanged at $4.50 after saying it had bought two document shredding firms, one on either side of the Tasman, for an aggregate $13 million.

Infratil was unchanged at $2.24 after Utilico Investments, a UK investor managed by Infratil director Duncan Saville's ICM, said it had reduced its stake to 11.8 percent from 13.3 percent after it sold 6.6 million shares in last week's buyback at $2.38 apiece and sold 5 million shares in March at $2.4015 a share.

Fonterra Shareholders' Fund fell about 3 percent to $6.23, amid talk among traders that the world's biggest dairy exporter will announce a hike to its forecast milk payout to farmers after a board meeting this week. The farmgate milk price is an input cost, as far as unitholders are concerned.

Fletcher Building, the biggest company on the NZX 50, fell 1.3 percent to $8.85.


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MARKET CLOSE: shares rise as Telecom sells AAPT, power companies bounce