NZ shares extend rally; Mainfreight, Diligent at records

New Zealand shares rose to a new five-year high, as foreign investors were drawn to the nation's relatively attractive returns and cheered the expansion plans of companies such as SkyCity Entertainment Group. Mainfreight and Diligent Board Members Services hit new records.

The NZX 50 Index rose 52.45 points, or 1.3% to 4075.45, the highest close since December 2007.

Within the index, 33 stocks rose, eight fell and nine were unchanged. Turnover was a higher-than-average $166 million, surprising traders who were expecting a pre-Christmas wind-down.

SkyCity, the casino and hotel operator, rose 1.3% to $3.84, extending its gains of yesterday when it announced it had reached agreement with the South Australia state government on the expansion of its Adelaide casino. Separately today SkyCity said it sold its half-share of Christchurch casino and has taken full ownership of Queenstown's gaming centre.

The SkyCity announcement on Adelaide "has been very well received," says David Price, a broker at Forsyth Barr. The Adelaide expansion added about 25 cents to the stock's valuation, he said.

Offshore investors were drawn to double-digit returns on New Zealand stocks, assuming for example, a 6% dividend yield and some capital appreciation, Price said. "There's a lot of fresh money coming into the market."

Diligent, which has soared 159% this year, rose 5.8% to $5.30, leading the NZX 50 higher. Xero, the cloud-based accounting platform, fell 1.3% to $7.60.

The two tech companies have been the star performers on the bourse this year, with Xero climbing 179%. That's prompted some key investors to trim their holdings, including Trade Me founder Sam Morgan, who has reduced his stake below 5%.

Trade Me declined 1.3% to $3.94. Australia's Fairfax Media sold its 51% stake this week.

Mainfreight, the logistics and transport group, rose about 4% to a record close of $11.75. the stock is rated 'outperform' based on six analyst recommendations compiled by Reuters.

Fletcher Building, the biggest company on the NZX 50, rose 2.2% to $8.45. Government figures today showed the economy grew a lower-than-expected 0.2% the third quarter, with much of the growth being driven by construction activity.

Telecom rose 1.3% to $2.32. Chorus, the network company spun off from Telecom last year, rose 4.4% to $2.84, recovering some of the ground lost last week when the regulator gave a draft view on network price controls. Contact Energy rose 3.1% to $5.34.

Rakon, which makes crystal oscillators used in smart phones and navigation systems, dropped 9.8% to 37 cents. The company cut its full-year earnings guidance because of sales delays and thinner margins.

Earnings before interest, tax, depreciation and amortisation would be $8 million to $12 million in the year ending March 31, down from its August guidance of $14 million to $16 million. The shares reached $5.80 a May 2007, a year after its listing

"Rakon has a history of continuing to disappoint," Price said.

Smiths City Group, the Christchurch-based retailer, rose 3.7% to 56 cents after posting a 2.6% gain in first-half profit and saying retail conditions are difficult, especially for consumer electronics. It kept its first-half dividend unchanged at 1 cent a share.

Veritas Investments, the shell company listed on the NZX after Salvus Strategic Investments was wound up, jumped 17% to 7 cents after announcing it had agreed to buy the Mad Butcher franchisor business in a $40 million cash and scrip deal, and will seek more funding.

(BusinessDesk)