MARKET CLOSE: NZ shares fall on SkyCity outlook   11 Feb 2016

MARKET CLOSE: NZ shares fall on underwhelming SkyCity outlook; Xero, MRP decline

By Sophie Boot

Feb. 11 (BusinessDesk) - New Zealand shares fell after SkyCity Entertainment Group, the first to post results this earnings season, reported a gain in first-half profit but left some investors underwhelmed with its outlook. Xero and Mighty River Power fell, while Vector rose.

The S&P/NZX 50 Index fell 32.46 points, or 0.5 percent, to 5987.03. Within the index, 31 stocks fell, 13 rose and six were unchanged. Turnover was a lower-than-average $90 million.

SkyCity fell 1.6 percent to $4.37. The casino operator posted a 30 percent gain in first-half profit, citing improvements across all its properties and lower funding costs, while revenue increased 14 percent to $566 million. The company will pay a first-half dividend of 10.5 cents a share on March 18, up from 10 cents a year earlier.

"At an overall group level, it's a very good result. Then you look at their outlook, and you start to think there's nothing in the result that allows you to go and upgrade my expectations," said Rickey Ward, New Zealand equity manager at JB Were. "People were focussed on the (dividend) payout ratio, which is 73 percent on a policy of 80 percent.

Companies need to deliver both earnings and dividend this earnings season, Ward said, with dividends holding the market multiple up.

"In a low-interest environment, you're having to take equity risk to get fixed-interest returns, and that's why we're trading on an eighteen-times multiple - it's not because we have really good growth potential, it's because a large component of our market pays you, reliably, a great degree of income," Ward said. "If you reduce the dividend on a poor result, you run the risk of getting punished quite quickly."

Xero led the index lower, down 3.5 percent to $14, a five-month low.

Mighty River Power fell 2.7 percent to $2.575, Tower dropped 2.3 percent to $1.71, and Z Energy fell 2 percent to $6.05.

"Direction's been driven by negative sentiment still," Ward said. "We're heading into a results season where the market is forecasting flat to modest growth in sales, and not much different to the profit line."

Fonterrra Shareholders' Fund shed 2.1 percent to $5.66, while Ebos Group fell 1.9 percent to $13.19. Orion Health Group dropped 1.8 percent to $2.74, and New Zealand Refining fell 1.7 percent to $3.50.

Vector was the biggest gainer on the index, up 1.6 percent to $3.25, while Metro Performance Glass gained 1.3 percent to $1.59, Auckland International Airport rose 1.1 percent to $5.71, and Summerset Group advanced 1 percent to $3.95.

Outside the benchmark, Intueri Education Group rose 5.4 percent to 29.5 cents, having fallen 61.1 percent so far this year. The private training college, which is under investigation by the Serious Fraud Office, suspended dividends pending the review by the Tertiary Education Commission funding agency, and said 2015 earnings met its downgraded guidance.

"It's clear their share price has come under immense pressure due to very well-publicised events," Ward said. "Today we've seen a result which is in line with their prospectus, which is good - what's not so good is their outlook statement. No dividend, when people were expecting one, and guidance being severely depleted. It's now the outlook more than what they delivered."

Wynyard Group rose 7.3 percent to $1.48. The New Zealand Shareholders Association says it will oppose security software developer Wynyard's plans to sell new shares below a previously announced price floor of $2 a share when a meeting of investors is held next week.

(BusinessDesk)

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