MARKET CLOSE: NZ shares flat as A2, Synlait hit records on Chinese approval; Z Energy falls

Thursday 28th September 2017

New Zealand shares were flat, as Synlait Milk and A2 Milk Co broke new records on regulatory approval to retain Chinese market access, while Z Energy dropped after missing heightened expectations on its bigger dividend policy.

The S&P/NZX50 Index dipped 0.16 points, or 0.002 percent, to 7,913.62. Within the index, 26 stocks fell, 19 rose and five were unchanged. Turnover was $204 million.

Z Energy led the index lower, down 3 percent to $7.39. At an investor briefing today, it said it anticipates paying bigger dividends to shareholders under a new policy, paying between 80 percent and 100 percent of free cash flow in the 2019-to-2021 financial years. On the mid-range of potential outcomes, that would see dividends of 40-to-42 cents per share at 80 percent of free cash flow and up to 55-to-55 cents at 100 percent, up from the forecast 32 cents per share in the current year.

"Most of the themes people were expecting were presented today, improved dividend payout and synergy gains from the mergers - but expectations were relatively high for a reasonable lift in that dividend, and it may not have quite achieved that," said James Lindsay, senior portfolio manager at Nikko Asset Management. "Plus the board has taken a position to maintain a reasonable level of gearing, given the uncertainties and the government looking at margins. A level of conservatism may have crept into their decision-making there."

Synlait Milk was the best performer, rising 6.7 percent to a record $6.25 after announcing it has received manufacturer registration for a2 Milk's Chinese label infant formula, meaning the products will continue to have market access in 2018 when China tightens its rules. A2 Milk ended the day up 0.2 percent to $6.54, also a record, although it jumped as high as $7.05 during intraday trading.

"It spurred the stock earlier on this morning, has come back a bit but Synlait is holding its gains. Those two names have been pretty stellar performers over recent months," Lindsay said. "A2 certainly hits highs on a regular basis."

Air New Zealand rose 3.4 percent to $3.34. At its annual shareholders meeting today, chair Tony Carter said the company was optimistic about its markets and had been pleased with the first quarter performance. However, he noted that the company's aim of lifting earnings in 2018 was based on fuel priced at US$60 per barrel, and it is currently trading higher than that "and has been volatile over the recent weeks."

Restaurant Brands New Zealand gained 0.8 percent to $6.65. It began trading as a foreign exempt entity on the Australian Securities Exchange today.

Outside the benchmark index, Trilogy International dropped 10 percent to $2.15. The scented candle and skincare products maker anticipates revenue for the six months to Sept. 30 to exceed $50 million - compared to $47.8 million in last year's first half - and earnings before interest, tax, depreciation and amortisation (ebitda) to exceed $6 million. Its 2016 first half ebitda was $7.2 million.

Moa Group gained 9.8 percent to 45 cents. The craft beer brewer told shareholders at its annual general meeting that its growth rate is currently running slightly ahead on the year and it has growing optimism around China although its bottom line will be impacted by heavy investment.

Hallenstein Glasson Holdings rose 4.7 percent to $3.33. The clothing retailer lifted net profit 26 percent to $17.3 million in the 2017 year as online sales continued to grow. New chief executive Mark Goddard said the first seven trading weeks of the current financial year has seen sales up 5.5 percent, with online trading continuing to show increased growth. The company will update shareholders at its December annual meeting.

(BusinessDesk)

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