NZX50 gains 4.9% in November as M&A boosts retirement sector

Power companies led the benchmark index higher. Photo / 123RF

The S&P/NZX 50 Index rose 4.9 per cent in November as retirement village operators were boosted by potential merger and acquisition activity and A2 Milk mounted a comeback on strong earnings guidance.

The benchmark index rose 109.29 points, or 1 per cent, to 11,316.58 today, led higher by power companies on news of a meeting between Energy Minister Megan Woods and Rio Tinto executives where ways to cut the Tiwai Point smelter's energy bill was discussed.

Within the index, 24 stocks gained, 17 fell, and nine were unchanged. Turnover was $199.6 million.

Meridian Energy led the market higher, up 4.1 per cent at $4.71. The country's biggest electricity generator was the most traded stock on a volume of 3.3 million shares, more than its 90-day average of 1.9 million.

The New Zealand Herald reported that Woods has directed officials to give her advice on material from Rio Tinto on how to reduce its energy costs.

Matt Goodson, managing director at Salt Funds Management, said many investors viewed the smelter owner's threat of closure as unlikely because it was cashflow positive and faces significant site rehabilitation costs.

"There are signs that the minister met with Rio Tinto to discuss transmission costs, which is one of Rio Tinto's bugbears," Goodson said.

"That was taken as a positive that there may be some movement on the transmission costs, so you've seen those stocks bounce quite hard today."

Contact Energy, which also has significant South Island generation assets, rose 1.6 per cent to $7.17 on a volume of 1.5 million shares, while Mercury NZ was up 1.7 per cent at $4.80 on a volume of 3 million, Genesis Energy rose 1.6 per cent to $3.20 and Trustpower advanced 2.8 per cent to $7.29.

Goodson said the local market continued to outperform most benchmark indices across Asia, trailing Pakistan's Karachi 100 which was up 13.2 per cent in November. However, the NZX50 has been the pick of the regional markets so far this year, up about 28 per cent.

Metlifecare posted the biggest gain in November, up 21 per cent. It was unchanged at $5.84 today. The retirement village operator this week hired Jarden to advise it in takeover negotiations with a "credible" buyer.

The prospect of a takeover helped buoy other retirement village operators, with Ryman Healthcare up 20 per cent in November and Summerset Group advancing 17 per cent. Ryman was up 0.6 per cent at $15.10 today, while Summerset slipped 0.1 per cent to $7.70.

A2 Milk rose 2.1 per cent to $15.52, taking its monthly increase to 20 per cent. The milk marketing firm upgraded its earnings guidance at this month's annual meeting, which Goodson said forced investors holding short positions – where they anticipate the stock will fall – to cover their positions by buying shares.

Fisher & Paykel Healthcare rose 3 per cent to $22.15, taking its monthly gain to 16 per cent. The breathing mask manufacturer reported a 24 per cent increase in first-half profit this week, which Goodson said was solid, but in line with expectations.

Healthcare stocks have been in vogue internationally, and that had added another tailwind to F&P Healthcare, which has led the NZX50 higher with a 65 per cent increase in the year-to-date.

Among other stocks trading on volumes of more than a million shares, Spark New Zealand fell 0.4 per cent to $4.54, Auckland International Airport dropped 1 per cent to $9.03, Sky Network Television rose 1.2 per cent to 85 cents, Goodman Property Trust was unchanged at $2.135, Oceania Healthcare was up 0.9 per cent at $1.08, Infratil was unchanged at $4.90, Vista Group International increased 1.3 per cent to $3.80 and Kiwi Property Group slipped 0.3 per cent to $1.58.

Gentrack Group posted the day's biggest decline, down 3.6 per cent at $4 on a volume of 205,000 shares, almost twice its 112,000 average. The utilities software developer reported a 20 per cent decline in underlying earnings this week and gave a subdued outlook for next year.

Fletcher Building rose 1.2 per cent to $5.23. Government data today showed strong underlying demand for new buildings, and economists expect elevated activity for another couple of years.