Welcome results for Scales, Chorus, Vector pace gains on NZX50

Investors welcomed solid results from fruit exporter Scales Corp, broadband network operator Chorus and Auckland lines company Vector as the S&P/NZX 50 index joined a globally stock market rally on the prospect of the US cutting interest rates.

Meanwhile, Heartland Group Holdings led the local market higher as brokers upgraded the lender after last week’s upbeat earnings outlook.

NZX was at the bottom of the leaderboard after an already pessimistic Forsyth Barr research team trimmed their target price for the stock market operator.

And the Reserve Bank made the first step towards loosening the capital rules for lenders as it adopts a greater tolerance to risk in its prudential settings.

Show, don’t tell

The NZX50 climbed 36.74 points, or 0.3%, to 13,079.5, with 25 stocks gaining, 21 declining and four unchanged. Turnover was $114.9 million across the main board.

The local bourse joined a global rally after US Federal Reserve chair Jerome Powell opened the door to cutting rates, boosting stocks on Wall Street on Friday. Australia’s S&P/ASX 200 index was up 0.1% in late trading, while Japan’s Nikkei 225 advanced 0.3% and Hong Kong’s Hang Seng jumped 1.9%.

The kiwi dollar traded at 58.66 US cents at 5pm in Auckland from 58.68 cents at 7am and 58.06 cents last week.

Heartland led the local market higher, climbing 5.6% to 95 cents, its highest close since February, with brokers upgrading the stock’s target price after its optimistic earnings outlook when it reported last week.

“Heartland’s continuing on well from its result,” said Peter McIntyre, an investment adviser at Craigs Investment Partners.

The local market was supported by a series of solid results on the day, with Chorus flagging an increased dividend in the coming year, Vector reporting earnings near the top end of guidance and Scales boosting its annual forecast.

Chorus rose 2.3% to $9.64, Vector gained 2% to $4.53 and Scales climbed 3% to $4.89.

“Scales was the highlight of the day – it was very impressive,” McIntyre said.

Property for Industry rose 1.5% after lifting annual adjusted funds from operations 8.1% and forecasting dividends to rise at least 3.5% in the coming year.

Turners Automotive Group gained 1.2% to $6.96 after saying it expects first-half earnings to rise more than 10%.

Red side of the ledger

Stock market operator NZX posted the biggest decline on the benchmark index, falling 2.1% to $1.42. Forsyth Barr analyst Ben Crozier trimmed his target price on the stock by 2 cents to $1.50 after it reported a small lift in first-half operating earnings on Friday.

The dual-listed banks were weaker, with Westpac Banking Corp down 1.8% at $42.10 and ANZ Group Holdings declining 1.2% to $36.87.

SkyCity Entertainment Group fell 1.4% to 70 cents on a volume of 3.1 million, the most heavily traded stock on the day.

Blue-chip stocks were mixed, with Fisher & Paykel Healthcare down 0.5% at $37.45, Contact Energy falling 1.4% to $9, Meridian Energy slipping 0.6% to $5.65, while Auckland International Airport rose 1.3% to $7.70, Mercury NZ gained 0.5% to $6.59 and Infratil nudged up 0.2% to $11.93.

Tourism Holdings was unchanged at $2.20 after reporting a loss of $25.8 million as it wrote down the value of its US business and deferred tax assets in the US and UK. The rental campervan operator expects strong growth in global rental revenue in the coming year, but is more cautious about the prospects for sales of its vehicles.

Outside the benchmark index, Steel & Tube Holdings dropped 4.3% to 67 cents after reporting a loss of $24.4 million with sales down 20% and margins squeezed. The chief executive and board took a 20% temporary pay cut and the leadership team agreed to a pay freeze while it prepares for the economy to turn around.

Michael Hill International fell 4.6% to 41.5 cents after reporting a return to profit, albeit without a dividend, and said sales have started improving in Australia and Canada.

Meanwhile, the Reserve Bank opened consultation on capital settings for deposit takers, with the options put forward adopting a higher risk appetite than the current regime. The central bank’s capital settings have been blamed for undermining competition in the banking sector by imposing overly restrictive rules for business and agri lending.

Reporting by Paul McBeth. Image from Anastasiya Romanova on Unsplash.