NZ stocks: Shares close in neutral territory

The New Zealand sharemarket put on a mixed show today, with Tranz Rail shunted up almost 50 per cent on news of a potential takeover, while The Warehouse eased 4 per cent following an upbeat profit result from its Australian rival.

The key indices closed near neutral today, with the NZ50 gross index ending 1.7 points higher at 2019.01, while the NZSE-40 capital index was 1.82 points lower at 1988.73.

Turnover totalled a solid $114 million.

US railroad operator RailAmerica Inc today launched a 75c-per-share offer for Tranz Rail, valuing the troubled company at $158 million.

That saw Tranz Rail's price spike by 25c, or 48 per cent, to 77c . JB Were's Murray Rutherford said the potential bid was a "welcome relief" to the market.

"It's reinforced value in the stock which the market was refusing to recognise. It reduces the prospect of Tranz Rail being a distressed seller," he said.

Brokers were sceptical as to whether shareholders would accept the deal at this price, however, which is well below the $3.62 the shares fetched a year ago.

"I think the bid price is low, given the potential break up of the company is well north of that. Seventy-five cents is not likely to be successful," Mr Rutherford said.

ASB Securities broker Andrew Kelleher agreed.

"The question is, are they committed?" he said , "Or is it just an opportunistic bid?"

Tranz Rail topped the turnover tables by volume today with 24 million shares - or about 11 per cent of the company - worth $18 million, changing hands.

RailAmerica's chief executive Marinus van Onselen will meet Finance Minister Michael Cullen on Tuesday to discuss the bid.

Discount retailer The Warehouse shed 19c, or 4 per cent of its value, today following an upbeat third quarter sales result from its Aussie rival Coles Myer.

Coles, which owns the Kmart and Target discount chains, reported third quarter sales of $A6.5 billion for the period ended April 27, an increase of 5.9 per cent.

Kmart and Officeworks combined sales rose 16.7 per cent to $A1.015 million, while Target sales lifted 13.4 per cent to $A588 million.

The Warehouse has been struggling to hit the right note with Australian consumers and earlier this month revised down its full year forecasts, saying poor promotion of key merchandise will see the Australian division book an operating loss for the full year. That warning saw shareholders wipe almost half a billion dollars off The Warehouse's market capitalisation.

In the broader market, rises outnumbered falls by 57 to 44 among the 147 stocks traded.

Today's budget provided few surprises, although a decision to reduce taxes on low income earners' superannuation savings would be positive for the sharemarket, Mr Rutherford said.

Dr Cullen cited an uncertain economic outlook for delivering another tight budget today, resisting pressure to spend a $4 billion surplus - the highest on record under modern accounting systems.

The Sars virus, weak global economy, and possible power shortages had led Treasury to reduce growth forecasts by half to 2.2 per cent in 2003, he said.

One key concession in the budget was a plan to reduce the tax rate on super contributions for those earning less than $38,000 a year to 21 per cent from 33 per cent.

The change is expected to cost the Government $7 million in foregone revenue in the first year and $29 million per annum thereafter.

In other significant moves today: Sky City added 14c to 814; Telecom rose 3c to 498; Baycorp Advantage eased 5c to 172; Contact Energy was down 3c at 452; Auckland Airport added a cent to 528; Fisher and Paykel Appliances was up 13c to 1075; its Healthcare cousin was a cent higher at 1080; and Lion Nathan lost 6c to 620 after posting a 10.3 per cent jump in half year net profit to $A110.3 million.

The Australasian brewer reiterated its full year profit guidance of $A180 million ($NZ204.63 million), but qualified this by saying it depended on the impact of the Sars outbreak on its Chinese operations.

Market newcomer Promina rose 5c to 223.

Infratil closed 2c lower at 187 after Alliant sold down 3.7 million shares as part of Intratil's share buyback.

AMP lost 14c to 566 as management fronted up to angry investors at its annual meeting in Sydney. The stock is down 70 per cent in the past year, with no good news in sight.

- NZPA