NZ stocks: Tranz Rail hogs the limelight

Cash-strapped rail operator Tranz Rail hogged the limelight as investors snapped up its shares in an otherwise lacklustre sharemarket today.

Tranz Rail closed the day up 12c at 92, having peaked at 102 in morning trading after the Government threw it a financial lifeline on Friday afternoon.

The rail operator's existing shareholders vote on whether to accept the Government's offer on July 11.

On Friday, Finance Minister Michael Cullen announced the rescue package, trading on Tranz Rail's shares being halted at 80c just before.

The Government and Tranz Rail have signed a heads of agreement, which includes the Government paying $76 million for a 35 per cent share of the rail operator through a rights issue at 67c a share.

It would also inject $44 million immediately, buy the national rail network for $1, pay $50 million for associated assets and spend $100 million over five years on network maintenance.

At 4.30pm, there had been $8.9 million of Tranz Rail shares traded on volume of 9.4 million. About a quarter of those shares were traded as soon as the market opened.

ABN Amro Craigs broker Matt Willis said the Government's offer had underpinned today's trading.

"What we've seen today is the impact of short-term sellers and short-term traders making the most of the strength on the day," he told NZPA.

But the full implications of the Government's offer had yet to be realised, he said.

"I think the jury is really out as far as the implications for the underlying valuation of the company.

"The Government's paying 67c (a share in a rights issue) is going to be dilutionary.

"I think the other slight negative is that the Government is not seen as a long-term holder of the stock and therefore their holding will be seen as a bit of an overhang."

Earlier today, brokers said the rally in Tranz Rail shares could be pinned to news of the Government's bailout, but expected the price to back-off during the day.

Tranz Rail shares are still under offer at 75c a share from Australian logistics group Toll Holdings which owns a 10.1 per cent stake in the rail operator.

The benchmark NZSX50 gross index gained 0.48 points to 2109.40 and the NZSX40 capital index fell 4.66 points to 2069.69.

Market leader Telecom finished the day down 1c on 508, having traded $8.4 million on volume of 1.7 million.

There were 56 rises and 43 falls among the 140 stocks traded today. A total of 23 million shares were traded for a total of $43.1 million.

Other rises on the market today included Bankers Investment Trust up 25c to 725, JPM Fleming up 45c to 1050, NZ Refining up 20c to 1650, and Westpac up 10c to 1800.

On the down side were ANZ Bank down 10c to 2150, Fisher and Paykel Appliances down 12c to 1288, Pacific Retail shed 8c to 220, F & P Healthcare slipped 21c to 1129, Tower slid 4c to 159, NZX fell 2c to 418, and NZX rights dropped 10c to 265, while AMP edged back 5c to 575.

- NZPA