NZ Refining, Metlifecare, Ebos lead rally in companies posting earnings growth

New Zealand Refining [NZX: NZR], Metlifecare [NZX: MET] and Ebos Group [NZX: EBO] led a rally in stocks of companies posting profit growth in the busiest day for results for earnings season.

NZ Refining climbed 3.9% to a three-week high of $3.74 after New Zealand's only oil refinery posted annual profit of $151 million as revenue almost doubled to $445 million, helped by historically high refining margins, a weaker kiwi dollar and improved plant reliability. Retirement village operator Metlifecare rose 3.5% to $4.44 after announcing that first-half profit more than tripled as property prices boomed.

Ebos rose 3.7% to $14.20, the highest level this year, after reporting a 19% gain in first-half profit, declaring a bigger-than-expected dividend and reiterating its expectation for double-digit full-year earnings growth.

"It has largely been a positive morning," said Matthew Goodson, managing director of Salt Funds Management. NZ Refining had a good result, but its earnings could move up and down across the year depending on refining margins. Metlifecare's result was also strong and the question now was whether it could make good development margins going forward, he said.

Ebos' earnings growth was largely in line with expectations, he said. "It's interesting the market likes that when it has really just reiterated its earlier statements."

Genesis Energy [NZX: GNE] rose 1.1% to $1.89. The country's biggest electricity retailer increased first-half earnings 1.5% as it grabbed more customers in a tightly contested retail market and lifted generation volumes, but still hasn't made a decision on whether to can its Huntly power station.

Meridian Energy [NZX: MET] advanced 0.9% to $2.36. It announced an 11% fall in net profit after tax of $104 million for the six months ended December 31 but cited sufficient strength in underlying earnings to lift the interim dividend and declare a special dividend of 2.4 cents per share.

Harbour Asset Management managing director Andrew Bascand said in a note this week that analysts had been relatively optimistic about earnings heading into results season "and overall only a handful of stocks have seen upgrades to earnings" so far. By contrast, dividend expectations have largely been met or exceeded.

"Compared to earnings, dividend (and special dividend) growth is strong," Mr Bascand said. "In New Zealand, so far dividends are up a healthy 9%. That is interesting as, despite a pause in earnings growth, companies remain confident in cash flows and future growth. Corporate balance sheets remain relatively strong."

[NZX] dropped 1% to $1 after reporting an 82% gain in full-year profit as a one-time gain from the sale of its Link Market Services division lifted flat operating earnings.

Summerset [NZX: SUM] rose 1.3% to $4. It lifted annual underlying earnings 55% in 2015 as the country's third-biggest retirement village operator by market value generated more sales after opening new sites and said it wants to double its national footprint over the next six years

Wynyard Group [NZX: WYN] tumbled 39% to 94 cents. The crime-fighting and security software developer plans to raise about $30 million in a one-for-four renounceable rights offer at 85 cents a share, a 55% discount to its last trading price and well below the minimum $2 that shareholders approved in December.

While its overall outlook is intact, Wynyard has disappointed by not managing its cash flows appropriately, Mr Goodson said.

(BusinessDesk)