Stocks to Watch: New Zealand Equity Preview

Wednesday 7th January 2009

The following stocks may be active on the New Zealand exchange after developments since the close of trading yesterday.

Themes of the day: Government figures today may show the trade deficit narrowed in November to NZ$830 million, for an annual gap of NZ$5.5 billion. The price of oil climbed back over US$50 a barrel amid OOEC cuts to shipments, tensions in the Gaza Strip and a dispute that's reducing Russian gas supplies to Europe. U.S. President-elect Barack Obama has warned that U.S. budget deficits are likely to be in the order of trillions of dollars for some years amid increased spending to revive the economy. Stocks on Wall Street gained yesterday.

Fisher & Paykel Healthcare (FPH): The manufacturer of respirators and breathing devices has gained more than 7% in the past month amid optimism demand for its products won't falter in a slowing global economy. The stock was down 0.6% to NZ$3.22 yesterday.

NZ Farming Systems Uruguay Ltd. (NZX): The average price for wholesale milk powder slumped 9.3% to US$2,017 per tonne at yesterday's online Fonterra auction, 50% lower than when online auctions began in July. The dairy farm developer's shares are unchanged at 60 New Zealand cents, having plummeted more than 60% in the last 12 months.

PGG Wrightson Ltd. (PGW): Dry soil conditions and light rainfall in the East Coast of the North Island has Federated Farmers warning of a possible drought in the region by late January. If farmers are forced to cull their stock levels, rural services supplier PGG Wrightson may see its revenue decline over the summer months. Shares rose 5% yesterday to NZ$1.37, and have jumped 30% since Christmas.

Rakon Ltd. (RAK): The economic downturn will impact on 2009 earnings at the maker of components for navigation systems, the company said in its interim report. Still, Rakon is "confident of delivering earnings growth for shareholders in the years to follow" and its market position "remains strong." The shares were unchanged at NZ$1.27 yesterday and have declined more than 65% in the past year.

Sky Network Television (SKT): The pay-TV operator was singled out in an analyst survey yesterday as a potential strong performer in 2009 and a beneficiary of the change of government, which may curtail state TV's expansion. The shares rose 5.3% to NZ$3.95 yesterday and have fallen about 12% in the past six months.

Tower Ltd. (TWR): Insurance Council regulation manager Terry Jordan is warning premiums may rise up to 10% this year to maintain their earnings as rising building costs boost the cost of claims. An increase in the number of claims will also lead to greater scrutiny of claims, Jordan said. Shares in the insurer fell to NZ$1.53, having fallen around 35% in the last year.

Warehouse Group (WHS): The discount retailer rose 2.9% to NZ$3.58 yesterday after managing director Ian Morrice said margins were "at levels similar to last year" and earnings before one-time items will be similar. Retailers gained yesterday after figures showed consumer spending rose last month.

By Jonathan Underhill

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