Daily ShareChat: Fletcher Building

By Jenny Ruth

Sunday 19th April 2009

Those participating in Fletcher Building’s up to $505 million capital raising should do so with the intention of selling their new shares rather than holding them, First NZ Capital analyst Kar Yue Yeo suggests.

"We have reservations of a ‘buy and hold’ strategy because our analysis suggests;
1/ the cyclicality in the building sector has yet to bottom in commercial construction and;
2/ the recent rebound in housing data may prove to be short-lived beyond the next two months," Kar Yue says.

Fletcher raised $406.5 million from a share placement in early April and is planning to raise the rest through a share purchase plan with individual shareholders limited to a maximum of $11,500 in new shares which will be priced at $5.35 each. In addition, a top-up offer will depend upon demand. The shares ended last Friday at $6.76.

Kar Yue’s 12-month price target is $6.05 compared with his $6.42 valuation. He is expecting annual net profit to fall to $295 million this year from $467 million last year before rising to $308 million in the year ending June 2010.

But he believes there is downside risks to both consensus and his own forecast for 2010 if there is no recovery in the New Zealand, Australian and European housing markets and if commercial construction activity in Australia and New Zealand doesn’t stablise.

BROKER CALL:

First NZ Capital rates FBU as NEUTRAL.

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