Stocks to watch: Contact, Delegat's, Fletcher Building

Thursday 10th September 2009

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

Themes of the day: Reserve Bank Governor Alan Bollard today kept the official cash rate unchanged at 2.5%, as expected, while keeping unchanged his projection that the OCR will remain at or below current levels until the second half of 2010. The kiwi dollar initially fell on the statement before rebounding to 69.65 US cents from 69.56 immediately before. Stocks on Wall Street advanced after the Federal Reserve’s Beige Book showed stability or recovery in most regions of the US and after Goldman Sachs Group recommended multi-sector industrial companies.

Contact Energy (CEN): Fitch Ratings downgraded the credit rating of biggest utility of the NZX 50 to BBB from BBB+ yesterday, reflecting a rising borrowing profile as new generation plant and underground gas storage facilities are installed, and the significant impact of national grid constraints on the company's full year profit. The 2009 financial year was challenging for Contact as a result of transmission and weather issues, but “it is the weakening of credit metrics which has placed the rating under pressure," Fitch said.

Delegat’s Group (DGL): The maker of Oyster Bay wines is rated a ‘buy’ by Craigs Investment Partners analyst David Oxley, according to the ShareChat website. Oxley said he has lowered his forecasts for Delegat's Group in line with the company’s conservative guidance though the stock is still good value. The shares were unchanged at $1.22 yesterday.

Ebos Group (EBO): The medical supplies distributor rose 2.2% to $6.08 yesterday after Australian equities analyst AspectHuntley recommended accumulating the stock because of its record of successful acquisitions and the recession-proof nature of medical sales.

Fisher & Paykel Healthcare (FPH): The respirator and breathing mask manufacturer gets almost 80% of sales in US dollars, and suffers when the kiwi dollar strengthens. The currency strengthened after the RBNZ statement today. The company’s shares fell 0.9% to $3.35 yesterday.

Fletcher Building (FBU): Reserve Bank Governor Alan Bollard kept the official cash rate at a record low 2.5% and said rates would have to stay low until the second half of 2010, reducing pressure on mortgage rates. Shares of New Zealand’s biggest construction company slipped 0.3% to $8.02 yesterday.

PGG Wrightson (PGW): Craigs Investment Partners cut its target price to 74 cents from $1.06 because of the potential for an overhaul of its capital structure. The overhaul “is likely to be dilutive to our current assessment of value," Craigs analyst David Oxley said, according to NZPA. The nation’s biggest rural services company fell 1.4% to 72 cents yesterday.

Businesswire.co.nz

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