Daily ShareChat: Fletcher Building

Allowing for potential synergies from more efficient management of Australia-based Crane Group under Fletcher Building's management, its A$9.35 (NZ$12.05) a share takeover bid will be at effectively between 10 and 12.6 times earnings, says Kar Yue Yeo, an analyst at First NZ Capital.

That's rather than the "headline" 19 times forecast 2011 earnings and 14 times 2012 earnings "which attracted criticism from some quarters," Kar Yue says.

He sees between $10 million and $30 million in savings of corporate costs - the managing director and chief financial officer are estimated to cost A$6 million of Crane's corporate overhead.

"Given the other potential areas of overlap in corporate structures (for example accounting, human resource, finance, business administration, legal, non-executive directors' fees, listing costs) a pretax A$10 million savings ... seems attainable."

"We regard Fletcher's proposed takeover of Crane as neither hugely expensive nor highly value accretive for Fletcher's shareholders because of the execution risks on the synergies and uncertainly over the Australian housing cycle," he says.

A successful takeover will further expand Fletcher's Australian portfolio and diversify its reliance on the New Zealand economic cycle.

"Management backs itself to leverage Fletcher's operating model into Crane and deliver additional returns for Fletcher's shareholders."

Rating: Outperform.

Comments from our readers

No comments yet

Add your comment:

Your name:
Your email:	Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Anti-spam verification:

Type the text you see in the image into the field below. You are asked to do this in order to verify that this enquiry is not being performed by an automated process.

Related News:

Fletcher Building faces probe into plasterboard supply deals
Fletcher closes Christchurch plasterboard plant after finding asbestos
Fletcher Building names Charles Bolt as general counsel, replacing Farrell
Fletcher beats estimates with $326M FY profit as NZ revives, Australia stays flat
Fletcher executive Worley leaves as underperforming Crane unit brought in-house
Fletcher puts strategy under microscope seeking $70M annual gain, will shed jobs
Fletcher Building 1H profit edges up
Fletcher Building capital notes rollover at 5.4 percent from 8.9 percent
Fletcher Building offloads CSP Coating galvanised steel unit
Fletcher not abusing its role running Canterbury home repairs, EQC says