Daily ShareChat: Fletcher Building

By Jenny Ruth

Thursday 16th April 2009

Following Fletcher Building’s up to $505 million capital raising, the company will be in a comfortable position no matter what the economic situation might be, according to Aspect Huntley.

"The capital raising provides Fletcher Building with an additional buffer should economic conditions deteriorate dramatically. More importantly, it puts to rest refinancing concerns which the firm might have faced in 2011 and 2012," it says. The company also has $605 million in un-drawn debt facilities at its disposal.

Fletcher Building’s lower gearing will enhance its credit rating and will also allow it to take advantage of acquisition opportunities as and when markets recover.

Even though the capital raising probably dilutes prospective earnings about 6% or 7%, "net-net, raising capital in these uncertain times seems like a prudent strategy," Aspect Huntley says.

Its fair value for the stock on a discounted cashflow basis falls to $7.50 from $8 previously compared with the $5.35 a share price for the new stock. The shares closed at $6.20 ahead of the Easter break.

Aspect Huntley says the company has a strong competitive position and industry leading brands and has "a strong management team with an exceptional track record of making value-accretive acquisitions." Fletcher Building is "poised to deliver superior returns over the long term."

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