Fletcher Building

Friday 29th July 2011

Fletcher Building (NZX: FBU ) has been upgraded to Buy from Neutral by UBS, after the recent sell off in the construction company’s shares.

FBU enjoyed a spike in its share price after the February 2011 Christchurch earthquake and the shares reached as high as $9.50, as the market quickly began to price in the benefits of the rebuilding process.

Financially, FBU’s interim result for the six months to 31 December 2010 saw the company report total operating revenue of $3.46b up 2% on the previous corresponding period. Net profit increased 8% to $166m and earnings per share increased 7% to 27.3cps. Operating earnings (earnings before interest and tax) were $285m compared with $271 million in the previous first half. An interim dividend of 16c per share was announced (2009: 14c).

Dan Stratful, broker at Investment Research Group (IRG) says “the delay in rebuilding Christchurch is weighing on FBU, as earnings from the rebuild will not benefit FBU as quickly as first thought”. The timing of the rebuild earnings is now expected to be later than first thought, due to the continuing aftershocks in the region. “Analysts have adjusted down their earnings per share (eps) forecasts by around 15% due to the delay in rebuilding, so all things being equal, the share price should also decline by around 15%, and that is what has happened.”

This means earnings from the Christchurch earthquake are more likely to be reported in the years ending 30 June 2012 and 30 June 2013.

Fletcher Building will release its financial results for the year ending 30 June 2011 on Wednesday 17 August 2011.

FBU last traded at $8.20.

Contact IRG on 0800 437 8489

dan.stratful@irg.co.nz

Broker recommendations are sourced from the IRESS software trading platform and Morningstar equity analysts.

Disclaimer

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