Tamsyn Parker 's Opinion

Money Editor for NZ Herald

Stock takes: Bargain basement?

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The Warehouse seems to have fallen out of favour with consumers this week but maybe not investors.

A market research survey of 300 consumers ranked the Red Sheds just 33 out of 44 well-known brands.

The retailer was recognised for its cheapness but lost points on value for money. Meanwhile investment house Goldman Sachs has dropped the stock from its high conviction focus list. The list is made up of just four or five stocks which the analysts strongly believe should be either bought or sold.

The Warehouse was its only strong sell conviction but it seems the New Zealand retail environment may be picking up.

"While structural headwinds still remain (competitive pressures, a costly and unproven repositioning plus expensive valuation), we believe the earnings risks have moderated supported by an improving cyclical environment.

"The key risk to our sell rating is a significantly stronger than expected cyclical recovery in NZ retail sales," Goldman analysts said in a note this week.

Shares in The Warehouse have clawed back some ground after hitting a year low of $2.50 last month.

But they still have a long way to go to even touch its year high of $3.75.

Yesterday it closed at $2.77.

INVESTMENT DIET

Riccardo Briganti, Macquarie Private Wealth's head of research, briefed journalists this week on the company's world investment views.

Unsurprisingly Macquarie is keen on the safer sectors for investment at the moment such as telecommunications, utilities and consumer staples.

Its New Zealand picks include Telecom, Vector and Restaurant Brands, which owns Pizza Hut and KFC in New Zealand.

Briganti, who was in town on a flying visit from Sydney, said one exception was the Australian supermarkets where a price war is taking place. Instead the investment firm is keen on Coca-Cola.

It seems even the investment analysts are betting on people consuming lots of junk food to get through these challenging times.

GETTING IN SHAPE

While Telecom might be shedding fat its share price is putting on weight. The company's share price is up by 55c, or 27.8 per cent, since its 2012 low of $1.98 in January.

At Telecom's half-year result last month, chief financial officer Nick Olson announced the company had cut nearly 400 jobs over the year.

Telecom also indicated this week that more cuts are likely as it goes about its "well-stated strategy of simplification".

Since last Friday Telecom's shares have gone up 14.5c and closed yesterday at $2.53.

Telecom's shares go ex-dividend on March 21 and a 9c dividend will be paid to shareholders on April 5.

BRIGHTER PATCH?

After a difficult few years, Pumpkin Patch might finally be making a turnaround.

The children's clothing retailer posted a $30 million net loss in its interim result on Wednesday due to costs related to store closures in Britain and the United States.

A challenging Australian retail market persists for the firm, but with its exit from those two loss- making northern hemisphere markets now complete its future is looking brighter.

Pumpkin Patch announced it was ditching its UK bricks-and-mortar operation in January and in the year-to-date its shares are up more than 46 per cent.

The retailer has entered promising new partnerships in Mexico and the Middle East and the company is making a big sales push online. Goldman Sachs has raised its recommendation on the stock from sell to neutral and lifted its earnings-per-share forecasts for the 2013 and 2014 financial years by 23 per cent and 26 per cent, respectively, reflecting the new wholesale contracts.

Pumpkin Patch shares, which were worth almost $5 in 2007, closed up 5.5 per cent at 96c last night.

CHINDIA PUSH

Whiteware maker Fisher & Paykel Appliances is expanding its presence in China, having opened a third F&P showroom in the northeastern city of Qingdao where Haier, its Chinese cornerstone shareholder, is based.

The development comes as the Auckland-based manufacturer establishes a footprint in India, where it has secured a local distributor and is looking to fit out newly built apartment blocks with high-end kitchen appliances.

F&P Appliances' chief operating officer for international business, Andrew Paykel, told the Business Herald this week that the company would focus on India and China and did not have plans to expand into other big emerging markets like Russia and Brazil.

"We're committed to these two markets and investing in them and ensuring that over time we can get a return out of them," he said.

F&P Appliances shares closed up 2.5c at 51c last night.

- NZ Herald

Tamsyn Parker

Money Editor for NZ Herald

Tamsyn Parker is the NZ Herald's Money Editor. A business journalist for ten years, she has worked in the UK and NZ for the New Zealand Herald, the National Business Review and a specialist publication on investment products for financial advisors. She is passionate about helping readers learn more about to make their money work for them.

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