Fletcher Building's share price surged to fresh 20-month highs yesterday reflecting the perception that rebuilding activity in Christchurch is now in full swing, analysts said.
A more buoyant Auckland housing market was also aiding sentiment, as was news that Fletcher Building's closest peer - Australia's Boral - is undergoing a major restructuring, they said.
Fletcher Building last traded at $9.30, up 15c from Friday's close, and up from its 52-week low of $5.69. The company's shares were last at today's closing level in February 2011, just before the most damaging Canterbury earthquake on February 22.
BT Funds Management portfolio manager Matt Goodson said it had taken time for Christchurch reconstruction to start in earnest.
"All of 2012 was a bit of a phony war - waiting for the Christchurch rebuild to happen," he told APNZ.
"If you look at the various employment indicators, and what's actually happening on the ground there, it (reconstruction) would appear to be underway," he said.
Craigs IP analyst Mark Lister said Fletcher Building had enjoyed an outstanding run, particularly over the last two or three months.
"People are getting a feeling that after a long wait and a number of false starts, the momentum in Christchurch is real and that reconstruction is starting to happen," he said. "Some Auckland housing statistics have helped and renovating and new building activity has added to sentiment," Lister said.
The investing public had in the last few years opted for more conservative sectors - such as healthcare - but were now more willing to venture into the riskier cyclical issues such as Fletcher Building, he said.
In Australia, Fletcher Building's second biggest market after New Zealand, there was also a sense that very low interest rates would start to kick in and help rejuvenate building activity there.
Australian building materials and construction firm Boral said last week it was axing 1000 jobs - 6.8 per cent of its workforce - in a major restructuring and Shane Solly, portfolio manager at Mint Asset Management, said Fletcher Building could stand to benefit while Boral sorts itself out.
Craigs IP's Lister said Fletcher Building had already restructured its operations, where needed, making the company a more logical choice than Boral for investors seeking a typical Australasian construction "play".
Another New Zealand cyclical construction related stock, Steel and Tube, has also traded strongly, finishing today at $2.55 - also its highest point since February 2011, and up from its 52-week low of $2.05.
At Fletcher Building's annual meeting in November, the company said activity levels in Christchurch continued to gain momentum.
"The re-entry into the market of insurance companies prepared to write fresh polices for housing has been key with regard to the improvement in housing activity," the company said.
It expected 2012-13 operating earnings for the full year to be in the range of $560m to $610m. Included in this range was an estimated $20m in restructuring costs arising from its Australian laminated products plant Laminex.