Tamsyn Parker 's Opinion

Tamsyn Parker is the NZ Herald's Money Editor

Stock Takes: Fletcher Building, ASX up - Trilogy woes

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Fletcher Building stock has had a stellar run despite chief executive Mark Adamson saying business in Australia remains tough. Photo / Steven McNicholl
Fletcher Building stock has had a stellar run despite chief executive Mark Adamson saying business in Australia remains tough. Photo / Steven McNicholl

BUILDING UP

Top stock Fletcher Building has had a stellar run in the last few months gaining 16 per cent since August 19 despite warnings from chief executive Mark Adamson that business in Australia remains tough.

Shares in Fletcher touched $9.52 yesterday morning, matching its closing high reached at the end of January this year.

Fletcher shares had been trending downwards in the first half of the year hitting a low of $8.03 in May but a better than expected results announcement on August 21 has stirred interest in the stock.

Last week it was backed by two analyst upgrades from local brokers First NZ/Credit Suisse and Australian firm CIMB Group.

Hamilton Hindin Greene director Grant Williamson said it looked like Fletcher's share price would continue to tick upwards based on strong demand from institutional investors.

Williamson said rising house prices in both New Zealand and Australia were expected to translate into stronger demand for house building.

Shares in Fletcher closed down 4c yesterday at $9.46.

AUSSIE HIGH

Australia's benchmark index hit a five-year closing high on Wednesday signalling it's not all bad news for the lucky country.

The ASX 200 closed on 5234.4, its highest since June 2008, before the global financial crisis really hit.

The index is up over 17 per cent this year beating New Zealand's benchmark index the NZX50 which is up 14 per cent since the start of the year.

Last year the NZX50 had its best year since 2004, rising 24 per cent. It doesn't look like the NZX50 will beat that this year.

The New Zealand market hit a high point in May of 4671 points, just after the sharemarket float of Mighty River Power.

It then went through a rough patch before recovering and recent gains made since the August reporting season mean the benchmark is headed back to where it was in May.

Yesterday the NZX50 closed on 4641.

POSITIVE ENERGY

The strength of the benchmark index bodes well for the Government's float of Meridian Energy.

Meridian's prospectus is expected to be out at the end of this month/early October pending no hiccups.

But Williamson said one fly in the ointment for Meridian was the performance of peers Contact Energy and Mighty River Power.

Contact closed at $5.11 yesterday, below the $5.28 it started from at the beginning of the year. Over the last year it has gained about 2 per cent.

Mighty River Power closed at $2.21 yesterday, well below its $2.50 issue price and the $2.62 it hit on its first day of trading on May 10.

Williamson said the stocks could be under pressure from investors wanting to sell shares in preparation for buying into Meridian.

The market will be heavily weighted to energy companies once Meridian joins the market.

TAPER TALK

Talk of Syria handing over its chemical weapons has buoyed financial markets in the last week although the US remains sceptical of it actually happening.

For now the backdown means all eyes will now turn to the Federal Open Market Committee meeting set down for next Wednesday and Thursday.

Markets are widely expecting the Fed to signal it will begin to taper its US$85 billion ($104.6 billion) per month bond-buying programme.

The reduction in money-printing is a sign the economy is starting to improve but markets have not liked its talk in the past as the money-printing has been great fuel for sharemarkets.

Expectations are that tapering will be done at a slower pace than initially signalled but markets will be waiting for clear guidance from the meeting.

BUYING ON DIPS

Sharemarket darling Port of Tauranga has come under pressure this week after the company revealed one of its subsidiaries will lose a major contract from January.

On Tuesday the port company announced Quality Marshalling had lost a log contract representing 60 per cent of its revenue at the time of acquisition.

The company missed out on the Kaingaroa Timberlands/PFP contract which was worth $12 million. It had held the contract for eight years.

Port of Tauranga only bought Quality Marshalling this year paying $34 million for the business. Investors will be questioning whether Port of Tauranga had any inkling of the potential loss of the contract when it bought the company.

The share price weakness prompted three of POT's senior managers to buy up shares.

The corporate service manager paid $14.60 each for 7500 shares, while the commercial manager snapped up 7210 shares at $14.45 each and the chief financial officer paid $14.23 each for 8430 shares in the company.

Port of Tauranga closed up 20c yesterday at $14.20.

NOT SO ROSY

Shares in body and bath fragrance business Trilogy hit a new low last week.

Shares in the company, formerly known as Ecoya, hit 61c. Candle business Ecoya debuted on the New Zealand sharemarket in May 2010 at $1 apiece with the backing of Geoff Ross and his investment company The Business Bakery.

Ecoya bought body care business Trilogy from Wellington entrepreneurs Catherine de Groot and Sarah Gibbs in late 2010 paying $20 million.

In May of this year the company was renamed Trilogy International. Gibbs remains a non-executive director.

This week she increased her stake in the business to 5.223 per cent jointly held between her and the Independent Trust Company.

The notice to the exchange reveals the shares were gifted to Gibbs from a trust associated with Catherine de Groot for nil value. Trilogy shares closed up 2c yesterday at 66c. At yesterday's price Trilogy is worth about $40.5 million.

INDEX SHAKEUP

ANZ Bank, Freightways and Guinness Peat Group have fallen out of the NZX's top 20 index. The companies will be replaced by Mighty River Power, Infratil and Xero from September 23.

- NZ Herald

Tamsyn Parker

Tamsyn Parker is the NZ Herald's Money Editor

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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