It's been a roller coaster of a week for Fletcher Building shareholders what with squashed rumours of a takeover followed by its $750 million capital raising via rights issue.

The company will come off a trading halt this morning allowing shares to trade again - but at what price? Shares in Fletcher Building last traded at $6.27 on Monday but have an ex-rights value of $6.

Craig Stent, head of equities at Harbour Asset Management, says it is hard to guess where the share price will go but he is hopeful the capital raising will allay some fears that had resulted in weak trading of late.

There was a small short-fall in the institutional take-up of the rights issue but not enough to be of concern.


The deep 23 per cent discount of the rights meant it was pretty attractive for shareholders to buy into.

But Stent says there are questions over why the company didn't move sooner given widespread concerns over Fletcher Building's capital structure.

"Maybe they should have done it two months ago when the price was a dollar higher," he suggested.

Fletcher Building shares were trading around $7.60 in early February but fell to a decade low of $5.76 earlier this month prompting fears it would fall out of the MSCI NZ index.

But analysts appear to be signalling that it is more likely to be upwards from here with Morningstar putting a fair value estimate of $7 on the stock and Citi a target price of $6.50.

Citi analyst Daniel Kang said in a note that the rights issue was a "painful but necessary decision".

"By using the proceeds to restore the balance sheet and adjust key debt terms Fletcher Building is aiming to permanently resolve its current debt covenant breaches."

Kang said the move would allow management to move forward with its restructuring strategy.



Part of the strategy is a re-trenching to focus on its Australian and New Zealand business with the proposed sale of Formica and its Roof Tiles Group.

Fletcher Building paid US$700 million ($947m) for Formica in 2007 buying it from private equity firms Cerberus Capital Management and Oaktree Capital Management.

There are wide estimations on the value of Formica with Citi's Daniel Kang believing it could be worth $1.2 billion based on its earnings before interest and tax being $100 million in the 2019 financial year.

But Morningstar's Adam Fleck is far less bullish valuing the two businesses at a combined $700 million.

The reality is probably somewhere in between those two figures but if Fletcher sells Formica for less than what it bought it for there will no doubt be some eyebrows raised at its decision to proceed with the sale.

Stent says one good thing about the capital raising is that it puts the company in a better position which means they won't be forced into a fire sale for the two businesses.

But questions remain over whether there will be any more fall-out from its building projects. It's hard for the company to give reassurances when many are only part way though.


Strong revenue growth at China's box office could be a boon for New Zealand's cinema software firm Vista.

Devon Fund Management's Tama Willis says news reports show China's box office totalled around US$3.2 billion in the first three months of this year - up 40 per cent year on year.

"In comparison, North America's box office (comprising U.S. and Canada) totalled US$2.89 billion in the same period.

"While Q1 is typically the strongest quarter in China due to Chinese New Year, we believe the current growth rate puts China on a path to surpass North America in the not too distant future."

Vista has over 40 per cent of the large circuit market globally including over 700 sites in China with a market share of 12 per cent.

A joint venture with Vista China in 2017 boosted revenue by 70 per cent to $17m in 2017 and Willis believes the ongoing increase in box office figures along with the potential for large market share growth puts Vista China in a very strong position.

"We believe the potential to build a significant Chinese business with third party ticketing customers linked to Tencent and Alibaba does not appear to be fully reflected in market forecasts."

Vista Group is expected to increase its stake in Vista China to 47.5 per cent after recently acquiring a further 7.9 per cent which Willis says will allow the group to consolidate the business into its financial accounts by mid-year.

Willis believes this would potentially drive revenue growth up by more than 30 per cent. That would be above the 20 per cent revenue guidance the company has already given for 2018.

Shares in Vista Group closed on XX yesterday and were up/down Xc over the last year.