KEY POINTS:
Fletcher Building, New Zealand's largest listed company as measured by annual revenue, has been one of the hardest hit blue chips in the sharemarket meltdown.
While it began the year well down on the $13.42 high it hit in May last year, since the beginning of 2008 its share price has fallen 17 per cent against the benchmark index's 10 per cent decline.
Hamilton, Hindin Greene broker Grant Williamson said the company had been hit harder than the wider market because of housing market weakness in the US where it acquired the Formica business last year, and also because of the local housing market outlook.
Williamson still expected a very solid half-year result from the company next week, "of course the market will be looking past that and whatever the directors say about the following six months will be very important".
"In my opinion the sell down is overdone but there's no sign of it letting up at this point and it's possible it may decline further, even if it posts a solid result."
Williamson believed at least some of the recent selling pressure was due to investors locking in profits from what has been a very good performer.
That view was echoed by Forsyth Barr head of research Rob Mercer who pointed out high "beta" stocks like Fletcher, which have outperformed the wider market in good times, are more likely to underperform when the going gets tougher.
Mercer, who pointed out in a recent research note that Fletcher's earnings are travelling ahead of last year, yesterday said the company's Australian divisions were performing ahead of expectations, and were likely to make up for any softer performance out of the US, including Formica. Furthermore, he believed expectations of a softer local residential building activity were overcooked and in any case, Fletcher had a significant pipeline of non residential activity which would take up the slack.
Forsyth Barr values Fletcher stock at $14.67, and given that the stock is trading at a huge discount to that, yesterday closing down 29c at $9.53, is maintaining its "buy" recommendation.
Debt is in
Last week Stock Takes reported Direct Broking's bullish view on listed debt securities given the equity market angst.
Market operator New Zealand Exchange's January operating metrics confirmed there was a surge of activity on the NZDX debt market during January with the number of trades up 20 per cent on a year ago and the value of those trades up a huge 147 per cent.
However, NZX's head of markets Geoff Brown wasn't convinced this was evidence of investors switching from equities into debt securities. He believed any material switching was out of unlisted finance company fixed interest offerings or out of listed securities that were regarded as being of lesser quality.
" I think there is now a growing appreciation of the quality of those products that are listed on the NZDX as well as a recognition of the ability to actually trade these things.
"If your circumstances change or if your perceptions of the risks associated with your investment change then you can simply sell out."
"Those things are starting to become more appreciated," said Brown, who admitted he'd never owned a debt security in his life and heads for the bank when he has a cautious investment outlook.
Going Dutch
One of the banks nervous investors have clearly been heading for is Raboplus. The global head of internet direct banking at Raboplus' Dutch parent Rabobank, Gert Bouwman, was in New Zealand this week taking a look at how the local business was tracking and formulating objectives and targets for the coming year.
Raboplus' funds under management here, including its PIE cash fund and the third party managed funds it offers via its website jumped by 300 per cent over the past two months to $33 million.
Bouwman and Raboplus' local boss Mike Heath said that looked to have occurred without a a lot of cannibalisation of its core online savings offering.
The vanilla online savings product itself has continued to grow apace, doubling in size in one year to about $5 billion. It is targeting further growth of about 50 to 60 per cent this year.
Rabobank has been relatively untouched by the credit market issues that have troubled other big European banks, some of the managed funds it offers access to have some exposure, but none of this has done anything to affect the bank's AAA rating, says Bouwman.
Rabo's rating is probably one of the key selling points for its online saving offering along with its two factor authentication security system which has yet to be breached by fraudsters anywhere.
In the Netherlands internet banking security is a big issue, with banks there contributing to a television advertising campaign informing the public about the dangers and remedies.
The Bankers Association has yet to tackle the issue with anything approaching the same enthusiasm.
Bouwman said a change of heart would be a good thing.
GPG hungry for next course
Since completing its acquisition of giant threads and haberdashery multinational Coats in 2003, Sir Ron Brierley's Guinness Peat Group has at times born a passing resemblance to an overfed python, temporarily immobilised as it digests a huge meal.
But with three takeover offers on the go at present, one each in New Zealand, Australia and the UK, GPG is back at the buffet table.
GPG's increased £34.6 million ($86 million), £11.50 a share offer for Newbury Racecourse in southern England lapsed on Wednesday after gaining just 5.55 per cent acceptance, which would have taken its stake to 26.34 per cent. It has yet to indicate whether or not it will try again.
In New Zealand, GPG's Turners & Growers has made a $2.10 a share offer for unlisted fruit producer Kerifresh after picking up 23 per cent of the company in a court-ordered sale of a stake held by managing director Alan Thompson and associated interests.
This is a resumption of Turners & Growers' tilt at the company after it suspended its $2 a share bid in October because of alleged breaches of the Takeovers Code by Thompson and associates.
The third takeover on the go is an A55c a share offer for Gosford Quarry in New South Wales. GPG holds 19.86 per cent of Gosford's shares.
GPG's modus operandi is to acquire part or all of the shares in underperforming or undervalued companies and use boardroom influence to extract or unlock value from them.
The Newbury and Gosford bids to some extent appear to be about unlocking the value of properties held by the companies, while the interest in Kerifresh appears to be driven by the synergies it offers for Turners & Growers.
GPG's Tony Gibbs downplayed the activity, saying it was business as usual.
Fine dining index could be measure of need for comfort food
While The Economist magazine's Big Mac index measures the purchasing power of currencies by comparing the price of the ubiquitous burger in various countries, the Langham Hotel is proffering an altogether different culinary economic indicator.
Anyone still concerned that the turmoil on international equity markets will continue into a meltdown ought to be assured by a release from the hotel this week titled "High-end restaurant diners refute doom atmosphere".
"Despite the widely reported down-turn in the economy, Partingtons at the Langham has experienced escalating demand from food-lovers looking for a full dining experience rather than a quick sit down meal," reads the release.
"As a result, Partingtons will open on Mondays for dinner service from 25 February 2008."
Then again, does this suggest that well-heeled investors regard a cup of tea and a lie-down as an insufficiently substantial diversion from market woe?
