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A 31 per cent fall in the shares of household appliance manufacturer Fisher & Paykel Appliances Ltd so far this year could make it a takeover target, according to a brokers' report.
Citi is the second broker to put forward the maker of high-end kitchen and laundry appliances as a target, after ABN Amro said last month that at the current share price it would likely come to the attention of prospective buyers.
"Fisher & Paykel's intellectual property library and production know-how must be a tempting target for potential acquirers," Citi analyst Blair Cooper said in a note to clients.
Shares in Fisher & Paykel have lost 31 per cent so far this year, compared to a 10 per cent fall in the benchmark top-50 index, and are the exchange's worst performer in 2008 due to a combination of tighter markets, rising costs and a stronger New Zealand dollar.
The shares last traded down 0.8 per cent at $2.35.
Citi said that at its valuation of $453 million, Fisher & Paykel would cost less than the annual research and development budgets of its much larger competitors, Whirlpool Corp, the world's No1 appliance maker, and Sweden's Electrolux.
Both of those companies would benefit from the F&P's premium brand and upcoming product releases.
Citi said it now expects F&P to post a net profit of $62.7 million in the year to March 2008, down 8 per cent from its previous forecast but higher than the $55.5 million in a survey of analysts by Reuters Estimates.
Higher raw material costs, lower sales and reduced earnings from its finance arm would all contribute to a lower profit, Cooper said. In 2007, F&P posted a net profit of $61.2 million.
For 2009, Citi cut its profit forecast by 21 per cent to $73.6 million.
Fisher & Paykel Appliances has been moving manufacturing operations to Thailand and the United States from New Zealand and Australia to cut costs and get closer to key markets.
F&P caters to the top end of the market, as opposed to mass-market rivals such as Whirlpool's Maytag, Electrolux and South Korea's LG Electronics.
- REUTERS
