KEY POINTS:
Opus International Consultants have confirmed First NZ Capital as lead manager for its float later this year and appointed Macquarie as co-lead manager. But given that First NZ is the sole lead manager, exactly what co-lead manager signifies is a bit of a mystery. Opus - the former Ministry of Works - could have an enterprise value of $170 million to $180 million, but staff are expected to retain a large portion of the business.
Still healthy
Fisher & Paykel Healthcare's steep drop in net profit in the last fiscal year and the cutting of earnings forecasts for the 2008 year haven't dented the confidence of analysts in the company, who are concentrating on the strong underlying earnings.
"Although FPH has been hammered by the strong dollar in recent years, the underlying business continues to go from strength to strength," wrote ABN Amro's Carolyn Holmes.
At Wednesday's profit announcement, FPH cut its forecast earnings before interest and tax in 2008 by 8 per cent to $75 million. But a lot of that is based on currency, and Holmes sees some potential upside.
"With FY08 guidance based on a US$0.73 rate, there is a good chance that guidance will be upgraded during the year on NZD weakness. Buy," she wrote.
ABN Amro increased its target price to $4.37 from $3.99.
Macquarie Research dropped its discounted cash flow valuation of the stock from $4.50 to $4.33 due to the lower guidance, but it retains its "outperform" rating and price target at $4.50.
"FPH's business is in just about the best shape ever, with very solid current performance and a number of emerging growth options," Macquarie's Steve Hodgson said in a note. "The only negative is the depressing impact the NZ dollar is having on current earnings, but we are happy to view this as transitory."
Shares in F&P Healthcare dropped 3c to $3.66 yesterday after a small rally on Wednesday following the result.
In the dark
Investors now have the chance to buy into the Pike River Coal mine, with the company finally issuing its prospectus this week.
But deciding whether to take part in the float - which is raising $65 million out of a total market capitalisation of $180 million - will be no easy task. There are no earnings forecasts in the prospectus and the section entitled "What returns will I get?" is unenlightening to say the least.
The company says because it's also listing in Australia and is a greenfield mining operation it is barred from issuing earnings forecasts.
The difficulty for Kiwi investors is that few of the local investment banks will be covering the stock. There's a lack of expertise here and analysts don't want to put their necks out.
"You're either going to be very right or completely wrong," said the head of research at one investment bank, who observed "just how volatile getting coal out of the ground can be".
But with a dual listing, there's a chance Aussie analysts might cover the stock.
More in reserve
Fletcher Building had little need to raise capital this week, but went ahead and raised $327 million anyway.
The fact that it chose to issue equity rather than fund the whole of the $1 billion Formica acquisition from debt points to just how acquisitive the company hopes to be. Clearly chief executive Jonathan Ling is retaining capacity in the company for further buys.
One analyst suggests that Fletcher - which now has $1.8 billion of debt - has capacity to make another acquisition for about $500 million. Another suggests that the company could turn around and make a buy of another $1 billion straight away if it wanted to, using its usual mixture of one-third new equity and two-thirds debt.
But don't expect anything too soon. This company has a rigorous five-point acquisition criteria and all the patience in the world - it won't buy anything unless it fits and is at the right price.
Having said that, should the assets of Australian building materials maker Rinker Group be broken up after the takeover by Mexico's Cemex, Fletcher might be buying sooner rather than later.
Shares in Fletcher Building hit a record high of $13.42 yesterday, before closing at $13.27, up 62c.
Big isn't always better
A look at the share price graph for PGG Wrightson is proof that following the big investors doesn't always pay off. The stock slumped to a low of $1.48 at the end of March as giant US fund The Capital Group sold out of its 5 per cent stake of the company.
Some investors might have wondered what Capital knew that they didn't. The answer, it appears, was "nothing". Eight weeks later and PGG shares are up 23 per cent at $1.82.
Today's the day - maybe
Shares in The Warehouse dropped as much as 10c early yesterday before recovering to $6.55 at the close of trade as investors became more concerned that the Commerce Commission would once again delay its decision into whether Foodstuffs and Progressive are allowed to buy the retailer.
It is understood the commission was asking questions of both supermarket groups as recently as early this month, raising questions about how far down the track its decision is. Foodstuffs and Progressive announced they were applying to be allowed to buy 100 per cent of the retailer late last year, which saw the shares climb steeply on hopes of a bidding war, but they've fallen from a recent high of $7.32 last month as the decision was delayed three times.
Each delay is seen as another pointer to a rejection of both parties, the thinking being that the commission is being particularly meticulous so that its decision will stand up in court. But the tea leaves could be wrong. Perhaps the tussle for the country's largest listed retailer will begin in earnest later today.
Sky is clearing
SkyCity Entertainment has been re-rated by the market after chief executive Evan Davies' presentation to analysts and investors on Tuesday, when the company said it would cut $33 million in costs and potentially sell some casinos and the cinema business.
First NZ Capital analyst Rob Bode - who in a note the week before called for "corrective action" - raised the price target on the stock to $5.70 from $5.25 and lifted the rating to outperform on the back of higher earnings.
"The presentation confirmed for us that management is firmly focused on turning performance around and that our view of earnings potential could be conservative," wrote Bode.
Such comments will be music to the ears of Davies, who had been facing increasingly strident calls for action from institutional investors. Whether it will be enough to mollify them before September's annual meeting remains to be seen.
Forsyth Barr also upgraded the stock by 4 per cent to $5.56.
"The successful execution of strategies provides upside to our earnings expectations and valuation," wrote analyst Jeremy Simpson.
SkyCity shares have already got a lift from the new strategy - rising from $4.85 at the start of the week to $5.18 at yesterday's close.