Fletcher shares low enough for a takeover?

Fletcher Building shares have dropped to a low point which could make them a takeover target, an analyst says. Photo/Supplied.

Fletcher Building's share price plummet last month after revelations of another unexpected profit downgrade has got some wondering if it is now a potential takeover target.

Fletcher shares sunk to $4.60 on Thursday last week - two days after its disastrous annual meeting and down-grade announcement.

That's the lowest the price the shares have closed at since July 2004 - just three years after Fletcher Building was split off from Fletcher Challenge.

Daniel Kieser, managing director of equity research firm ShareClarity says Fletcher Building's share price it is now trading beneath its book value.

"At some point it could become an acquisition target."

Kieser suggests potential buyers could include state enterprises like China Communications Construction, China State Construction or China National Building Materials.

"They each have operations in New Zealand and may want more exposure to the infrastructure and housing markets."

And they have deep pockets with China State Construction having $60 billion cash on its balance sheet and China Communications Construction with $8 billion cash.

Kieser said other potential buyers may include construction companies looking to diversify their interests like Hochtief who owns CIMIC in Australia or VINCI who owns HEB Construction in New Zealand; or global private equity firms like Bain Capital, Hellman & Friedman or the Carlyle Group who have invested in undervalued/turnaround Australian companies in the past.

Given Fletcher's down and out situation it's hard to know if shareholders would welcome a bidder as a white knight or see it as opportunistic.

Building consent data out this week showed continued strength in domestic construction activity, yet Fletcher's share price has struggled.

"Fletcher Building's share price is currently below where it was in the depths of the GFC," NZ Funds senior portfolio manager Josh Wilson said.

"But building consents - a key driver of Fletcher's business - are more than twice as high as then and show no signs of slowing," he said.

Wilson said the whole sector -- comprising Steel & Tube, Metro Performance Glass, Methven, Cavalier - has failed to capture the benefit of the building boom for shareholders.