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Stocks to watch: Contact, Fletcher, Michael Hill

Monday 23rd August 2010

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Contact Energy shares fell at the end of last week after the company's earnings announcement, Fletcher Building shares fell after it bought Australian Construction Products, while Michael Hill shares fell 4.4% after announcing a 60% decline in net profit.

Contact Energy (CEN): The biggest utility on the NZX fell 0.7% to $5.78 on Friday after the company reported underlying earnings of $150 million in the year to June 30, in line with expectations. Directors announced a reduced final dividend equivalent to 14 cents a share, bringing the full-year payment to 25 cents, down 3 cents on the year before. Underlying earnings per share fell 7% to 25 cents.

Fletcher Building (FBU): The company announced on Friday it has acquired Australian Construction Products, a roading equipment maker with A$20 million of annual sales. The shares fell 1.8% to $7.30 on Friday.

Michael Hill International (MHI): The retailer reported a 60% decline in net profit to $26.5 million on Friday. The year-earlier results included the $50.1 million tax credit. Operating earnings were up 38% to $36.2 million on sales and profit growth in its New Zealand and Australian operations. The shares fell 4.4% to 66 cents on Friday.

NZ Farming Systems Uruguay (NXS): The South American dairy operator is expected to report a net loss for the year when it releases its full-year financial results later today, according to a forecast from John Cairns, an analyst with Forsyth Barr Research. The result is anticipated to be an improvement on the previous period, but “uncertainty” remains over the takeover target’s $60 million farm development programme. Shares were unchanged at 63 cents on Friday.

Sky Network Television Group (SKT): New Zealand’s biggest pay-TV company reported a 16% increase in full-year profit as a lineup of sports events and tough economic conditions made TV a more attractive form of entertainment. The shares have declined 2.6% this year, outperforming the NZX 50’s 6.6% decline. They slipped 0.6% to $2.89 on Friday.

Steel & Tube Holdings (STU): The company was raised to ‘outperform’ from neutral’ by Kar Yue Yeo, an analyst at First NZ Capital, according to the ShareChat website. The stock is trading well below its $3 mid-cycle valuation. Uncertainty about the recovery of the housing market and the length of the slump in non-residential is now reflected in the stock price, he said. The stock fell 2 cents to $2.22 on Friday.

Allied Farmers (ALF): The company's shares sank 3.7% to 2.6 cents on Friday as its Allied Nationwide unit was placed in receivership. Allied's chairman, John Loughlin, has resigned in the wake of the announcement. The stock has shed more than 70% of its value this year. More than 95% of the stock is held by former investors in Hanover and United.

Themes of the day: Concerns that America's economic recovery is faltering outweighed the impetus of a better-than-expected US corporate earnings season. The S&P 500 Index fell 0.4% on Friday. International markets are expected to focus on key economic numbers from the US this week, with data due on new home sales, home resales and durable goods orders for July, as well as the first of two revisions to the second-quarter economic growth rate. The US government's estimate of GDP is expected to show a 1.4% increase in the second quarter, down from the 2.4% gain estimated a month ago.

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