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Stocks to watch: AIA expansion an 'expensive experiment', Nuplex, PPP

Tuesday 26th January 2010

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The following stocks may be active on the New Zealand exchange after developments since the close of trading yesterday. 

Themes of the day: Investors’ appetite for higher yields returned amid speculation Ben Bernanke will be reappointed for a second term as head of the Federal Reserve this week. U.S. President Barack Obama added further support to the boost in sentiment as reports in America indicated he will use his State of the Union address on Thursday to announce a new stimulus package for middle-class families, as opposed to fleshing out his proposal for tougher regulations on banks’ risk-taking. Stocks on Wall Street edged up with the Standard & Poor’s 500 climbing 0.8%, while the New Zealand dollar inched up to 71.41 U.S. cents on the rising optimism. December’s credit card billings data today are expected to show a somewhat more subdued Christmas retail period than earlier expected.

Air New Zealand (AIR): The national carrier’s revolutionary new first class cabin and better sleeping-enabled seats for economy passengers are two innovations to avoid being part of an expected clean out of some airlines in the Asia area said chief executive Rob Fyfe. The changes are expected to be introduced in the next year, as the airline introduces new planes and overhauls its extremely competitive Tasman services. Its shares remained unchanged at $1.20 yesterday.

Auckland International Airport (AIA): The national gateway’s decision to buy a 25% share in North Queensland Airport is an “expensive experiment” Marcus Curley, a Goldman Sachs JBWere analyst, told the Sharechat website. He fails to see how a shareholding in the Australian airports materially enhances the effectiveness of route development in Auckland, and lowered his earnings estimate to the end of June 2010 by 5%. There are no synergy benefits between the Cairns and Auckland Airports, he said. AIA dropped a cent to $1.87 yesterday.

Freightways (FRE): The transport and logistics company has “a classic combination of high quality earnings and value,” Salvus Strategic Investments said in its quarterly report yesterday. Freightways has “considerable operating leverage to an economic recovery in New Zealand and growth opportunities in its information management division,” it said. The shares fell 1.2% to $3.32 yesterday. Salvus (SAM) traded unchanged at 74 cents.

Nuplex Industries (NPX): The specialty chemicals maker has advanced more than 7% in the past two sessions after announcing on Friday that it made a record first-half profit, lifted its full-year forecast and reinstated its interim dividends. The stock rose 3.1% to $3.30 yesterday.

Pan Pacific Petroleum (PPP): The oil explorer shed 8.3% to 44 cents yesterday, when it said its 15%-owned Lolotoe-1 well in the Timor Sea found no commercial quantities of hydrocarbons and will be abandoned. The nearby Lore-1 well was abandoned in December for the same reason. New Zealand Oil & Gas (NZO), which owns a stake in PPP, fell 1.3% to $1.58 yesterday.

Zintel (ZIN): Chairman Nick Gordon said in the company’s first-half report that costs of its acquisition of Cogent are “high” in the short term which will “significantly impact” profit in the year ending March 31. Still, the group “should enjoy considerably improved profitability in future years,” he said. The shares last traded at 40 cents on January 13.

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