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NZ Top 50 in healthier state: rater

Monday 14th February 2005

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A number of unlikely companies appear in the top 10 of an index rating the financial health of the 50 biggest companies listed on the stock exchange.

Corporate credit and equity risk-rating researcher Rapid Ratings has released its third comparative risk report of the New Zealand Top 50 companies (by market cap).

The report indicates that the Top 50 Index is once again in a healthy state, investment grade and low to moderate risk.

On its rating scale the unweighted index average has increased from B4 61 in 2004 to B3 66.

Rapid Ratings says other encouraging signs indicating good health include:

  • Thirty-three companies (66%) rated at or above investment grade (B3 65) compared with 28 (56%) in the last report
  • Seventeen (34%) companies operating at their peak rating in the last 5-8 years, depending on company data available, compared with 11 (22%) in 2004
  • Twenty-nine (58%) companies rated at moderate or low risk (compared with 24 in 2004)
  • None are rated as high risk, compared with two in 2004.

“Our analysis shows that the New Zealand Top 50 is in good health and investment grade once again and has improved its overall risk profile," Rapid Ratings managing director Patrick Caragata says.

“Substantial increases in the number of investment grade companies, and more companies operating at their peak ratings, as well as fewer companies in the high risk categories are very positive signs.”

The top rated company on the index is Sky Television News, the pay television provider, which has a rating of A3 89, meaning it is a very low risk company with assets of high quality. The company has consolidated its 2004 rating, and is 48% up on the previous year (2003) when it was rated slightly below the investment grade threshold at B4 60.

Telecom (A3 87), Auckland International Airport (A4 82), FP Healthcare (A4 80) all rated in the Top 10. The two new entrants to the Top 10 are Restaurant Brands (A4 80) and Steel & Tube Holdings (B1 79).

The company which made the most significant turnaround in its ratings is wood products manufacturer Carter Holt Harvey, whose rating has improved to a current investment grade rating of B2 71, after successful restructuring.

Looking to the future, the number of companies with positive outlooks increased to 22 up 6% from 19 in 2004. For the same period, those with negative outlooks declined by 6% to 12.

"The fact that two-thirds of the companies making up the index have a positive or stable outlook suggests that the index may not have peaked yet," Caragata says.

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