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Stocks to watch: Affco, Air NZ, Contact Energy, GPG

Wednesday 22nd September 2010

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Affco's board has endorsed the takeover bid from Talley's, Air NZ boosted passenger numbers last month, while Contact Energy continues to lose customers and has fallen to a seven-year low. Guinness Peat has also appointed four independent directors.

Affco Holdings (AFF): The meat processor’s board endorsed a takeover bid from major shareholders Talley’s Group after the frozen food manufacturer declared the bid unconditional having secured Hugh Green Group’s holding in the company. That means shareholders will receive payment within seven days. The shares were unchanged at 36 cents.

Air New Zealand (AIR): The national carrier boosted passenger numbers 5.8% last month, and lifted its load factor, which is the percentage of passengers to seats relative to distance flown, 1.5 percentage points to 81.9%. The shares were unchanged at $1.29.

Contact Energy (CEN): New Zealand’s third biggest listed company continued to lose customers last month after the exodus slowed down, falling to a new seven-year low. The power company lost 2,500 electricity customers in August, taking its total to 474,000, the lowest since 2002, according to its monthly operation data. The stock fell 0.2% to $5.75 yesterday.

Guinness Peat Group (GPG): The investment company chaired by Ron Brierley has appointed four independent directors after Tony Gibbs left after protesting the proposed carve-up of the business. Incoming directors Mike Allen, Rob Campbell, Mark Johnson and Gavin Walker, will sit on an independent sub-committee to evaluate strategic options for the company. The shares were unchanged at 66 cents yesterday, and have declined 14% this year.

Fletcher Building (FBU): Shares in New Zealand’s biggest listed company have gained 12% since the Canterbury earthquake, amid heightened expectations for the construction sector. The entrance of iShares into the market has added to Fletcher’s attraction, with the world’s largest group of passive funds having a renewed interest in large cap stocks, according to Shane Solly, a portfolio manager at Mint Asset Investment. The stock rose 1.9% yesterday to $8.66.

ING Medical Properties Trust (IMP): The ANZ National-managed health clinic investor said it is conducting due diligence on Essential Healthcare Trust, an Australian health clinic investor managed by Orchard Capital Investments. The stock fell 2.3% to $1.25 yesterday.

Restaurant Brands (RBD): The fast food franchise operator yesterday posted second-quarter sales growth of 3.7% to $100.4 million on continued strong trading from its KFC stores. On a same store basis, sales rose 3.9% to $97.2 million in the quarter. The shares gained 3.2% to $2.59 yesterday and have risen 48% so far this year.

Steel & Tube Holdings (STU): The one-off net earnings gain from Canterbury's earthquake for Steel & Tube "is not very significant," according to Dennis Lee at Craigs Investment Partners, quoted on the ShareChat website. He says 75% of the $4 billion repair bill will go into construction work and about 5% of the construction cost is the steel input. This is expected to boost earnings in the year ending June 2011 by 2.2%, peaking at 4.2% in 2012 and fading to 1.2% by 2014. The shares rose 2.1% yesterday to $2.45.

Wellington Drive Technologies (WDT): The manufacturer of electric motors raised $7.7 million in a share purchase plan and private placement at a 17% discount. The company plans to use the proceeds to finance its expansion plans. The shares were unchanged at 8.5 cents.

Themes of the day: Wall Street eased lower after the Federal Open Market Committee said it may ramp up its asset purchase programme to deal with concerns about the low level of inflation in the world's biggest economy. The kiwi dollar climbed back over 73 US cents on the news as investors shed their holdings in the greenback. Statistics New Zealand is set to release second-quarter Balance of Payments data today, and economists predict the current account deficit will be 2.8% of gross domestic product, according to a Reuters survey.

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