Stocks to watch: Telecom, Contact Energy, Steel & Tube, Tenon

Thursday 11th February 2010

The first half earnings season kicks off in earnest today with reporting due from Tenon Holdings and Steel and Tube, while Telecom-watchers are reading the tea-leaves ahead of tomorrow's profit update as it seeks to undo the damage of two recent failures of its new XT mobile network.

Telecom (NZX: TEL ): The national telco operator reports its first half results tomorrow, including an update on how well the company was going on its target of 9% growth in mobile revenues following its XT launch last year. The figures will not include the impact of two serious XT network failures this year, which are expected to dent uptake as prospective switchers wait to see that the system is stable. NBR's website reports this morning that Fonterra has put its switch from Vodafone to XT on hold. Telecom has also informed the Commerce Commission that it is aligning the date for reductions in mobile termination rates with Vodafone's, to 1 October this year. Telecom had previously intended to implement the reductions on April 1. Macquarie Bank has emerged as beginning to have substantial shareholding in TEL, at 3.76%, in an announcement to the NZX this morning. TEL was down 1c to $2.29 yesterday;

Contact Energy (NZX: CEN ): The national electricity generator-retailer is increasing tariffs by 5% for approximately half its customer base, drawing mildly critical comment from Energy Minister Gerry Brownlee. Customer losses and transmission constraints have hit earnings, and the company has been ramping up the argument in favour of raising tariffs since New Year. The company reports its first-half result on February 23. CEN shares lost 5c in trading yesterday to close at $5.80;

Fletcher Building (NZX: FBU ): Some 8.7 million shares, or 1.4% of those on issue, changed hands in a single trade yesterday. Shares of New Zealand’s biggest construction company climbed 1.2% to $7.55, having declined 7% in the previous three months. “Someone has run out of patience and placed it (Fletcher) at a discount,” said Paul Robertshawe, who manages $250 million of equities at Tower Asset Management.

Horizon Energy Distribution (NZX: HED ): Eastern Bay Energy Trust, which owns 77.3% of the utility, suspended its takeover offer for the remaining shares while it seeks a High Court ruling on its rights under its trust deed. Its proposal was challenged by a local Maori trust. The trust has challenged the quality of disclosure to shareholders in a move by EBET to keep the company in local hands following a takeover attempt by Marlborough Lines last year. The shares fell 4.1% to $3.74 yesterday, having previously traded at or close to the $4 a share Horizon offer level;

Steel & Tube Holdings (NZX: STU ): The supplier of steel building products is due to post its first-half results today, and Forsyth Barr analyst Rob Mercer expects sales to drop 31% and reported profit to tumble 79%, reflecting lower steel prices and volumes. The shares fell 1.4% to $2.76 yesterday;

Tenon (NZX: TEN ): The wood mouldings company is scheduled to release its first-half earnings today. Tenon may break even before one-time items, according to Forsyth Barr analyst John Cairns. While the company appears to be able to sustain “bottom of the cycle earnings” there is uncertainty about recovery in its US market. The stock was unchanged at 84 cents yesterday.

Abano Healthcare (NZX: ABA ): The health clinic investor has “a very strong balance sheet and capital capacity to develop the many growth opportunities we see ahead” as a result of the sale of the New Zealand audiology business, chairman Alison Paterson said in its interim report. Yesterday the stock was unchanged at $5.70.

Cynotech Holdings (NZX: CYT ): Allan Hawkins’ Cynotech Securities had attracted acceptances for its takeover offer from holders of 11% of the shares, 2.37% of the convertible preference shares and 24% of the warrants of the listed company as of yesterday. The stock rose 2.7% to 7 cents yesterday.

Postie Plus Group (NZX: PPG ): The clothing retailer yesterday said it had a "significantly lower" loss in the six months ended January 31 than the $2.7 million reported for the same period in 2008 as sales rose and its margin widened. The stock yesterday rose 2.6% to 40 cents.

Economic themes of the day: Comments by the US Federal Reserve chairman Ben Bernanke were interpreted in overnight trading on international markets as indicating increasing willingness by the US central banking authorities to start normalising credit conditions over coming months.

Businesswire.co.nz

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