Stocks to watch: Telecom, Contact Energy, Tenon

Friday 12th February 2010

Earnings season starts in earnest today with Telecom reporting its second quarter net profit, up 1.7% to $425 million. January retail sales and Real Estate Institute residential property sales figures are due out today, and are expected to reflect patchy consumer sentiment, especially ahead of property tax changes.

Telecom (NZX: TEL ): The nation’s biggest phone company described a 1.7% rise in net profit of $425 million for the three months to 31 December as "solid" in results posted with the NZX this morning. Six month EBITDA fell 1.4% to $872m, with a 6.5% decline in revenues outstripped by cost containment. Tough trading conditions and the impact of two recent outages in the XT network is not changing earnings guidance from the previous range of negative 1% to growth of 2% for the full year, although the expectation is now in "the lower half of that range".
The shares rose 0.9% to $2.31 yesterday;

Contact Energy (NZX: CEN ): The biggest utility on the NZX 50 disclosed it is raising tariffs for around 75% of its 479,000 customers by around 5%. Customer losses and unprecedented retail market competition since late 2008 may have reduced investors' confidence that Contact can execute price increases ahead of the market without sustaining further customer losses, said Andrew Harvey-Green, an analyst at Forsyth Barr. State-owned retailer Mercury Energy is also raising prices and other SOEs are expected to follow CEN's lead as market circumstances allow.
The stock fell 2.4% to $5.66 yesterday.

Cynotech Holdings (NZX: CYT ): The Commerce Commission intends to proceed with an action against its Budget Loans unit for alleged breaches against the Fair Trading Act in relation to non-disclosure of letter fees, charging interest after re-possession of goods and applying goods to contracts as security after repossession. The matters raised affect 61 loans out of our total portfolio in excess of 5,000 loans, the company said.
The shares were unchanged at 7.7 cents yesterday.

L & M Energy (NZX: LME ): The company said yesterday that it hopes its latest acquisition of seismic data at its South Taranaki onshore location will this time prove profitable. The Wellington-based company expects to acquire 54km of 2D seismic data over 10 days if current weather conditions continue on its almost 500 square kilometer permit 51151. It contains a number of previously identified oil and gas leads, and after data processing, work will delineate drillable targets said managing director John Bay.
The stock fell 6.3% to 15 cents yesterday.

Steel & Tube Holdings (NZX: STU ): The distributor of steel building supplies such as reinforcing rods yesterday said that first-half profit tumbled to $3.17 million from $20.8 million a year earlier. Profit missed some estimates and chief executive Dave Taylor said the sustainability of any pickup in activity “is still uncertain.”
The shares fell 2.5% to $2.69 yesterday.

Tenon (NZX: TEN ): The wood products processing, marketing and distribution business was scheduled to report first-half results yesterday.
Tenon shares were unchanged at 84 cents.

Economic themes of the day: European markets were jittery overnight as the EU continued attempts to stitch together a united approach to any sovereign bond commitments that might emerge to help bail out the Greek economy. The Greek government has yet to move beyond rhetorical acknowledgement of the need to act.

US stocks received a boost from signs that the economy was continuing to heal with jobless claims falling faster than expected and home sales advancing in the fourth quarter by 14%.

Businesswire.co.nz

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