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Stocks to watch: New Zealand equity preview

Tuesday 21st October 2008

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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: Stocks on Wall Street rallied, with the Dow Jones Industrial Average gaining 4.7% after Federal Reserve Chairman Ben Bernanke threw his weight behind additional bailout funds and a gain in the price of crude oil lifted energy related shares. In New Zealand, government figures today are expected to show inflation accelerated to 5.1% in the third quarter, the highest in 18 years. The central bank has said it expects inflation to start abating.

Air New Zealand (AIR): Demand for air travel has dropped, Geoff Dixon, chief executive of rival Qantas Airways, said at the launch of the carrier's 20 Airbus A380 superjumbos yesterday. Air NZ shares rose 1.2% to 84 cents yesterday, trimming their decline the past month to 22%. Qantas gained 5.7% to A$2.80 on the ASX.

New Zealand Oil & Gas (NZO): The oil producer has other assets that reduce its overall exposure to the sliding price of crude oil, such as its holding in Pike River Coal, First NZ Capital research manager Barry Lindsay said yesterday. The market "is placing a very low value on its assets," he said. NZOG stock was unchanged at NZ$1.08. Pike River, which reached its target coal last week, rose 5.2% to NZ$1.43.

RLV No. 3 (RLV): The shell company set up as a reverse listing vehicle said today it has a conditional agreement to buy the shares of Minera Varry SA, a company incorporated in Chile. Minera Varry owns a mining concession in Chile in respect of the excavation, processing and export of iron ore. On completion of the transaction RLV would be listed as Orion Minerals Group, it said. RLV last traded on July 25 at 1 cent.

Steel & Tube (STU): The shares tumbled 22% yesterday to NZ$2.82 as the potential premium of a NZ$4 a share offer evaporated. Australia's OneSteel abandoned its cash offer on Friday, citing increased market volatility and a more uncertain outlook for the target company. OneSteel rose 1.1% to A$3.55 on the ASX.

Telecom (TEL): The nation's biggest phone company led index gains yesterday, rising 6.8% to NZ$2.50 after sinking to a record low last week. At yesterday's price the stock has a dividend yield of 18% and is trading at about six times earnings. Australian rival Telstra has a dividend yield of 10% and trades at 13 times earnings. Telstra gained 4.8% to A$4.18 on the ASX yesterday.

Warehouse Group (WHS), Briscoe Group (BGR), Pumpkin Patch (PPL): Government figures yesterday showed growth in consumer spending on debit and credit cards stalled in September. Transactions excluding fuel and vehicle sales fell 0.4% from August. Warehouse was unchanged at NZ$3.87 yesterday and has gained 24% in the past month, on the prospects of a renewed takeover bid from Woolworths. Briscoe was unchanged at 74 cents yesterday and has dropped 15% in the past four weeks. Pumpkin Patch fell 3 cents to NZ$1.11 yesterday and is down 21% in the past month.

By Jonathan Underhill

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