Daily ShareChat: TrustPower

TrustPower's first-half results are a case of "heads or tails, TrustPower wins," says Goldman Sachs JB Were analyst Matt Henry.

Its operating earnings rose 13.3% and net profit was up 6.2% despite a 75% lower wholesale electricity price and a 9% decline in New Zealand generation output, Henry says.

The results were highly creditable, "particularly given the considerable pressures in both the wholesale and retail markets," he says.

"The result highlights the positive qualities of both TrustPower's generation portfolio and retail customer base. These qualities allow TrustPower to flex its generation portfolio to maximise earnings through the volatile cycles of the New Zealand electricity market."

Henry has upgraded his forecasts, principally to reflect the company's stronger retail tariff growth. He raised his earnings-per-share forecast for the year ending March 2010 by 6.4% and his 2011 forecast by 9.4%.

"We expect the normalisation of wholesale prices and generation output to provide medium-term earnings growth for TrustPower."

But though he has a positive long-term view of both TrustPower and the New Zealand electicity sector, Henry expects in the near-term the stock will be constrained by generally negative industry news.

This will include a weak wholesale market, retail competition and regulatory risks, including any moves to remove barriers to retail competition.

BROKER CALL:  Goldman Sachs JB Were rate Trustpower as hold.

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