Sharechat Logo

Contact threatens to topple Telecom as biggest NZ stock

Friday 19th September 2008

Text too small?
Telecom, whose stock has fallen more than 60% in the past decade, is poised to be toppled from its reign as the nation's biggest public company by Contact Energy.

Shares of Telecom changed hands at as little as NZ$2.68 yesterday. The shares bought more than NZ$9.50 in early 2000. At today's price, the company has a market value of NZ$5.13 billion. Contact's market cap is NZ$5.05 billion.

Contact's profit growth profile may give it the edge over the next few years, as it embarks on an expansion of its generation capacity. The stock it rated 'buy' or `outperform' by six analysts who follow the stock. Earnings growth is forecast to rise 17% between 2009 and 2011, according to consensus estimates. By contrast, 10 analysts rate Telecom a 'hold', two say sell the stock and two rate it 'outperform'. Profit growth is forecast to stall over the next three years.

"Telecom's lost its gloss for good reason, its earnings are in decline," said Barry Lindsay, research manager at First NZ Capital in Wellington. "What appeals with Contact is electricity prices are rising and will continue to rise."

Telecom faces increased costs to comply with government regulation in a slowing economy with more competition from rivals such as Vodafone Group. Mobile revenue dropped 8.7% in the fourth quarter, the biggest decline of any Telecom unit, it said in July.

Government-imposed operational separation of the company's wholesale and retail units "will continue to significantly impact operating revenues, operating costs and capital expenditure," chief executive Paul Reynolds said. Its dividend this year won't carry imputation creits.

Telecom rose 2.2% to NZ$2.79 today, accounting for about 13.6% of the NZX 50 Index. Contact rose 0.8% to NZ$8.68, or 13.4% of the benchmark weighting, even though half of its stock is held by Origin Energy Ltd. Fletcher Building Ltd., in third place at 9.4% of the NZX 50, rose 2.9% to NZ$7.15.

Telecom's weight in the index has roughly halved from 30%

By Jonathan Underhill



  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

Telecom Corporation of New Zealand (TEL)
Telecom in drive to latch on to growing data usage with 4G mobile launch next month
Telecom lines up to buy 700MHz spectrum to extend reach of 4G network
Telecom backs setting copper prices until 2020, warns against getting too far away from input cost
Telecom puts $60M price tag on new Auckland data centre, Hawkins, AECOM win build
Telecom ends jobs purge, looks for ‘more sophisticated’ ways to save money
Telecom FY earnings fall to bottom of guidance range, sees unchanged dividend in 2014
Telecom takes spat with Vodafone to regulator after dropping court action
Telecom unbundling key to regulator's copper conundrum
Telecom lures customers to faster services in EPL deal