Tuesday 22nd April 2014
|Text too small?|
Shares in Warehouse Group, New Zealand's largest publicly listed retailer, rose to a six-week high after the stock was upgraded to 'buy' at brokerage Craigs Investment Partners.
Warehouse jumped 1.8 percent to $3.32, its highest since March 10. That's a discount to the stock's 12-month price target of $3.64, Craigs analyst Chris Byrne said in an April 17 note where he upgraded his recommendation from 'hold'.
Under chief executive Mark Powell, who notches up three years in the job next month, Warehouse is investing in its core 'red shed' stores and has bought 11 businesses in the past 18 months as part of a plan to grow the 'non-red' side of its business to be as large as the general discount stores. While investors are questioning when the investment will translate into higher profits, the retailer's expansion into financial services by buying the Diners Club business last month is a good strategic move, Byrne said.
"Warehouse has announced that it plans to be a leading retail financial services company within five years," Byrne said. "We are of the view that this is a good, low-risk strategy given Warehouse's ability to build a business of scale."
Auckland-based Warehouse aims to build a finance book worth about $600 million by 2020. Based on the earnings of Fisher & Paykel's finance business, which was a similar size, Warehouse could build a finance business worth $68 million to $90 million in that time, Byrne said.
The business doesn't appear to be overly risky and is an opportunity that Warehouse "should not pass up", Byrne said.
No comments yet
NZ dollar stalled amid uncertainty about US rate cuts
RBNZ a 'poor communicator' - CBL's Harris
Methane reduction target could be catastrophic - Fonterra Shareholders' Council
Greater role for gas in electrification of transport, industry
Chorus sees growth in high value gigabit fibre plans
Arvida gets 87% uptake in $92 mln rights offer
NZ dollar weakens after US retail sales boost greenback
17th July 2019 Morning Report
Dairy product prices gain for first time in five auctions
MARKET CLOSE: NZ shares fall in listless trading; power companies gain