Sharechat Logo

Stock selection important in fairly valued NZ market, Morningstar says

Wednesday 9th July 2014

Text too small?

Bargains are hard to find in the New Zealand share market as it is fairly valued overall and the electricity sector has recovered to be trading close to fair value, according to Morningstar.

The research company has ‘hold’ recommendations on 76 percent of the stocks it covers and has no ‘buy’ or ‘sell’ recommendations, though it has seven ‘reduce’ recommendations.

Morningstar sees Telecom is its “best idea”, and says the market may be underestimating the value of the company’s turnaround strategy. The shares rose 0.2 percent to $2.695 today.

“We think the strategy will work and initial signs are promising,” Morningstar said.

It expects the company to maintain momentum in the mobile market with an aggressive pricing strategy, which is important as mobile contributes 33 percent of retail revenue and is a key for future growth. The sale of AAPT has cleaned up the group structure and reduced risk.

“A strong balance sheet provides scope for the company to consider new capital management initiatives during the next 12 to 24 months, assuming delivery of operational and cost savings target,” Morningstar said.

Fletcher Building is the most expensive stock Morningstar covers, trading at 1.36 times fair value.

Energy is the most expensive sector, with Z Energy and New Zealand Oil & Gas trading well above Morningstar’s fair value estimates.

The health sector has good long-term fundamentals due to the ageing population but Ryman Healthcare and Ebos Group are expensive. Fisher & Paykel Healthcare looks to be reasonable value because it is trading at 0.94 of Morningstar’s fair value estimate.

Stock selection is important in a share market that is currently fairly valued, the research company said.

The consumer discretionary sector is a mixed bag with SkyCity Entertainment Group, The Warehouse Group and Trade Me Group looking to be reasonable value.

SkyCity looks to be the best value but is not rated as a best idea by Morningstar.

“We still believe the market is underestimating the benefits of the Adelaide and Auckland casino expansions,” Morningstar said.

 

 

BusinessDesk.co.nz



  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:

SML - Synlait Milk Limited - Trading Halt of Securities
AIA - Auckland Airport announces board chair changes
AIA - Auckland Airport announces board chair changes
CEN - Tauhara commissioning progress update
FPH initiates voluntary limited recall
March 28th Morning Report
KFL Celebrates 20 Years of Excellence in Investment Mgmt.
SVR - Savor FY24 Earnings Guidance & Change in Banking Partner
NZK - NZ King Salmon Investments Limited FY24 Results
March 27th Morning Report