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.
No comments yet
Steel & Tube Fy20 Trading Update
Further Contract Win Strengthens Scott Technology’s Position In Mining Sector
China’s Assertiveness Is Becoming a Problem for Its Friends, Too
New Talisman - Chairman’s Address to AGM 2020 August 6, 2020
T&G reports its 2020 Interim Results
Gold price hits $2,000 for first time on Covid
TruScreen strengthens its market presence in central and eastern Europe
Refining NZ announces non-cash impairment
Ryman Healthcare COVID-19 update Victoria
Talisman Quarterly Activities Report to 30 June 2020