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Stocks to watch: New Zealand equity preview

Thursday 17th July 2008

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The following stocks may be active on the New Zealand exchange after developments since the close of trading yesterday.

Themes of the day: Oil extended its decline. US futures traded at US$134.60 a barrel and are now $13 below last week's record. US inflation sped to the fastest pace since 1991. US stocks gained. In New Zealand, the central bank will probably keep interest rates unchanged at 8.25% at its meeting next week, according to 8 of 12 economists in a Good Returns survey. Three predict a 25 basis point cut.

Air New Zealand (AIR): Pilots at the Air Nelson subsidiary of the national airline plan a three-day strike this weekend over stalled pay talks. The pilots want the airline to agree to roster changes that the carrier says would mean hiring more pilots at a cost of more than NZ$4 million a year. The stock has fallen more than 40% this year amid a surge if fuel costs and last traded at NZ$1.10.

Allied Workforce Group (AWF): The provider of casual labour "still enjoys a very strong balance sheet," the company told shareholders at their annual meeting yesterday. "This position leaves all growth prospects requiring capital as real options," it said. The shares have dropped 28% this year and were last at 72 cents.

Fletcher Building (FBU): New Zealand's largest building products maker may be a takeover target for Australian rival Boral Ltd. after it shares more than halved since October, the New Zealand Herald reported. Boral may be attracted to Fletcher because of its lack of exposure to the New Zealand market, according to Forsyth Barr research head Rob Mercer, the paper said. Forsyth Barr values Fletcher shares, which traded at NZ$6.04 yesterday, at NZ$11.95.

New Zealand Oil & Gas (NZO): The price of oil has dropped US$13 from its high last week. NZOG owns 12.5% of the Tui oilfield. The stock has gained 10% in the past month.

Rakon (RAK): The designer of components for navigation systems today announced the confirmation of a joint venture with China's Timemaker Crystal Technology Ltd., the world's biggest manufacturer of high specification quartz crystal blanks, the key component in crystal resonators. Rakon said the JV, of which it will own 70%, is its best option for expanding production in China. It will also take 40% of Timemaker. The shares have fallen 45% the past year to NZ$2.60.

Xero (XRO): The online accounting system provider said today the start of automated daily imports of bank transactions for Xero customers who bank with Westpac Banking Corp. Xero, whose directors include cashed-up Trade Me founder Sam Morgan, said the service allows small businesses to have a real time view of their cash flow. The shares last traded at 90 cents and are unchanged the past 12 months, while the NZX 50 Index has slumped 28%.

By Jonathan Underhill

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