Stocks to watch: Contact, TrustPower, Infratil, PGC, IMP, TLS

Friday 12th March 2010

Brokers believe that the worst might be behind Contact Energy and Pyne Gould's, MARAC Finance, has been granted an extension under the deposit guarantee scheme. Trustpower sees one more year of intense retail electricity competition ahead and Infratil briefs its investors on the company's focus. Maintenance of the OCR at 2.5% is strengthening the view that the divergence between the Australian and New Zealand currencies may widen.

Contact Energy (NZX: CEN ): Broker reports are emerging on CEN's half-year profit, announced February 23. Analysts at Macquarie and Goldman Sachs JB Were believe the worst is behind CEN after major customer losses and a broken hedging strategy until the Cook Strait cable is fixed in 2013. Macquarie is rating CEN "outperform". CEN shares have bounced up sharply since February 19, when they were hovering near a 52 week low of $5.40, closing yesterday at $6.13.

TrustPower (NZX: TPW ): The utility controlled by Infratil yesterday said it expects electricity market reforms to drive customer churn as state-owned electricity retailers ditch and replace customers in different areas, reflecting asset swaps ordered in a December review by Energy Minister Gerry Brownlee. The shares were unchanged at $7.15 yesterday.

Infratil (NZX: IFT ): Infratil briefed investors yesterday about returning its focus "with an energy bias" to Australasian assets. Its purchase, with the New Zealand Super Fund, of the downstream assets of Shell New Zealand is expected to complete in early April, although material matters remain outstanding. IFT shares were down 1 cent to $1.65 yesterday.

Pyne Gould Corp. (NZX: PGC ): The firm's MARAC Finance unit has been approved under the extended Retail Deposit Guarantee Scheme, the company said yesterday. The extended scheme covers deposits through to the end of 2011. The shares were unchanged at 47 cents yesterday.

ING Medical Properties Trust (NZX: IMP ): The trust’s manager yesterday announced the the unconditional sale of the Central Hawkes Bay Health Centre in Waipukurau for $4.3 million. The sale price was about 6% above its June 30 valuation and the proceeds would be used to repay debt, reducing gearing to about 33% on settlement in June. The shares were unchanged at $1.20 yesterday.

Telstra (NZX: TLS ): Australia’s opposition is fighting a federal government bill that would split up that nation’s biggest phone company as a precursor to the rollout of a A$43 billion broadband network. The shares climbed 2.8% to $4 in the NZX yesterday.

Economic themes of the day: The potential for the Chinese economy to overheat has become the global economic talking-point since yesterday's release of unexpectedly strong February inflation figures.

Tighter Chinese monetary policy and a stronger yuan would be welcomed in the US, whose indebtedness to and trade imbalance with China is exacerbated by the artifically low yuan.

In New Zealand, maintenance of the Official Cash Rate this Thursday at a record low 2.5% is strengthening the view that the divergence between the Australian and New Zealand currencies may widen, with positive short term competitiveness benefits for exporters to New Zealand's largest, highest value export market.

Businesswire.co.nz

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