By Jenny Ruth
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Sunday 12th December 2010 |
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Fisher & Paykel Appliances Holdings' shares are being priced based on its near-term earnings outlook with any earnings recovery being heavily discounted, says Greg Main, an analyst at First NZ Capital.
"While Fisher & Paykel is reliant on a bounce back in consumer spending, which could take a while, even based on the relatively undemanding assumptions around financial 2012, Fisher & Paykel continues to be conservatively valued," Main says.
He has lowered his 12-month target price for the shares to 67 cents from 70 cents to reflect the weaker near-term forecast for the appliances division.
The division's first half earnings before interest, tax, depreciation and amortisation (EBITDA) fell 12.3% to $22.9 million, well below Main's forecast of $36.5 million while the finance division's 40.5% rise in EBITDA to $23.1 million was above his $20.2 million forecast.
The company downgraded his guidance for the appliances division because of weak markets. That was even though the division had increased its gross margin, "thus indicating when things improve that operating leverage should be strong."
Until there's evidence of consumer spending recovering in the company's key New Zealand, Australian and North American markets its shares are likely to trade sideways, Main says.
"We would expect good leverage to any recovery when it does arrive."
Rating: Outperform.
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