NZ shares rise as Fletcher Building hikes forecast

Fletcher Building led the local market higher after beating earnings expectations, while global indices rallied on the perception Russia may be walking back its Ukraine threat.

Wednesday, February 16th 2022, 7:30PM

by BusinessDesk

The S&P/NZX 50 Index rose 183 points, or 1.5%, to 12,121.65. Turnover was $115 million.

Shares markets around the world had generally moved higher over the past 24 hours as investors welcomed “cooling geopolitical tensions,” said Tina Teng, a CMC Markets analyst.

The US dollar weakened with investors sensing less risk of fallout from the crisis, which helped the NZ dollar gain a little ground – trading at 66.40 US cents from 66.22 yesterday.

Peter Cavanaugh, managing director at Independent Treasury Advisors, said currency traders were nervous with both economic and geopolitical risks “simmering in the background”.

He said investors were particularly concerned about the Russia and Ukraine crisis, which remains tense despite the Russian president claiming to have withdrawn some troops from the border.

The market rally may have been premature with officials from the United States and Ukraine saying they had not verified the claim and that an invasion remained possible.

Strong corporate earnings were driving the local market higher as much, if not more, than global events.

Fletcher Building jumped 6.7% to $6.70 after it said full-year earnings would likely be higher than analysts had expected.

The construction firm is forecasting full-year ebit before significant items to be about $750m, above analysts' consensus which Bloomberg had set at $715m.

Hobson Wealth Partners director, Brad Gordon, said net profit up 41% in the first half was a solid, but not wholly unexpected, result.

“In terms of share price, it's only regaining some of the ground that's lost in the last month,” he said.

Fletcher shares had fallen more than 12% in the month leading up to the result and are still down 7.3% after today’s rally.

Pharmaceutical company Ebos Group reported net profit up more than 7% – at A$102m – sending its share price up 3.4% to $39.39.

Chief executive John Cullity said the business was benefitting from pandemic related demand and it had delivered 23% of all covid vaccinations in Australia.

Vista Group International climbed 2% to $2.09 after it announced the acquisition of an entertainment software company it said will help it grow its market share in the US.

Some other technology stocks also gained: Plexure Group jumped 5.2% to 40.5 cents – bouncing from a year low yesterday – and Rakon was up 3.4% at $1.81.

Shares in Infratil were up 1.3% to $7.85 today, continuing to climb after its investor day yesterday.

Forsyth Barr analyst Aaron Ibbotson raised his target price to $9.20 on a strong growth outlook for its data centre business and a $290m increase to the valuation of its stake in Longroad.

“We have only added 5 cents to our target price, but this should be viewed in the context of a broad-based de-rating of portfolio asset peers used for valuing Vodafone and CDC,” he said.

Ibbotson said the firm had signalled it would invite a minority investor to buy a chunk of Longroad to showcase its value to the market.

“Infratil is getting somewhat impatient with what it considers the market's lack of appreciation for its first-class assets,” he said.

Forsyth Barr also warned investors not to expect much good news in Auckland Airport’s first-half earnings report next week, with further underlying losses on the cards.

The airport is at risk of breaching a banking covenant in June, however, Forsyth analysts expect its bankers would be understanding and not enact significant penalties.

Eroad had the index’s biggest decline, falling 2.3% to $4.20.

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