Haley Van Leeuwen.
Fletcher Building shares have hit a 20-month high, but
the forecast strength of the New Zealand dollar against its
United States counterpart could erode long-term after-tax
While the share price, up more than 5% during the past week
after climbing to $8.86 yesterday, reflects strong investor
confidence, the kiwi's predicted strength this year has seen
Craigs Investment Partners pare back after-tax profit
expectations for 2013 and 2014, respectively by 0.7% to $337
million and 0.9% to $503 million.
Economists have suggested the kiwi will be unlikely to spend
much time below US80c this year, while Craigs broker Peter
McIntyre yesterday said an earlier forecast of an average
US81.4 this year was revised up a further 1.4% to US82.5c.
''What's been driving the price is investors looking for
[dividend] yield and security; which is coming from the
Christchurch rebuild and the more than $1 billion backlog in
work orders,'' Mr McIntyre said yesterday.
Forsyth Barr broker Haley Van Leeuwen said key short-term
drivers were Christchurch rebuilding and general construction
recovery - reflected in the share price.
''We expect building activity in New Zealand to begin a
sustainable recovery in full-year 2013 ... resulting in an
uplift in earnings lift over the next few years,'' she said.
While rating Fletcher stock as ''accumulate'', Ms Van Leeuwen
was targeting an entry point below the price now.
The stronger kiwi forecast had impacted on Craigs estimates
of Fletcher's division Laminates and Panels and also its
Crane Group (an Australian acquisition), prompting a 12-month
price target downgrade from $9.33 to $9.24.
Mr McIntyre said investors were aware of some Australian
construction companies performing well, and the positive
exposure of Fletcher to housing shortages in Christchurch and