Investor confidence has been repaid as billions flow back
into Fletcher Building's market capitalisation, buoyed by
housing and construction in New Zealand, Australia and the
Fletcher shares, which were hammered down to about $5 during
the global financial crisis and haemorrhaged billions in
market capitalisation, are now closing in on a five-year
share price high as good news gathers momentum and underpins
the surge in value.
Since late July's year-low of $5.77, Fletcher shares had
steadily gained to pass through $9 last week and were
yesterday trading around $9.20 - an almost 60% gain on July.
Fletcher shares continued to rise during the day, finishing
up 1.6% at $9.30.
Fletcher's shares had been plagued by the slow uptake of work
in the Canterbury rebuilding effort, where it is the lead
contractor, and also volatile and flagging construction data
from Australia and the United States. Its shares had declined
from $9.28 in April 2011. Yesterday's $9.20 price put its
market capitalisation at more than $6.3 billion, Craigs
Investment Partners broker Peter McIntyre said.
''Investor confidence has been repaid. It's a cyclical
business, which its investors understand,'' Mr McIntyre said.
Evidence of that understanding was in March-April 2009, when
its shares traded from $5.06 to $6.20 and it raised $605
million - an institutional placement of $505 million and $100
million from a shareholder placement.
''Fletcher's has a very supportive shareholder base, which
was invaluable [for Fletcher's] at the time of the funding
crisis,'' Mr McIntyre said.
Its forward order book remained ''in good order'', with well
over $1 billion of work, he said.
The company told shareholders at its annual meeting in
November its earnings growth for 2013 could be beyond 20%,
from new home construction, but they were cautioned that any
downturn in Australian work could prompt a downgrade of those
Mr McIntyre countered that, saying the Reserve Bank of
Australia had slashed its interest-driving cash rate to 3%
and the likelihood of another cut shortly could further buoy
construction in Australia.
Operating earnings guidance, for the year to this June, was
estimated at between $560 million and $610 million, an
increase of between 12% and 22%, compared to the 2012 result.