Craigs Investment Partners still has a 12-month price target on Fletcher shares of $9.85, when they last traded at $8.03.
Craigs broker Chris Timms said yesterday Fletcher chief executive Mark Adamson was subdued during his Macquarie presentation.
Much had been expected from the opportunities in Australia but Mr Adamson ''poured cold water'' on the suggestions of market growth in the presentation, Mr Timms said. Mr Adamson said there had been a downturn in residential activity in Australia and commercial construction activity was likely to remain weak in the second half of the financial year.
Cost reduction initiatives would partly mitigate the impact of continued weak underlying trading conditions.
In New Zealand, the uplift in housing consents in the first half should lift the performance of businesses exposed to the residential sector. Infrastructure projects continued to underpin non-residential activity and reconstruction work in Canterbury was expected to remain at high levels, he said.
Any improvement in Asia was dependent on an expected upturn in China; an improvement in North America was expected in the second half but depressed conditions were likely to remain in Europe, Mr Adamson said.
Australian brokers became negative about Fletcher's growth position, and their concerns were echoed by international investors, who sold out of the stock.
Mr Timms said Mr Adamson did not change Fletcher's full-year earnings guidance range of $560 million to $610 million, in line with Craigs' forecast of $606 million.
''We believe this is positive, as there has been some concern around the ability to achieve the implied second-half earnings growth of 21.8% year-on-year.''
Mr Timms said the Canterbury rebuilding was on track and its size had increased by 33%, to $40 billion from $30 billion. While further details on the revised rebuilding number would not be available until next week's Budget, the increase would almost certainly favourably affect Craigs' rebuilding assumptions by a similar 33% magnitude.
''We believe Fletcher Building is a buy, given strong leverage to a recovering New Zealand housing market, leverage to the Australian housing recovery set to start in the fourth quarter, significant focus on cost reductions, leverage to the Canterbury rebuild and valuation. There is a 15% upside to the current share price, based on our target price,'' Mr Timms said.
