Retailer and building business bright spots
AUCKLAND: Retailers and building sector businesses are expected to provide bright spots in the upcoming reporting season while tourism and border exposed businesses continue to do it tough.
A raft of major listed companies are due to release their largely halfyear financials from February 15 with all the major power companies expected to report as well as a2 Milk, Fletcher Building, SkyCity Entertainment and Auckland Airport.
Adrian Allbon, director of equity research at Jarden, said those companies that were tourismrelated and border exposed would have earnings results that were likely to have been hammered.
‘‘They will be down over 100%, which is what you would expect.’’
Mr Allbon said those companies included Auckland Airport, Air New Zealand and Tourism Holdings.
This time last year the Covid19 outbreak had only just started to become a big worry and company results largely did not reflect any of the impact.
‘‘This is probably the first season where you get quite a disparity in terms of earnings outlooks between the ones that are Covidexposed and the ones that are not.’’
Mr Allbon said it was difficult to recommend stocks like Air New Zealand when the company still had to sort out its capital structure.
‘‘We have got a sell rating on it and our target price is well below what the share price is at.’’
Mr Allbon said the likes of Tourism Holdings was a bit more up the spectrum as it was well managed. ‘‘They have done a great job on the capital base and it is essentially in hibernation mode.’’
Auckland Airport was also exposed but he said it was more debatable how attractive the shares were.
‘‘It is obviously a highquality infrastructure base. But we think it is a touch expensive, we think the earnings will fade a little bit as people push out their border assumptions. But fundamentally it is a stock we would like to own again at some point.’’
Jarden’s reporting season preview report picked Fletcher Building, Spark and Ebos as having the potential for upside.
Mr Allbon said this time last year Fletcher Building was shutting down its operations but now benefited from a booming housing market.
‘‘That is one where it is in this Goldilocks period where they had trimmed the cost base much more dramatically down to a Covidimpacted activity level, and actually the activity level has been much stronger than anyone expected.’’
He said seven or eight months ago everyone hated the stock at $3.50 and now it had the potential for further upgrades.
Mr Allbon said retailers will have benefited from strong domestic spending.
Freightways was expected to produce good result and was typically seen as a bellwether for the domestic economy.
Mr Allbon said Ebos could benefit from the vaccine rollout. ‘‘It is in Ebos’ competency set absolutely. The hard thing to know at the moment is how will the Government look to distribute it?’’
Analysts at Forsyth Barr were forecasting revenue growth of just 1.1% across the 39 companies they covered with a decline in earnings before interest tax, depreciation (ebitda) and amortisation of 0.8%.
Excluding forecasted lossmaking companies Auckland Airport, Air New Zealand, New Zealand Refining, Scales Corporation and Tourism Holdings, it expected revenue to be up 2.4% and ebitda to lift 5.8%.
Companies they expected to have a positive bias include Briscoe Group, Freightways and The Warehouse Group. — The New Zealand Herald