FYI | May 29 2006
By Chris Shaw (Tokyo)
A result in line with expectations is not usually enough to see a stock upgraded, but in the case of Fisher & Paykel Appliances (FPA.NZ) it was at least enough to give the market increased confidence in the trend for earnings estimates in future years.
ABN Amro made such a point in its review of the company’s profit result, which at NZ$63.9m (or NZ$62.2m when a NZ$1.7m abnormal is eliminated) was in line with the broker’s forecast. It has not changed its Hold recommendation or target price and valuation of NZ$4.43, but suggests the company now appears better placed to deal with any further weakening in trading conditions. The broker points out though the improved outlook appears to be priced into the stock at current levels.
Like ABN, GSJB Were is anticipating improved results going forward, this improvement to be driven by the appliances division thanks largely to its growth in the US market. The broker cut its earnings estimates, a litlle, and sees the company as being well placed to deliver a sustained period of earnings growth despite the competitive pressures being faced in the finance division. The broker rates the stock as Marketperform, L/T Buy with a valuation of NZ$4.31.
Credit Suisse suggests the market is likely to react positively to the result as it means the company is closer to a year where it makes no downgrades to estimates or even lifts estimates slightly. Current guidance for FY07 is for a profit of between NZ$75-$80m, though the broker notes this remains dependent on exchange rates and raw material costs.
Credit Suisse has retained its Neutral rating but lifted its target price to NZ$4.30 from NZ$3.80, while increasing its valuation to NZ$3.93 from NZ$3.53. Citigroup in contrast has upgraded its rating to Hold, suggesting this is justified by recent weakness in the share price.
It too has cut its forecast for FY07 slightly, but notes this reflects only a different exchange rate forecast to that used by management in its guidance. The broker’s valuation is NZ$4.05.
The last closing price for FPA was NZ$4.25.