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New Zealand Core Stocks - December 2016

This quarterly review we briefly profile MERIDIAN ENERGY LIMITED, GOODMAN PROPERTY TRUST, MAINFREIGHT & FISHER & PAYKEL HEALTHCARE.

MERIDIAN ENERGY LIMITED - PRICE $2.55 - FORECAST GROSS DIVIDEND YIELD 9.0%

Meridian is New Zealand’s largest electricity generator, producing around 30% of the country’s electricity from purely renewable sources (seven Hydro stations and five Wind farms in NZ and two Wind farms in Australia). This vertically integrated generator retails electricity to 357,000 customers in New Zealand and Australia through its two brands Meridian and Powershop.

Meridian is a well-managed company with a solid balance sheet and the lowest debt leverage in the sector. The Crown retains a 51% ownership in Meridian.

The recent pull back in the share price from $3.00 provides investors with an opportunity to buy this defensive stock at an attractive dividend yield.

HHG view Meridian as a core portfolio stock and rate it as a strong buy at current levels for yield investors.

GOODMAN PROPERTY TRUST - SHARE PRICE $1.19 - FORECAST GROSS DIVIDEND YIELD 6.9%

Goodman Property Trust (GMT), listed on the NZX, is an externally managed listed Unit Trust that invests in high quality industrial and business space property throughout New Zealand. It owns more than 19 investment properties, split between industrial and business parks (72%), office parks (20%) and development land. The high quality property portfolio has an occupancy rate of 96% and an average lease term of approximately 5 years.

Goodman Property Trust has a market capitalisation of around $1.7billion. Currently, the shares are trading at a slight premium to the NTA of
$1.20. With the New Zealand economy appearing to be resilient, Goodman is considered a core holding for a diversified portfolio of stocks and bonds.

GMT has a corporate credit rating of "BBB" from Standard & Poor's.

MAINFREIGHT - PRICE $20.40 - FORECAST GROSS DIVIDEND YIELD 2.72%

Mainfreight is a global supply chain logistics provider, specialising in the handling of freight that is less-than-container load, with businesses operating in 200 branches throughout New Zealand, Australia, Europe, Asia, and the United States.

Australasia is the largest contributor to, and the main driver of, group earnings, accounting for roughly 65% of total operating earnings. Its fortunes are inextricably linked to domestic and global trade volumes, which in turn is linked to economic conditions.

Trends in international freight are favourable for the company, including globalisation of trade, increasing e-commerce, and higher demand for less-than-container load delivery. Given this, and the potential of their international operations, we expect the international component of Mainfreight’s business to be a key driver of earnings growth over the next few years.

Mainfreight is a suitable addition for investors looking for growth, whilst remaining firmly in the blue chip category.

FISHER & PAYKEL HEALTHCARE - SHARE PRICE 8.39 - DIVIDEND YIELD 3.02% 

Fisher & Paykel Healthcare is a leading designer, manufacturer and marketer of products and systems for use in respiratory care, acute care, surgery and the treatment of obstructive sleep apnea. The company’s products are sold in over 120 countries worldwide. For more information about the company, call your advisor at Hamilton Hindin Greene.

RECORD HALF YEAR RESULT FOR FISHER & PAYKEL HEALTHCARE, EARNINGS GUIDANCE UPGRADED
In November Fisher & Paykel Healthcare Corporation Limited announced its results for the half year ended 30 September 2016. Net profit after tax was up 26% for the half at a record NZ$78.2 million. Operating revenue was NZ$425.2 million, 12% above the prior comparable period, or 16% growth in constant currency.

Chief Executive Officer Lewis Gradon said, “We are very pleased with the record results achieved in the first half of the year, as we continued to execute on the delivery of innovative technologies that improve care and outcomes in hospital and homecare settings. Based on our positive first half performance we are today upgrading our full year earnings guidance and we now expect, at current exchange rates, for full year net profit after tax to be towards the middle of a NZ$165 to NZ$170 million range.”

The company’s directors approved an increased interim dividend of 8.25 NZ cents per ordinary share, an increase of 23% on the interim dividend last year. The interim dividend, carrying full New Zealand imputation credit, will be paid on 21 December 2016.

OUTLOOK FOR FY2017
The company has shown continued strength this half, buoyed by supportive clinical research, a skilled global team and innovative products. They will continue to build on existing expertise and educate healthcare providers on the benefits that the company’s products provide. The longstanding objective is to double the constant currency operating revenue every five or six years. The performance this financial year to date is consistent with that objective and the opportunities give us confidence for the future.

Mr Gradon concluded that “Given the positive first half result we now expect full year net profit after tax to be towards the middle of a NZ$165 to NZ$170 million range and we expect full year operating revenue to be approximately NZ$880 million,”

Please contact your adviser for further details and to discuss how Fisher and Paykel Healthcare may complement your existing portfolio.

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Add a comment2 Comments

Reply Anne Fogarty | December 20th, 2016 at 9:57am
As a small shareholder I find these reviews really good and wish they were more frequent.
Reply Hamilton Hindin Greene (Author) | December 22nd, 2016 at 9:29am
Hi Anne, Season's Greetings. Thank you for your comment, if you would like more regular updates please feel free to signup to our daily morning report by emailing enquiries@hhg.co.nz. Kind regards HHG

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