With the start of the present reporting season under way, and Telecom due out tomorrow, Craigs Investment Partners have picked five stocks expected to report positively; all with increased after-tax bottom lines and boosted dividends.
Craigs broker Peter McIntyre said in spite of the Reserve Bank being expected to raise the official cash rate to 3.75% by the end of the year, he predicted interest rates and bond yields would remain low for some time this year; prompting his preferance for equities over fixed income for investors during 2011.
"Equities are still our preferred assets class, in terms of value, income generation and inflation protection," Mr McIntyre said.
For the top five of the current reporting period, Mr McIntyre has picked Auckland International Airport stock; also his top pick for 2011 performance overall, Fletcher Building, Hellaby Holdings, Steel & Tube and Sky Network TV.
For Auckland International Airport, which reports on February 24, international passenger growth is slightly ahead of Craig's estimate of 4.7%, has confirmed recent route developments such as Southern China Airlines and maintains an enticing 400ha property bank.
With revenue split 50:50 between aeronautical and non-aeronautical interests, Mr McIntyre said he expected increased earnings from non-aeronautical during the year ahead.
After-tax profit is expected to be up from $54 million last year to $58.1 million for the corresponding reporting period and the dividend to increase from 3.8 to 4c per share.
Fletcher Building, which has seen a surge in shares value since upping its hostile takeover offer for Australian competitor Crane Group to $A800 million, is due to report its half-year on February 16.
Mr McIntyre said its wider exposure through Crane in Australia, work around Christchurch and Queensland would see Fletcher "best-placed" later in the year as the New Zealand economic recovery begins taking shape.
After-tax profit is expected to be up from $154 million last year to $170 million for the corresponding reporting period and the dividend up from 14c to 15c per share.
Mr McIntyre said the management of investment company Hellaby Holdings, which reports on February 28, had during the past three years divested itself of non-core assets, reduced debt from $166 million to $73 million and recently raised $28 million in a rights issue.
"This could be a good period for them to be making `bolt on' acquisitions," Mr McIntyre said.
Its after-tax profit is expected to be up from $1.1 million last year to $4.1 million for the corresponding reporting period and the dividend to increase from 3c to 4c per share.
Manufacturer Steel & Tube, which is due to report today, might have some "near-term challenges", including the escalating cost of raw materials for steel manufacturing, but Mr McIntyre said ongoing work looked positive for the year.
There is infrastructure and steel work around Australia and Asia, including contributions to Queensland and Christchurch repairs, with rising prices having to be absorbed globally because of the underlying demand and necessity, he said.
After-tax profit is one of the best forecast by Craigs, up 124%, expected to be up from $3.2 million last year to $7.1 million for the corresponding reporting period and the dividend to be boosted from 3.5c to 5.3c per share.
Mr McIntyre said he was "in general, positive about the media sector", with the companies which embraced new technology, such as Sky Network TV, which reports on February 18.
Sky had paid debt during the past year and reduced capital expenditure while remaining "cash generative" with its numerous channels and outlets.
While maintaining a market share around 50%, Mr McIntyre cautioned subscriber growth might be "subdued" during the year.
Its after-tax profit is expected to be up from $50.8 million last year to $60.7 million for the corresponding reporting period and the dividend to rise from 7c to 8c per share.
Mr McIntyre said since mid-November there had been a swing in reallocation from bonds to equity markets, especially in United States markets.
"We believe that corporate activity will continue to hold momentum into 2011," he said.
Mr McIntyre was "optimistic" that growth in the New Zealand economy will improve during 2011, in spite of weak growth data in recent quarters.
