Confirmation the rebuilding in Christchurch appears likely to start more slowly and take longer to work through, has prompted selling of Fletcher shares, as it is the lead company for the repair of more than 50,000 homes.
Fletcher shares lost about 12% value last week, and continued to slide yesterday to trade down 1.8%, or 15c, to $8.20. Shares had hit a year high of $9.53 in April.
Forsyth Barr broker Tony Conroy said while Fletcher's near term earnings were expected to increase, they would be at a slower pace than earlier anticipated, prompting a 5% decline in forecasts of profit, down to $325.9 million for the present financial year, with 2012 forecast down 6.2% and 2013 by 2.1%.
Mr Conroy was surprised by weaker than expected building consent for the first half of the year; down 16% to the end of May and "very weak" residential consents down 22% for the same period.
"Thankfully, the consent data is beginning to show a turning point but, realistically, a definite uplift will not be seen until the last quarter of the year," he said.
Despite lowering the near term forecasts on Fletcher, Mr Conroy has changed recommendation on Fletcher shares from "reduce" to "accumulate", based on the recent share price decline. The valuation impact is unchanged at $10.02; with shares offering good value while priced between $7.50-$8.50, he said.
Brokers Craigs Investment Partners has maintained its "hold" recommendation and 12-month target price at $8.62 but, similarly, sees long-term appeal for the shares, broker Chris Timms said yesterday.
"The [shares] have been oversold; mainly because of the Christchurch rebuild time-frame," Mr Timms said.
However, in the long term Fletcher should have "valuation appeal" as the benefits of the rebuilding flow through the company during 2012 and 2013, he said.
