Fletcher Building shares continued to decline yesterday following an almost 20% plunge during the past fortnight which has wiped almost $1 billion off its market capitalisation.
As the expectations of a later start for Christchurch's rebuild are borne out, issues such as insurance claims and reinsurance problems, low building consent numbers, further earthquakes and Treasury pushing out its rebuild cost expectations have all compounded to push out the start date into the second half of next year.
While brokerages Forsyth Barr and Craigs Investment Partners remain positive on the medium to long-term outlook for Fletchers, Forsyth Barr has downgraded profit expectations and Craigs believes overseas institutional investors are "de-risking" and selling Fletcher stock.
The complexity of the Christchurch rebuild was reflected in Treasury revising its costing outlook on Tuesday from $15 billion to $20 billion, but other analysts then suggesting it could be up to $30 billion.
Fletcher shares were trading around $6.92 a fortnight ago and were trading around $6.30 yesterday. The decline of more than 8% has shaved $385 million from Fletcher's market capitalisation.
A fortnight ago, the day after Fletcher's 10% earnings downgrade and lacklustre outlook, its shares slumped to a more than two-year low, steadily trading down 12.4% from $7.90 to close at $6.92. Some 7.9 million shares changed hands, wiping more than $597 million off market capitalisation.
Craigs broker Peter McIntyre said Fletcher's after-tax profit outlook had been downgraded 18% for full-year 2012 and maintained a "hold" recommendation on the stock.
The recent 5.5-magnitude quake in Christchurch, unavailability of reinsurance, Fletcher's own downgrade and Treasury's latest revision to work starting had all compounded to capture investor attention.
"This is enough to make investors nervy, which has seen the share price retrace," he said.
Historically, Fletchers has been attractive to investors as it often under-promised then over-delivered on forecast financial guidance, but having downgraded its own profit expectations by 10% and kept the markets informed of expected headwinds, "investors have to readjust to this new cycle the construction sector is now in", Mr McIntyre said.
Because of the volume of shares traded during the past fortnight, Mr McIntyre said institutional investors overseas, continuing to be spooked by the European debt crisis, were "derisking" their offshore investments to return to safer havens, closer to home.
Forsyth Barr broker Peter Young said while the brokerage had downgraded its Fletcher profit forecast for 2012 by 15%, he maintained a "buy" recommendation on its shares.
"We maintain our focus on on the recovery in earnings in full-year 2013," Mr Young said.
Short-term earnings for Fletchers have been negatively impacted by the slowing of commercial and residential work in Australia and ongoing weakness in New Zealand, plus the Christchurch delays.
Mr Young said he expected a "strong and substantial" lift in New Zealand building activity for the calendar year 2012, which should in turn lead to a "substantial" lift in Fletchers' earnings for its full-year 2013.
• Fletchers annual meeting for shareholders is scheduled to be held on November 16, in Auckland.
