Best New Zealand Stocks To Buy: New Zealand is probably best known for its rolling green hills, its famous All Blacks rugby team, and the setting of many blockbuster Hollywood films, such as Lord of the Rings. But when it comes to top New Zealand companies to own in your portfolio, you might find yourself scratching your head. We’re here to help lift the veil on some of the top stocks down under!
Fletcher’s Current Share Buyback Program to Lift its Stock Price
Fletcher Building Limited [ASX: FBU] is one of the largest listed companies in New Zealand, with a market capitalization of over NZ$4 billion. Its operations span manufacturing, distribution and retail, home building, and major construction and infrastructure projects in New Zealand, Australia, North America, Asia, Europe, and globally.
The company today employs over 16,000 people in New Zealand, Australia, and the South Pacific. The company was split from Fletcher Challenge in 2001, formerly New Zealand’s largest multinational conglomerate.
Fletcher Building’s return to profit and a recent announcement of $300 million share buyback met with a positive response from the investors. The construction company was finally able to suture a tide of bad news to report a $164m annual net profit for the year up to June 30, in sharp contrast to a net loss of $190m the previous year.
The construction company has been struggling with unfavorable market conditions and rising input costs, among other things. Fletcher Building announced that it would be purchasing NZ$300 million worth of shares. It has plans to buy 70 million shares through the NZX and ASX order matching markets at the prevailing market price over a 12-month period.
However, the management emphasized that it reserved the right to end or suspend the buyback program anytime it deemed necessary after taking into account market conditions, investment opportunities and its own share price.
The company decided on a buyback program after the cash it got in its kitty post the sale of Formica business for NZ$1.2 billion. The company disclosed in June about its NZ$600 million debt, which it needs to pay over the next 12 months.
Also, it requires around NZ$250 million of cash outflows to complete its legacy B+I projects. This leaves the company with around NZ$300 million, and the company has decided to distribute it to the shareholders via on-market share buyback.
Investors are buying Fletcher’s shares on the hope that they have now bottomed. The current buyback is expected to give some momentum to its share price over the next one year.
Genesis Has All the Potential to Outperform the Market
Genesis Energy Limited [ASX: GNE], formerly Genesis Power Limited, is a diversified New Zealand publicly listed energy company. It generates, trades in, and sells electricity, reticulated natural gas and LPG through its retail brands of Genesis Energy and Energy Online to homes and businesses in New Zealand.
It is New Zealand’s largest energy retailer with around 500,000 customers. The company generates electricity from a diverse portfolio of thermal, hydro, and wind sources.
Genesis Energy also has a 46% interest in the Kupe Joint Venture, which owns the Kupe Oil and Gas Field offshore of Taranaki, New Zealand. The company operates through four segments: Customer experience, Energy management, Oil and gas, and Corporate.
The Genesis Energy’s [ASX: GNE] share price is up 15% so far this year, which can be safely termed a formidable performance. Genesis Energy has enjoyed a steady growth with earnings per share up 3.5% on an average over the last five years.
The energy company recently signed a 130 MW Waverley Wind Farm off-take agreement with Tilt Renewables, an important landmark in realizing its ‘Future-gen’ framework.
Reliability remains high at its Kupe plant, which is operating at 99.7% of the available capacity over the period. Thermal generation witnessed an upswing of over 16% as compared to the previous year.
The financial health and growth prospects of GEL demonstrate its potential to outperform the market.
Also, shares like those of infrastructure assets and energy companies have traditionally been seen as long-term plays. Investors as such buy and hold them for long for appreciation while enjoying good dividends along the way.
Revenues Expected To Surge: Sunny Days Ahead for Pushpay
Pushpay Holdings Limited, [ASX: PPH] known as Pushpay, provides mobile engagement applications and solutions to nonprofit, faith-sector and educational organizations in the US, Canada, Australia and New Zealand.
Their solutions aim to simplify engagement, payments and administration and make it easier for users to donate to charities and non-profit organizations.
The company’s solutions include Event Registration, 3D Touch, echurch Apps and Pushpay Fastpay, and its subsidiaries include eChurch Inc, eChurch Inc, Pushpay NZ Limited and ZipZap Processing Inc, among others.
Pushpay Holdings Limited was incorporated in 2011 by Chris Heaslip and Eliot Crowther, who wanted to make it easier for people to make donations using their mobile phones.
A majority of the Auckland-based company customers (around 98%) are from the United States and Canada, and the remaining 2% located in Australia and New Zealand.
Pushpay Holdings’ [ASX: PPH] earnings over the next few years are expected to witness an augmentation of more than 60%, which paints an incredibly rosy picture for the company.
Higher earnings invariably lead to robust cash flows, something that increases the stock’s valuation.
Since PPH is currently undervalued, analysts feel that it is the perfect time to buy its shares. The optimistic outlook for the company isn’t fully reflected in the current share price yet, which means the timing could not be more right to invest in PPH stocks.
PPH, which is into the IT business, returned 42.8% for the year, surpassing the NZ IT industry which returned 34.1% over the past year as well as the New Zealand market which returned 20.5%.
In another positive sign, Pushpay in December bought Church Community Builder for US$87.5M. The 100 percent acquisition of the Colorado-based company in an all-cash deal is likely to add about 4,000 church customers to its books.
Sky Network Working Hard To Regain its Footings
Sky Network Television [ASX: SKT] Limited is a media and entertainment company. The company derives its revenue from free-to-air television, pay television and multi-channel services.
The company offers a range of content to its customers, including movies, television series, entertainment quizzes, commercial music, sports, documentaries and news. It also sells on-demand video (streaming) via its NEON brand.
The company, founded in 2005 in Auckland, New Zealand employs approximately 1,200 people and serves over 750,000 customers.
Sky Network Television [ASX: SKT] reported a net loss of $607.8 million for the June quarter, compared to the prior year’s loss of $240 million.
Revenue declined 7 percent to $795 million, as the company lost more satellite pay TV subscribers, though there was a limited gain on its other subscription services.
It was, however, expected as the pay TV operator had expected a hit on its revenue and earnings owing to a variety of factors. It had to scrap a technology project, development of a new puck device, similar to Amazon’s Firestick, which would have allowed customers to watch streaming services on television.
Sky Network has been facing heat from telecommunications company Spark, which has added to its kitty an impressive lineup of major sporting events, including this year’s Rugby World Cup, English Premier League football and basketball, among others.
The TV operator seems to be working overtime to attract and retain customers. It has unveiled plans to start new sports channels and has already launched a new dedicated sport streaming service.
Sky has revamped its sports channels, plans to sponsor more women’s teams, and is in the process of renewing content deals at higher prices.
The entertainment company recently bought a Dublin-based broadcaster RugbyPass for US$40 million. It also bought the naming rights for Wellington’s stadium.
Analysts believe the pay-television operator’s transformation strategy is likely to bear fruit with strong chances of a turnaround in the company’s fortunes. Their consensus 1-year target price for Sky is around $1.74.
Concentrating on European Markets and Vodafone NZ Acquisition Augurs Well for Infratil
Infratil Limited [ASX: IFT] is a New Zealand-based infrastructure investment company, which derives its revenue from investments in infrastructure and utility businesses in New Zealand, Australia and the United States. The company is organized into seven business segments: Trustpower, Tilt Renewables, Wellington International Airport, NZ Bus, Perth Energy, and Associate Companies among others.
It owns airports, electricity generators and retailers, and offers retailing, electricity, bus transportation services, natural gas, bottled LNG and telecommunication services.
Founded in 1994, the Wellington, New Zealand-based publicly listed company was named Deloitte/Management Magazine Company of the Year in 2007.
Sales at Infratil Limited [ASX: IFT] were 1.34 billion New Zealand Dollars (US$855.18 million) during the year ended March of 2019, a decline of approximately 23% versus 2018.
A major factor contributing to the drop was the 15.8% decline in Nz Bus. Perth Energy also witnessed a 12.0% slide. However, these declines were partially offset by the increase in sales of Trustpower, up 5.2%, and Tilt Renewables, up 21.1%.
High yield and a long history of paying dividends makes Infratil appealing. Although it reported a loss over the past 12 months, Infratil currently pays a dividend and a stable one at that. Earnings per share have remained more or less the same for the past five years, but at least the dividends have been relatively stable.
However, the company has ambitious future growth plans. It has decided to focus on utility scale solar projects in Southern Europe, as well as wind farms in the Nordic countries and Ireland, citing smaller projects and higher returns.
The company, together with Brookfield Asset Management Inc., also disclosed an aspiring push into the telecommunications arena, spending NZD 3.4bn on Vodafone NZ. Infatil hopes Vodafone NZ will increase Infratil’s exposure to long-term data and connectivity growth and complement the acquisition of Canberra Data Centres.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.