Steel & Tube Holdings shares reached a nine-month high after First NZ Captial analysts raised their rating on the stock following the steel products maker posting better-than-expected annual earnings and lifting its dividend payment.
The shares jumped 13 percent to $2.47, the highest level since November 11, after First NZ upgraded its rating on Steel & Tube to 'outperform' from 'neutral' and lifted its target price 10c to $2.70. The Lower Hutt-based company last week reported an underlying profit of $19.4 million in the year ended June 30 on record sales of $516 million as the contribution from new acquisitions and cost savings helped offset weaker prices and margins and costs related to "quality issues."
First NZ analyst Kar Yue Yeo raised its forecasts for Steel & Tube's earnings by between 5-8 percent over the next three years reflecting better gross margins and the removal of product issue costs incurred in 2016.
"Further improvement in New Zealand steel demand is anticipated to lift sales in the 2017 financial year," Mr Yeo said in a note to clients. "Additionally, steel product providing and distribution margin appears to be recovering following a recent round of price increases."
Steel & Tube has been recovering from a tough year that saw its shares sink as low as $1.79 in June, the lowest since 2001. In March, the Commerce Commission began an investigation into earthquake reinforcing mesh products that weren't certified as claimed, and the company was forced to cut guidance in May as intense competition in the domestic steel market squeezed margins and its Chinese-sourced road reinforcing for the Huntly bypass was found to be weaker than specified.
(BusinessDesk)
Paul McBeth
Mon, 15 Aug 2016
Mon, 15 Aug 2016
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Steel & Tube shares hit nine-month high
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