Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


NZ shares still have distance to climb, says Milford

NZ shares still have distance to climb, says Milford

Jan 30 (BusinessDesk) - Fears the New Zealand sharemarket is becoming over-valued as it continues last year's run into the new year are over-stated, and the market is "far from frothy", says Milford Assets portfolio manager Mark Warminger.

Writing in the fund manager's blog, Warminger says the last few years have been tough for corporate earnings and that even though analysts know earnings have stabilised, they are too reluctant to forecast improved profits as the six monthly earnings reporting season looms next month.

"We believe that earnings are likely to exceed expectations over the next year as the economic recovery continues and gains pace," he writes. If that happens, what looks at present like a high average price/earnings ratio for New Zealand shares of around 15.5 times will be somewhat lower.

The average PE ratio for the market over the last decade has been 14.7 times.
"Analysing another valuation metric would suggest the New Zealand equity market is currently fair value on a dividend-yield basis, with the current prospective dividend yield equal to its 20 year average.

"Comparing the equity market dividend yield to current government bond yields would suggest the New Zealand equity market is cheap," Warminger argues, and applies the same logic to other metrics such as equity risk premium and discounted cash flows.

"The current investment climate of low interest rates, low but stable growth and most valuation metrics showing no signs of frothiness argues well for continued gains as earnings improve and the PE multiple expands to reflect the current environment."

Fears of an overheated local equities market followed last year's 25 percent rise in the NZX50 Index of leading stocks, with the rise continuing in the early part of this year.

The NZX50 briefly hit a five year high point of 4,2204.407 on Monday, in very light trade affected by Auckland and Australia anniversary weekends.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Final Frontier: Rocket Lab And NASA Sign Commercial Space Launch Agreement

Rocket Lab has signed a Commercial Space Launch Act Agreement with the National Aeronautics and Space Administration (NASA). The agreement enables Rocket Lab to use NASA resources - including personnel, facilities and equipment - for launch and reentry efforts. More>>

ALSO:

Scoop Business: Wheeler Downplays Scope For ‘Large’ Rates Fall

Reserve Bank governor Graeme Wheeler says some market commentators are predicting further declines in interest rates that would only make sense for an economy in recession, although some easing is likely to be needed to maintain New Zealand’s economic growth. More>>

ALSO:

Ruataniwha Dam: Consent Conditions Could Mean Reduced Intensity

Legal advice sought by the Hawke’s Bay Regional Council on the Ruataniwha Dam consent conditions has confirmed that farmers who sign up to take water from the dam could be required to reduce the intensity of their farming operation to meet the catchment’s strict nitrogen limit. More>>

Health And Safety: Bill Now Sees Rules Relaxed For Small Businesses

Health and safety law reform sparked by the Pike River coalmine disaster has been reported back from the industrial relations select committee with weakened requirements on small businesses to appoint health and safety representatives and committees. More>>

ALSO:

Bearing Fruit: Annual Fruit Exports Hit $2 Billion For First Time

The value of fruit exported rose 20 percent (up $330 million) for the June 2015 year when compared with the year ended June 2014. Both higher prices and a greater quantity of exports (up 9.0 percent) contributed to the overall rise. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news