This week's hot stock pick

Last updated 05:00 19/01/2013

Relevant offers

Money

Banks behaving badly, and how to fight back Economy expected to grow strongly in 2017 as confidence overcomes quakes The truth about inequality in New Zealand Owner pleased after historic yacht with $1 reserve sells for $480,000 Businessman tied to ACC bribery in 'dire financial position' Rob Stock: You have a secret cash source Karen Scott-Howman: Customers drive banking innovation Budget Buster: How to nail your 2017 money goals How to survive a mid-life career crisis Left your cash at the ATM? You're paying the Vague Tax

This week's hot stock pick, brought to you by Hamilton Hindin Greene

Company: Chorus

Sector: Infrastructure

Overview: Demerged from Telecom in November 2011, Chorus has been in the headlines recently after a Commerce Commission draft decision that could have a marked impact on profitability.

Chorus comes under the jurisdiction of the Commerce Commission because of its near monopoly on wholesale broadband, with a 90 per cent market share. The Commerce Commission draft decision proposed substantial cuts to the price Chorus charges for Unbundled Bitstream Access.

Pros: Numerous parties will now make submissions to the Commerce Commission, ranging from Chorus and other industry players to the Government. The Government is likely to have a huge say and has already made its intentions clear: Both John Key and Amy Adams (Minister of Communications) have been vocal in their criticism of the draft, with Key saying the draft decision is "very problematic" and the Government will not rule out legislation to get the outcome it wants.

The Government prefer to see the draft watered down due to the perceived negative impact it would have on the uptake of the Ultra Fast Broadband Network (a core infrastructure project).

Cons: If the draft decision stands Chorus has said it will have to fundamentally rethink its business model, capital structure and approach to dividends." Long term investors in Telecom know the damage to shareholder value that can be inflicted through regulation.

Price performance: Chorus shares traded down as low as $2.68 after the announcement, a drop of over 20 per cent from pre-announcement levels. The share price has since recovered to recently trade at $2.85.

Investment outlook: Uncertainty will dominate the Chorus market until the final decision comes out in June. Much of the downside is priced in at these levels, with upside existing if the government gets its way by watering down the decision.

*A Broker's View is written by NZX broker and investment adviser Hamilton Hindin Greene Limited.

This article represents general information provided by Hamilton Hindin Greene, who may hold an interest in the security. It does not constitute investment advice. Should you wish to receive personalised advice please contact an authorised financial adviser.

Ad Feedback

- Sunday Star Times

Special offers

Featured Promotions

Sponsored Content