Chorus shares rated as 'accumulate'

JAMES WEIR
Last updated 07:32 27/12/2012

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Telecommunications network company Chorus' shares are cheap, but final government regulation on pricing raises the level of uncertainty for the share, according to a Morningstar analysis.

While telecommunications stocks offered the most value, the rest of the New Zealand market was trading around "fair value".

Morningstar had more negative recommendations than positive.

There were few buying opportunities in the New Zealand market after a strong run this year, Morningstar said.

The NZX 50 index has risen steadily this year from about 3246 points to 4057, a gain of almost 25 per cent. That was despite New Zealand's lacklustre economic growth.

After the rise in the market, Morningstar said most stocks were now in the "hold zone" and outright buy and sell calls were hard to come by.

Morningstar rated Chorus shares "accumulate" and put a fair value of $3.60 on the shares but with a high level of uncertainty.

Other most preferred stocks included Nuplex, Sky TV, casino operator SkyCity, and Telecom. But household names such as Briscoe and Fletcher Building were well overvalued, according to Morningstar.

Chorus shares last traded at $2.95, rebounding from a recent low of $2.69 in the middle of December.

The shares were knocked down heavily from about $3.40 at the end of November, after monopoly watchdog the Commerce Commission came out with a much lower than expected draft wholesale broadband price decision in early December.

That would sharply cut the revenue potential Morningstar earlier forecast.

"We expect a better outcome post industry consultation," Morningstar said. Fairfax NZ

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