The market perception of Fisher & Paykel Appliances would improve following the sale of its 19.3% stake in sister company F&P Healthcare, Forsyth Barr investment adviser Ken Lister said yesterday.
Appliances, which has a factory near Mosgiel, announced on Friday it was selling its stake in FPH, becoming a “pure play” appliance manufacturer. The intention was to use the sale proceeds to reduce debt with excess funds returned to shareholders through a 21c a share special dividend and an on-market share buy-back likely to cost $65 million.
The dividend will paid on March 29, with a record date of March 19. Non residential shareholders will receive a supplementary dividend of 3.71c per share.
The on-market share buy-back is to begin on May 20 subject to necessary approvals following the company’s annual result announcement.
In late trading, Appliances’ share price had risen more than 3% to $3.84 and FPH shares had fallen 4.5% to $11.80. The FPH price is expected to recover.
Mr Lister said those sorts of reactions had been expected.
“With Appliances you are getting the special cash payment and they placed the FPH stock at $11.70 so it is getting to around that level.”
Forsyth Barr forecast yesterday the balance sheet would be under-geared with net debt falling from $236.7 million to $145.9 million. That would give a gearing ratio of 25.1% and forecast interest coverage of more than 10 times.
“We estimate the transactions will be mildly accretive to earnings per share. The foregone FPH dividend will be offset by the lower interest expense and a reduced number of shares outstanding,” Mr Lister said.
“The key value driver for Appliances remains the growth of higher value appliances into niche Northern Hemisphere markets. We consider the divestment of the FPH stake and distribution of part of the proceeds to shareholders a positive move.”
Forsyth Barr retained its valuation of $3.71 a share and its hold recommendation.
From odt.co.nz