Global markets were mixed overnight as investors remain cautious ahead of this week’s crucial 2-day US Federal Reserve Meeting which began overnight. The UK market also remains under heavy pressure with ongoing Brexit uncertainty.
As we touched on earlier, while the Fed is likely to lift interest rates on Thursday morning, there will be more focus on the Fed's outlook for 2019.
Stock in Focus: Fletcher Building (FBU:NZX / FBU:ASX)
Fletcher Building shares rose yesterday as the construction company announced the sale of its Formica unit for US$840 million and said it will resume paying dividends (likely to be announced in February).
The sale of the Formica business was not a surprise, and in line with analyst expectations, with the date of the announcement well within the up to 18-month timeframe that managing director Ross Taylor suggested when he announced the decision to sell in April. “Our five-year strategy is to refocus Fletcher Building’s capital and capability behind our New Zealand and Australian businesses with building products and distribution at our core” Taylor said.
The sale provides investors with some comfort and further strengthens Fletcher’s balance sheet at a time when there are risks around macroeconomic conditions. Both the Australian and NZ property markets are showing signs that they have peaked, and the construction cycle is likely entering a slowing period, in our view. In saying that, the market is well aware of these risks with FBU shares trading at decade lows.
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