MIDDAY UPDATE: Earnings season surprise as gloom lifts?

Jan 30 (BusinessDesk) - The upcoming corporate earnings reporting season could surprise investors by showing stronger profits than expected after a long period of stagnation, says a portfolio manager with funds manager Milford Assets.

The comments from Mark Warminger come as shares on the NZX climbed again this morning to 4212.121 points on the NZX50 Index of leading stocks, up 0.282 percent this morning, led by Fisher & Paykel Healthcare and Fletcher Building.

The NZX50 briefly hit a five year high on Monday at just above 4,2204 points.

In his blog commentary, Warminger says the New Zealand market is "far from frothy", despite fears among some investors that a 25 percent rise in the NZX50 over the last year suggests local equities could be getting overcooked.

"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.

"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."

Cashed-up NZOG likely to return to two dividends a year
New Zealand Oil & Gas says its war-chest is full enough and its cashflows steady enough to return to paying interim dividends for the first time in perhaps 15 years, but there's no prospect of an increase on the current annual payout of six cents a share.

The company will also halt the 2.5 percent discount previously offered in dividend reinvestment scheme, saying it doesn't need to raise capital at the moment and the discount disadvantaged non-participating shareholders.

Recently appointed chief executive David Knight wasn't sure how long it was since NZOG last paid interim dividends, but suggested it was about 15 years ago.

The announcements came in NZOG's operations report for the three months to December 30, and follow yesterday's disclosure of the intention to drill two new wells in the Tui prospect, one a development well to get better production from the Pateke resource, and an exploration well in a prospective tenement known as Oi.

Those wells will be drilled by the Kan Tan IV semi-submersible rig, due in New Zealand waters later this year, but NZOG is also looking for a jack-up rig to undertake drilling in the Kaheru prospect, where NZOG is the operator with a 35 percent interest, and is joined by Australia's Beach Energy (35 percent) and TAG Oil (40 percent).

However, while New Zealand portfolio development continues, the company's near-term prospects for substantial new cashflows are in its Tunisian offshore oil resource known as Cosmos, where a final investment decision is likely in March, with first oil to flow by late 2014.

A proven resource of 9.2 million barrels of oil has been assessed in the "A" lobe of the Cosmos find.

Karaka yearling sales see prices hold up
New Zealand Bloodstock's 2013 premier sale wrapped up at Karaka on Tuesday with 323 of the 441 lots sold. The total raised of $51.05 million was $3.085 million less than in 2012, with 27 fewer horses sold.

The sale average of $158,054 is a 2 percent increase on last year's figure, while the median was unchanged at $120,000. The clearance rate of 79 percent was up from 74 percent in 2012.

The top price of $1.975 million on the first day was paid by Ireland's Tom Magnier for a colt by Fastnet Rock from the Peintre Celebre mare Celebria. It was the fifth highest price ever fetched at Karaka.

The top price of day two was for a colt by stallion Pins from Sayyida (Zabeel), sold to Melbourne trainer Peter Moody for $775,000. It was the highest price ever paid at Karaka for a yearling by the sire.

Lower rates favoured more than higher by shadow board
The members of a "shadow board" looking over the shoulder of Reserve Bank of New Zealand governor Graeme Wheeler are more in favour of a cut in the official cash rate than a rise.

Economists widely expect Wheeler to hold the official cash rate at 2.5 percent when reviews the Official Cash Rate tomorrow morning. That is also the official line of the New Zealand Institute of Economic Research's (NZIER) shadow board.

Ahead of the decision, economists have noted that Wheeler has tough call in weighing a strong property market, fuelled further by the Christchurch rebuild, against a stubbornly weak economy.

The shadow board puts a 56 percent chance on a hold at 2.5 percent, but graphs revealing the thinking of individual members show an easing bias.

(BusinessDesk)

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