Wednesday, January 7, 2009

February 2009 reporting season to headline a bad year

Welcome back to the Share Investor Blog for 2009.

I wish you all an especially prosperous year after the routing we have all had to our wealth last year.

Lets get back to business!

The first real indication of how the global recession has affected New Zealand business, in terms of profit and sales, will be of course the coming reporting season, which kicks off in February.

We have already had some indication of what might lay ahead.

August 2008 reporting season was flat to lack lustre and profit warnings from several companies pre-Christmas, especially retailers (with the notable exception of The Warehouse [WHS.NZ] which only saw a 1.9% same store sales report out today), which have taken the shine off Feb 2009.

The six months to February 2009 will show a good 3-4 months of trading for New Zealand NZX listed companies, under the economic gloom that kicked off in October 2008, with massive market corrections, credit difficulties and the collapse of some large American business icons, bailouts of banks, car makers and a host of other businesses, large and small.

It isn't going to be pretty.

While companies like Contact Energy[CEN.NZ], Sky City Entertainment[SKC.NZ], Vector [VCT.NZ], Trustpower [TPW.NZ] are likely to have solid profit results, businesses such as Nuplex [NPX.NZ], Pumpkin Patch [PPL.NZ] and Rakon [RAK.NZ] are going to disappoint.

Furthermore we will be able to get a better grip on how company management see the 2009 business year going.

To be sure many companies have already ditched any accurate forecast for the coming year but shareholder should expect to see comments that will elucidate company fortunes.

This will enable us all to more accurately gauge the value of companies in this market turmoil and ascertain as to whether the stockmarket drop over the last 6 months or so has been overdone or not.

I'm picking the market has been oversold, as it usually does in times of fear.

The meek amongst us will decide to sell our shares and others, like me, will then be more able to decide-another market explosion excepted* and that is very possible- when to start buying stocks again.

Make no mistake, 2009 isn't going to be a great year for the economy, business, stocks or any other asset but it is certainly going to separate the wheat from the chaff.

* some commentators are picking the commercial property bubble bursting. The only bubble left to burst.

Disclosure: I own SKC & PPL.

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c Share Investor 2009