Wednesday, January 21, 2009

Fisher & Paykel Appliances looking fair value

I have given Fisher & Paykel Appliances [FPA.NZ] a beating over the last few years.

This is mainly due to its future prospects as a long-term going concern and the value that the stockmarket has previously given it.

The stockmarket plunge of the last year or so has largely changed my opinion.

That and more than a few changes management have made, and global economic circumstances as they are, have worked in the company's favour.

Lets have a look at the circumstances outside company control that are benefiting them first.

Input costs such as steel, plastics and appliance component's will have drastically come down in price over the latter quarter of 2008 and during the beginning of this year.

Couple this with a collapsing NZ dollar and you have a recipe for a profit improvement when the global economy recovers.

The full financial force of management moving key areas of manufacturing to Thailand is also set to be shown in the next reporting season come mid-May.

I must reiterate that my previous history of negative comments on the company focused primarily on Fishers attempts to compete globally by manufacturing in the high cost base of New Zealand with small production runs with niche products.

This has been slowly ameliorated by introducing a lower cost brand that sells alongside Fisher & Paykel branded goods and competes on a more level footing with the LG's, Mitsubishi's and other big appliance brands.

This is where I may have been a bit short-sighted in my previous criticism of the company.

If the company can grow its lower cost brand, making more units and therefore lower production cost, then they will be more able to compete with the aforementioned brands.

Selling their niche appliances alongside will be the icing on the cake.

Of course the only stumbling block to this whole process of transformation is going to be the global recession that I have already mentioned.

It has hit sales of appliance companies like Fishers badly-you can always put off that fridge purchase in the tough times!

All is not lost though it wont last forever.

Id love to see Fisher & Paykel make it to the big time.

The stock was down 1c today to NZ$1.32, not quite at its low of $1.18 but clearly close.

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