Plenty of good things have come from New Zealand. Wine is one. Sonny Bill Williams is probably another. The country is also home to a number of great publicly listed companies.
However, investment research firm Morningstar has cautioned that New Zealand’s share market is overvalued after a strong run this year. The NZX 50 Gross Index (Index: ^NZ50) has jumped 22% in the last 12 months compared to the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO), which is up 16.5%.
According to Fairfax Media, Morningstar identified four Kiwi companies that still represent good value in the overpriced market. Recently listed electricity producer and retailer Mighty River Power (ASX: MYT) was identified as Morningstar’s current “best idea”.
Mighty River was the first sale in the New Zealand government’s program of selling state assets to raise money to invest in public services. The company opened at $2.17 per share on listing day, before quickly sinking to $1.87. The shares closed last week at $2.01 and have a dividend yield of around 5.3% at NZ$0.12 per share. This is expected to rise to NZ$0.13 for the 2014 financial year.
Casino operator SkyCity Entertainment Group (ASX: SKC) was identified as trading at a “healthy discount” to Morningstar’s calculated share value. This is possibly because of the strong growth the company is likely to see over the next four to five years.
SkyCity has been given approval to develop two new convention centres, one in Auckland at its flagship casino, and one along Adelaide’s River Torrens, which will cost upwards of $300 million. Both deals have been done in conjunction with local governments and will allow the company extensions to current casino licences and an increase in the permitted number of gaming tables and pokies in exchange for building the convention centres.
New Zealand’s two key telecommunications companies Telecom (ASX: TEL) and Chorus (ASX: CNU) were also viewed as offering good value at their current prices. Both companies currently offer outstanding dividend yields at 6.4% and 9% respectively.
Markets on both sides of the Tasman have risen strongly in value over the last year and it is becoming as crucial as ever to hunt for attractively priced companies with solid long-term prospects. Morningstar reckon these four Kiwi companies do just that.
If you’re looking for great dividend payers, discover The Motley Fool’s favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of “The Motley Fool’s Top Dividend Stock for 2013-2014.”
- 4 stocks that increased their dividend more than 45% this year
- Three reasons Santos is a long-term play
- Online spending hits $14.2 billion
Motley Fool contributor Regan Pearson own shares in SkyCity.