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Fletcher Building Ltd shares down despite broker’s overweight rating

Shares in building products company Fletcher Building Ltd (ASX: FBU) were down 2% to $5.88 at the time of writing as Morgan Stanley placed an overweight rating on the stock.

Fletcher has plans to raise NZ$750 million through an entitlement offer and divest its Formica and roof tile business which could net a combined NZ$1.2 billion.

While Fletcher has maintained its guidance for FY18 earnings to between NZ$680 million to NZ$720 million, with an affirmed loss from its building interiors segment of NZ$660 million, Morgan Stanley has reduced its price target from NZ$8.00 to NZ$7.00.

The broker suggests the capital raising may address the concerns of many investors so it’s one to watch as this plays out.

Other players in the building materials space are gunning for good returns as they leverage the buoyant housing market, with CSR Limited (ASX: CSR) hitting a 52-week high on April 28 despite sitting down 0.8% to $5.56 today as peer GWA Group Ltd (ASX: GWA) also dropped down marginally to $3.69.

Boral Limited (ASX: BLD) has also been on the up, but opened down today too, dropping 0.4% to $7.59 at the time of writing.

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Motley Fool contributor Carin Pickworth has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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