Fletcher Building: Still Feeling the Heat From Convention Centre Fire

We maintain our fair value estimate of NZD 6.00 (AUD 5.50) for no-moat Fletcher Building. The firm is expecting an additional NZD 180 million in pretax costs. This includes NZD 165 million to complete the New Zealand International Convention Centre, or NZICC, following a fire in 2019, and NZD 15 million to remediate quality issues at Wellington International Airport, or WIAL. We raise our pretax cash cost forecasts—for NZICC by NZD 165 million to NZD 440 and NZD 15 million for WIAL. The additional cash costs are modestly dilutive to our fair value, but this is offset by the time value of money.