MARKETS SPECTATOR: Newcrest's lost lustre

Newcrest’s $6 billion write off surprised an analyst or two.

“We had previously contemplated a write-down but not incorporated it into our base case having determined it was low probability given the long asset life,” writes Morgan Stanley analyst Brendan Fitzpatrick. “Now we do. It is a non-cash event but will increase gearing to 26 per cent on our forecasts”.

The fall in the gold price and potential write offs has led Fitzpatrick to cut his earnings per share forecast for Newcrest, Australia’s biggest publicly traded gold miner.

The spot price for gold today fell $3.08, or 0.2 per cent, to $US1,383.42 a troy ounce, according to Bloomberg data. The spot price of gold, in US dollars, has fallen 17 per cent this year, according to Bloomberg.

In the 12 months to June 30, 2013, Fitzpatrick forecasts Newcrest’s earnings per share to be 66 cents compared with an earlier forecast of 72 cents. He expects the company’s earnings per share in 2014 to be 70 cents compared with an earlier forecast of $1.01.

The Morgan Stanley analyst expects Newcrest to pay no dividend in 2013 and 2014.

“A lower gold price would continue to add to operational pressure,” says Fitzpatrick. His target price for the stock is now $13 compared with a previous $16 forecast.

At 1416 AEST Newcrest shares were down 33 cents, or 2.7 per cent, to $12.02. The stock has plunged 21 per cent since May 5.

The S&P/ASX200 Index was up 14.197, or 0.3 per cent, to 4,751.90. The index has lost 3 per cent since May 5.