Friday, September 21, 2007

Share Investor's Friday Free for all: Edition 4

Safety in Numbers

The week began with Rabobank defying the depressed debt market raising NZ$900 Million after initially wanting to raise $400 Million. It just goes to show that quality wins out every time and money that has been pulled from shaky finance companies has found a new safe home.

Pumpkin Patchy

Pumpkin Patch (PPL) the trendy New Zealand children's clothing retailer, reported a full year 2007 profit slightly down for the 2007 year to $27 million. Revenue was up strongly but expansion costs, high interest rates, wages and other fixed business costs rose.

The Patch is bullish on expansion, especially in the USA and is expecting a better contribution from New Zealand and Australia next year.

10-4, looks like we got a convoy

Mainfreight (MFT) the ever growing New Zealand trucking company this week plunked down US $53.7 million for the US international freight forwarder and logistics provider, Target Logistics which is publicly listed on the US Stock Exchange.

Mainfreight Boss Don Braid said the transaction would provide Mainfreight with a foundation for further growth in the US and international freight markets.

The purchase will be earnings positive and continues the companies wish to grow the company substantially by clever acquisitions and organic growth.

Sales grow slowly at fast food company

Restaurant Brands (RBD) the operator of KFC, Pizza Hut and Starbucks had a better sales report this week.

The company today reported second quarter sales across its three New Zealand businesses up 5.8 per cent to $93.6 million, with same store sales up 5 per cent.

KFC sales were up 11.7 per cent for the 16 weeks ended September 10, compared to the second quarter a year earlier. Despite recent stellar sales increases KFC sales are still well off historical sales figures when adjusted for inflation.

Starbucks Coffee was up a steady 6.7 per cent for the second quarter from a year earlier, while Pizza Hut began to improve but still produced an overall sales decline of 7.5 per cent.

It looks like the profit announcement in October, which should be allot better than last reporting, will push the share price closer to the $1 mark, the market has valued the stock at less than a buck for most of the year, don't count your chickens yet though.

Can Canadians Fly?

Not content with just flicking through and buying Telecom's Yellow Pages, another Canuck pension outfit is in town to make a bid for New Zealand's largest airport.

The Canada Pension Plan Investment Board says it has come up with three options for acquiring a significant minority stake in Auckland International Airport Ltd(AIA)

They include an all cash option of $3.70 per share.

The other two options, which would provide a value of up to $3.90 per share, would involve a combination of cash and the issue of new securities that provided enhanced returns while preserving the investment grade rating of AIAL.

The market saw the shares increase in price to around $3.30 on the day of the announcement so it has probably factored in a likelihood that this deal isn't necessarily going to fly.

In my opinion, local and central government opposition will sink any possible deal.

Shame really, while Canadians are a little odd at times they certainly get my approval over AIA's last suitor Dubai Aeronautical Enterprise.

Time for a climate change

The nonsense that was the New Zealand Labour Party's Carbon Trading and tax plan to ameliorate the non-existent "global warming" problem hit Kiwis right between their wallets on Thursday.

The thirst by socialists for more of our tax money was outlined by David (eyes closed) Parker the Climate Change Minister.

Consumers will pay more for oil, gas, electricity and just about everything else we buy, unless they are low income earners and then the middle classes will simply subsidise these individuals so they can continue to pollute.

I am reminded of the failure of "fairy dust" schemes like carbon trading that have come crashing down in the past.

From the great tulip bulb craze in Europe in the 1600s to the Carbon Trading scheme invented by Enron in the 1990s. Both of these failed, miserably.

The taxes placed on our economy with the excuse of global warming by the present government are likely to do the same.

Waiting for the Ace Card

Casino and cinema operator SkyCity Entertainment Group(SKC) has received a takeover bid from an as yet unnamed party.

Seems an odd way of informing the market without really saying much at all!

The offer would have to be significantly over the current share price of $5.27 for my good self to accept any offer as it is part of my long-term portfolio and has been for 5 years and I own a very large parcel. In fact I went on a buying spree this week and bought some more SKC, as well as a significant parcel of The Warehouse(WHS) for the large dividend payout and imputation credit feast.

If you are a short-term investor you should probably run for the hills today but if you have bought this company as an investment then I wouldn't sell for less than 8 bucks, not that the offer is going to be this high.

There were rumours of Tattersalls and Tabcorp being the suitors but Tabcorp has scotched their inclusion. Does such a quick denial have any deeper meaning?

Thought Id just put it out there.

NZX market Wrap

A huge rise by takeover target Sky City(SKC) and a solid Fletcher Building(FBU) lifted the benchmark index today, outweighing a 3 per cent slide in top stock Telecom(TEL)

Sky City said it has received an indicative and confidential approach from a party interested in acquiring all its shares.

The news boosted the casino company's stock to a record high of $5.56, before it closed up 22 per cent, or 95c, at $5.28 on turnover totalling $96.8m.

Fletcher Building announced today that it had raised over $300 million in debt to cover bridging loans used to fund the recent Formica Corp purchase. Fletcher Building rose 3 per cent, or 40c, to $12.80

The NZSX-50 index ended the week up 0.6 per cent, or 24.28 points, at 4231.16 on turnover totalling $231.5 million.

Top stock Telecom(TEL) was down 13c, or nearly 3 per cent, at $4.29. Contact Energy(CEN) fell a cent to $9.33, Fisher & Paykel Healthcare (FPH) lost 4c to $3.45, F&P Appliances fell a cent to $3.57 (FPA) and Auckland Airport(AIA) lost a cent to $3.24 after rising strongly this week on a Candian pension bid for the company.

Sky TV (SKT)was up 4c at $5.52, Air New Zealand (AIA)rose 3c to $2.22, The Warehouse(WHS) gained 3c to $6.08, Infratil(IFT) was down 2c at $2.98, and Hellaby(HBY) was up 10c at $2.90.

Freightways(FRE) fell 2c to $3.68, Sanford(SAN) rose 4c to 4$.55, and Nuplex(NPX) was up 7c at $7.02.

Guinness Peat Group(GPG) shares fell 4c to $1.89 after the lifting of its trading suspension.

GPG recently quit its $3.62 per cent stake in NZX at a market discount of $9.50. NZX shares closed down 10c today at $9.50.

Disclosure: I own AIA, PPL, SKC, MFT shares

C Share Investor 2007