Friday, November 30, 2007

The Warehouse in play

The decision by the High Court to grant a positive decision to the appellant's Woolworths Australia [WOW.ASX] Foodstuffs and itself will make the coming months for the company very interesting.

The High Court decision to allow Foodstuffs and Woolworths to make bids for The Warehouse Group [WHS.NZX] means it is just the beginning of a long process of a bidding war, possible legal wrangles by the Commerce Commission should they wish to appeal the High Court decision in the Appeal Court and difficulties for either Foodstuffs or Woollies to get the required 90% stake for a takeover.

Both Foodstuffs and Woollies own 10% of shares each and they require at least 90% of shareholder approval to make a takeover successful so both companies could block their rival bids. Considering founder Stephen Tindall has a 51% majority, it is definitely up to him and his family interests to sell or not should bids be made.

It is possible that the difficulties of gaining a 90% approval could be got around by organising a complicated "takeover" structure in the guise of a "merger", as was done when Transpacific Waste effectively took over Waste Management in 2005. Only 75% shareholder approval is needed in this scenario.

At today's AGM shareholders were told that the company had strong cashflow and he dropped hints at a capital return to shareholders.

"In the absence of any major acquisition opportunity, the company will consider undertaking further capital management initiatives in the 2008 calendar year," Chairman Keith Smith

Little was said about a possible takeover and the main focus was on company performance for next year which was expected to be flat.

The bulk of sales for the company are made during the November /December Christmas lead up and look to be flat as well, due to high mortgage rates and petrol prices.

The positive news out yesterday led Warehouse shares up around 24% and by 5c to NZ$6.20 today.


Disc: I own WHS shares in the Share Investor Portfolio


Warehouse Group Ltd: 2010 Full Year Profit Analysis
Share Investor Q & A: Questions to The Warehouse' Ian Morrice
Long Term View: The Warehouse Group Ltd
Share Investor Short: Warehouse Group yield worth a look
The Warehouse Group: 2010 Interim Profit Review
The Warehouse: Big Brands, Big Opportunities
Warehouse strike opportunity to buy
Long Term Play: The Warehouse Group
Share Investor Short: Warehouse Group yield worth a second look
Woolworths supermarket consolidation an indicator of a move on the Warehouse?
Stock of the Week: The Warehouse Group
Warehouse 2009 interim profit a key economic indicator
When will The Warehouse bidders make their move?
Long vs Short: The Warehouse Group
Warehouse bidders ready to lay money down
The Warehouse set to cut lose "extra" impediment
The Warehouse sale could hinge on "Extra" decision
The case for The Warehouse without a buyer
Foodstuffs take their foot off the gas
Woolworths seek leave to appeal to Supreme Court
Warehouse appeal decision imminent
Warehouse decision a loser for all
Warehouse Court of appeal decision in Commerce Commission's favour
MARKETWATCH: The Warehouse
The Warehouse takeover saga continues
Why did you buy that stock? [The Warehouse]
History of Warehouse takeover players suggest a long winding road
Court of Appeal delays Warehouse bid
The Warehouse set for turbulent 2008
The Warehouse Court of Appeal case lay in "Extras" hands
WHS Court of Appeal case could be dismissed next week
Commerce Commission impacts on the Warehouse bottom line
The Warehouse in play
Outcomes of Commerce Commission decision
The fight for control begins soonLink

Discuss WHS @ Share Investor Forum - Register free
Download WHS company reports

Shop online at The Warehouse


NEW - From Fishpond.co.nz |
Think Bigger, By Michael Hill




c Share Investor 2007 & 2009



Thursday, November 29, 2007

The Carbon Fairy has no clothes on

In what is clearly gearing up to be one of history's greatest financial explosions and implosion when it all inevitably collapses, is news today that the carbon trading "market" tripled in size to US$30 Billion last year.

With this market built on failed "science", lies and spruiking by the likes of wealthy green investors Al Gore and Leonardo Di Caprio, like all markets built on such flimsy backgrounds the money made, and there will be billions, will be made by those that get on the greenwagon first:

Since co-founding Climate Change Capital in 2003, James Cameron and his business partner Mark Woodall have turned their company into a powerhouse in the burgeoning global market in greenhouse gases. Driven by the Kyoto Protocol on global warming, an accord Cameron helped write, this corner of the derivatives arena is growing as never before.


Clearly, Cameron and Woodall are smart cookies but these self interested scam artists, who have written their own rules and now profit from them by "investing" other peoples hard earned cash into worthless carbon credits will be the first to withdraw their own funds when the climate change hysteria is revealed for what it is, that the sun simply getting hotter.

http://www.bbc.co.uk/norfolk/content/images/2007/02/02/carbon_footprint_400_03_400x300.jpg
A Carbon footprint recently traded on Ebay for
US$1 Million.


I am old enough to remember similar things happening during the dot com era where mum and dad investors piled into worthless "businesses" and the big boys got out first before the truth about the bulk of silicon valley Internet companies hit the investment fan.

The same thing is going to happen with the carbon trading market.


Related Share Investor Reading

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c Share Investor 2007


Wednesday, November 28, 2007

Sky City sale could be off

News yesterday that Sky City Entertainment Group Ltd [SKC.NZX], which has been in play for the last 3 months, has probably only got one interested party left that wants to buy the company is music to my ears.

Reportedly there had been "several" interested parties with one, United States- based private equity TPG Newbridge Capital with Apollo Management, doing due diligence and one other "serious" bidder.

As I have ranted on before Sky City is worth a whole lot more than the rumored $NZ5.50-6 per share that has been talked about. It is a monopoly in all the markets it operates in and has some seriously good assets that have been mismanaged to the point where another party thinks it can take the company for a bargain price.

One reason cited for difficulties with parties looking over the company making offers was the current climate of fear over raising debt and the cost of that borrowing.

Shareholders will be expected to hear a definite outcome at the time of the board meeting on December 5 and 6, according to Sky City Management.

I'm still a little unclear as to when shareholders will know about the Cinema division sale because the deadline has changed so many times but as I have mentioned before the sale of this asset should return a special dividend back to owners.

The only questions that are left to answer are who the new CEO is going to be and whether he or she will have a clear direction as to where the company is going and whether he can inspire the motley crew that are currently there with their feet under the boardroom table to follow his direction.

The stock was punished on the news today with the share price down 30c to $4.90 on big volume of 25 million dollars.

Disc: I own SKC shares in the Share Investor Portfolio


Sky City Convention Centre @ Share Investor

VIDEO - Sky City Entertainment Group : Parliamentary Question related to Convention Centre
Sky City to pay for National Convention Centre
Share Investor discusses Convention Centre proposal with CEO Nigel Morrison
Sky City Convention Centre Expansion a Money Loser: Part Two
Sky City Convention Centre Expansion a Money loser
SKC Convention Centre power-point slide illustrations & SKC submission to Auckland City Council

Sky City Entertainment Group @ Share Investor


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Sky City Entertainment Group Ltd: Presentation to Macquarie Group
Morningstar Revalues Sky City Entertainment Group
Guest Post - Michele Hewitson Interview: Nigel Morrison
Failed Sky City bid for Christchurch Casino good news for Shareholders
Sky City Entertainment Group Ltd: Christchurch Casino bid falls short of Investment Criteria
Sky City Entertainment Group Ltd: Never mind the width feel the volume
Sky City Annual Meeting & 2011 - 2012 Profit Forecast
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Sky City set to lose National Convention Centre bid
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Sky City Entertainment Group Ltd: Download full Company analysis
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Sky City Entertainment: CEO Nigel Morrison discusses 2010 Half Year
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Sky City Entertainment 2008 Full Year profit results , NZX release, 2008 full year presentation, result briefing webcast, financial statements
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Discuss SKC @ Share Investor Forum
Download SKC Company Reports

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c Share Investor 2007


Monday, November 26, 2007

Fletcher's got game

http://media.apn.co.nz/webcontent/image/gif/012edednpark.gif
Artist impression of the new Eden Park

In a provisional decision, it has been announced today that Fletcher Building Ltd [FBU.NZ] has been picked as the preferred builder for the new Eden Park revamp, valued at anywhere between NZ$190 million and north of $300 million, depending on who you speak to.

The stadium is to be rebuilt for the 2011 Rugby World Cup and construction is expected to start in August 2008.

If Fletcher's can negotiate a good deal for them, it is going to be good for the company. I'm mindful though that many stadiums built around the world have caused construction companies much grief, as changes to design, construction problems, and political meddling has put profits at stake and even put company futures at risk.

The new Wembly Stadium almost sunk the Australian builder Multiplex last year and the company building the new Vector Arena in Downtown Auckland lost big dollars on that project.

It is more than likely that the big New Zealand construction company will win the bid as it has the size and experience to be able to complete the project

Grab your seat for the game, Fletchers could be in for a bumpy ride.


Fletcher Building @ Share Investor

Fletcher House built on hard times
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c Share Investor 2007

Helen Clark and Jenette Fitzsimons knee deep in Windflow Technology conflict

Helen Clark, the Prime Minister of New Zealand, continues to have a problem with separation of her job from conflicts of interest and possible conflicts of interest.

Apart from the numerous personality, and socio-political conflicts she has in her day to day activities the topic up for discussion here is her and her Government's numerous conflicts of interest with the business world.

We have had recently Clark herself, Micheal Cullen and other Government Ministers interfering in Air New Zealand by making public statements that have affected the share price of the airline, likewise she and her Ministers erred again in 2006 when making inappropriate comments, on several occasions, about Telecom New Zealand that lost shareholders 100s of millions of dollars.

Most recently we have had Winston Peters, a Labour Government partner and lapdog making inappropriate comments in the media about influences they could use to stop the Auckland International Airport from being sold.

The most glaring example and probably least known, is the conflict that arises from Jeanette Fitzsimons from the Green Party and her major shareholding in the listed NZ windfarm owner , manufacturer and developer, Windflow Technologies.

Fitzsimons is a partner to the Labour Government and drives Labour's "Green Agenda" for them. Fitzsimons has been responsible for passing law and changing rules to give companies like hers an advantage over competitors and as a result she has financially benefited directly from her activities in Parliament. Jenette has a knack of forgetting to mention her large shareholding in Windflow Technology when dealing with such matters when doing Parliamentary business.

You cant get more corrupt and conflicted than that but she has a good role model for her modus operandi in Al Gore, but that is another story.

If we get back to Clark's role in this though, not only is her Government culpable in the conflict of interest by allowing Fitzsimons to feather her own nest but she has also been directly championing the company with financial, moral and media support for Windflow Tech.

Helen Clark with Windflow Technology
head Geoff Henderson,centre, and Derek Walker,
chairman of NZ Windfarms, at the commissioning
of NZ Windfarms' turbines near Palmerston North.



This sort of Parliamentary, legislative and Prime ministerial support for Windflow Tech is clearly a huge conflict of interest that shouldn't be allowed to continue, although we shouldn't be surprised by this sort of conflict as it is apparent at most of our listed companies: Tim Saunders at Contact Energy, Lloyd Morrison at Auckland Airport and a host of other rapscallions and rascals at a whole host of other listed companies.

The shareholders at Windflow Tech should be worried too.

Government interference, as outlined above, can also change to the negative at a whim, should policy, Government or thinking change.

We have to remember, as shareholders in companies, however small or large our holding maybe, it is our personal property rights that are at issue here. Interference from individuals, entities, whether Government or private have no more rights than you or me and their influence shouldn't be able to be subscribed to the extent that they can change laws to suit their own agendas and line their own pockets.


C Share Investor 2007

Friday, November 23, 2007

Share Investor Friday free for all: Edition 12

Fat Prophets

There have been some good company results out this week. Ryman Healthcare had a 20% rise in profit for the last half year and forecast another strong year in 2008, while Fisher and Paykel Health half year profit was down sharply because of repatriated funds in US dollars lower due to the weak US currency but sales and profitability before currency exchange were up strongly.

http://www.headliner.co.nz/images/Ryman_Healthcare.jpg
Part of a Ryman Healthcare Village

Earlier this week, Mainfreight half year profit rose around 9% before abnormals and future guidance gave investors positive encouragement for their investment in the company.

OK, OK, so I'm blowing my own trumpet because I own shares in all these companies? Well, Yes and No.

While individually these 3 companies are doing well, with rising sales, profits and good future profits indicated, as a group they show that New Zealand listed companies are still doing well, despite all the international drama of market turmoil, rising oil, mineral, commodity prices and Al Gore putting his carbon footprint in his mouth again.

Investing long term in good companies always beats the likes of trading carbon fairy dust!


I'll be baackk

The Loan Terminator, Governor Arnold Schwarzenegger, is back in the news again this week, in a sequel to his Terminator movies that would have him eliminate Californian home loan debtors the pain of repaying their sub prime mortgages at normal interest rates by making the sweetheart deals they initially signed up for extend for a period of up to seven years.

http://img.timeinc.net/time/2007/villains/images/schwarz_land_page.jpg
The Governator terminates debt while
looking cool at the same time.


The bulk of these "sweetheart" deals at very low interest rates were due to be recalculated in several months time but 3 lending institutions who have exposure to 25% of sub prime loans, Countrywide Financial Corp, GMAC, Litton Loan Servicing and HomEq Servicing, seem to have convinced Arnie that eliminating the inevitable collapse of borrowers next year and putting it off till 2014 is a great idea.

As I have ranted on before, these individuals, as sad as it is, simply need to bite the bullet and face the music now, instead of slowly dragging down the rest of us with them.

Arnie needs to go back to Hollywood and fight the bad guys not Terminate borrowers' and lenders' responsibilities to face their own debt woes.

Terminator 4 anyone?


The carbon fairy has no clothes on

In what is clearly gearing up to be one of history's greatest financial explosions and implosion when it all inevitably collapses, is news today that the carbon trading "market" tripled in size to US$30 Billion last year.

With this market built on failed "science", lies and spruiking by the likes of wealthy green investors Al Gore and Leonardo Di Caprio, like all markets built on such flimsy backgrounds the money made, and there will be billions, will be made by those that get on the greenwagon first:

Since co-founding Climate Change Capital in 2003, James Cameron and his business partner Mark Woodall have turned their company into a powerhouse in the burgeoning global market in greenhouse gases. Driven by the Kyoto Protocol on global warming, an accord Cameron helped write, this corner of the derivatives arena is growing as never before.


Clearly, Cameron and Woodall are smart cookies but these self interested scam artists, who have written their own rules and now profit from them by "investing" other peoples hard earned cash into worthless carbon credits will be the first to withdraw their own funds when the climate change hysteria is revealed for what it is, that the sun simply getting hotter.

http://www.bbc.co.uk/norfolk/content/images/2007/02/02/carbon_footprint_400_03_400x300.jpg
A Carbon footprint recently traded on Ebay for
US$1 Million.


I am old enough to remember similar things happening during the dot com era where mum and dad investors piled into worthless "businesses" and the big boys got out first before the truth about the bulk of silicon valley Internet companies hit the investment fan.

The same thing is going to happen with the carbon trading market.


Fletcher Building's got game


http://media.apn.co.nz/webcontent/image/gif/012edednpark.gif
Artist impression of the new Eden Park

In a provisional decision, it has been announced today that Fletcher Building has been picked as the preferred builder for the new Eden Park revamp, valued at anywhere between NZ$190 million and north of $300 million, depending on who you speak to.

The stadium is to be rebuilt for the 2011 Rugby World Cup and construction is expected to start in August 2008.

If Fletcher's can negotiate a good deal for them, it is going to be good for the company. I'm mindful though that many stadiums built around the world have caused construction companies much grief, as changes to design, construction problems, and political meddling has put profits at stake and even put company futures at risk.

The new Wembly Stadium almost sunk the Australian builder Multiplex last year and the company building the new Vector Arena in Downtown Auckland lost big dollars on that project.

Grab your seat for the game, Fletchers could be in for a bumpy ride.


NZX Market Wrap



The benchmark NZSX-50 index, which yesterday ended below where it started the year, close up 16.8 points on 4071.0.

Turnover was light at $71 million.

"The over-riding theme was one of extreme caution," said ABN Amro broker Matt Willis. While value was starting to emerge, there was no rush to buy. Investors remained risk averse due to the US subprime mortgage crisis, which he said was a bi-product of weakening economy.

On the local scene, results of export stocks this week revealed the lagged impact of the high dollar was starting to hurt as currency hedges ran out. Companies were concerned about higher costs.

"Operating conditions are less than positive and that has followed through into sentiment."

However, retirement village operator Ryman Healthcare picked up 2c to 207 after reporting a 22 per cent lift in half year net profit after tax to $34.7 million.

No.2 stock Fletcher Building pared its morning loss to 5c, ending on 1175, after it was confirmed as the prime contractor to revamp Eden Park.

No.3 Contact Energy finished 4c up on 889.

NZ Oil & Gas eased back 2c to 110, having traded up to 113 in the morning, after gaining 11c yesterday on news estimated oil reserves for the Tui field had increased 30 per cent to 41.7 million barrels. That was worth an extra $200 million to NZOG, over time.

Sky City ended unchanged on 518 with possible bidders expected to show their hands early next week. However, share action suggests the market does not hold high hope for high offers.

Australian stocks mostly had a good session despite uncertainty surrounding tomorrow's election result.

Lion Nathan, which on Wednesday reported a strong result with good prospects for 2008, closed up 60 at 1100.

Goodman Fielder recovered some of its recent losses with a 9c gain to 230.

NZPA


NZ Dollar Wrap

Reuters currency rates

5pm today 5pm yesterday

NZ dlr/US dlr US75.62c US75.46c
NZ dlr/Aust dlr A86.25c A86.41c
NZ dlr/euro 0.5060 0.5074
NZ dlr/yen 81.60 82.10
NZ dlr/stg 36.47p 36.53p
NZ TWI 69.31 69.42
Australian dollar US87.64c US87.36c
Euro/US dollar 1.4942 1.4870
US dollar/yen 107.89 108.84


Disclosure: I own Fletcher Building, Ryman Healthcare, Fisher Healthcare and Mainfreight shares


C Share Investor 2007

Thursday, November 22, 2007

Border's decision an indicator for Warehouse takeover outcome

A very interesting decision by the NZ Commerce Commission on Tuesday to give Whitcoulls the go ahead to buy the Borders book chains in New Zealand and Australia.


http://www.aucklanddailyphoto.com/wp-content/uploads/2007/04/a24042007.jpg
Border's Auckland Queen St Store

Given this outcome one could be forgiven for not thinking that either Foodstuffs or Woolworths should be able to get similar approval to buy The Warehouse chain. when a decision in the appeal to the High Court comes to light.

The approval for Whitcoulls to buy the 5 store chain in NZ is a similar scenario to the possible Warehouse buyout.

In Whitcoulls you have a dominant player wanting to takeover the superstore format that Borders is modelled on even before it has been given a chance to flourish under another independent player. Paper Plus is another dominant NZ player that is also interested. Dymocks, with quite large format stores and a much NZ smaller business has dropped out of the running for some reason.

Dymocks would have been the natural partner for Borders in NZ simply because of its small size.

As has been covered ad nauseum, Foodstuffs and Woolworths twin bids for The Warehouse are being made by two dominant grocery players in New Zealand and the Warehouse has recently kicked off development of a superstore format along the lines of Walmart's "supercenters" that include grocery lines and with three of these stores the format is in its infancy.

In Auckland City CBD the purchase of Borders by Whitcoulls will allow the combo company almost a monopoly in the superstore format, with the Whitcoulls store only a block away from Borders, you will see price rises for stock. In the rest of the country Whitcoulls and Paper Plus dominate the book and stationery industry.

If you use the CC rationale for allowing a Whitcoulls or Paperplus buyout of Borders and apply it to a possible Warehouse takeover by two dominant grocery players the similarities are spookily parallel ones. The Warehouse extra format is in its infancy, as is the Border's format and allowing Foodstuffs or Woolworths to purchase would by the CCs own standards be acceptable.

The nub of the Commerce Commissions argument in the Borders case seems to be that their large format stores don't lessen competition in the hands of a dominant player, so the same measuring stick must be applied in the Warehouse decision before the High Court. Extra format stores are unlikely to be a threat to other competition if purchased by a dominant player if you apply the Borders decision or they cant be much of a threat in themselves as a successful format in anyones hands. Therefore a positive outcome must be applied otherwise consistency in decisions at the Commission will be threatened.

The wait and outcome will be interesting and the High Court have a tough decision to make. However, they must apply the same rules to the Warehouse decision as the Commerce Commission have made this week in regard to Borders.

Disclosure: I own Warehouse shares

C Share Investor 2007

Wednesday, November 21, 2007

Auckland Airports new directors must focus on shareholders

After yesterday's vote at Auckland International Airport [AIA.NZ] AGM a number of the original board was gone and replaced by a motley crew of local politicians, individuals with axes sharpened and ready to grind and a couple of incumbents only just scraping in.

The amount of mud slinging by the current elected directors aimed at each other in the media recently could well leave one thinking that turbulence in the board room will be de rigeur.

Individual agendas are likely to be the order of the day, with newly elected Lloyd Morrison the person with the most to gain. Through his company Infratil [IFT.NZ] and a partnership with the NZ Super Fund, Morrison owns around 9% of AIA. He also owns a majority stake in Wellington Airport and is behind the proposal to build a second airport in Auckland.

Morrison's conflict of interest is clear but his agenda isn't. He made a bid for the Airport earlier this year at a share price of less than what Dubai Aerospace was prepared to pay but said in the meeting yesterday that NZ companies had been "undersold in the past".

Auckland businessman Richard Didsbury, a director nominated and acting on behalf of Auckland City Council and John Brabazon, nominated by Manukau City Council but now stood down, are two individuals with political direction with Didsbury acting on behalf of his council to keep the airport in "New Zealand hands", whatever that means because it is currently a publicly owned company with shareholders living in many countries and Brabazon still possibly imbued with Manukau's don't sell at any price strategy.

Chairman John Maasland is going to have a difficult job getting anyone to agree on a single defined direction for the company as it goes forward because they all seem to have their own ideas as to where the company should go. Ego has raised its ugly head in the lead up to the directorship elections yesterday but it has no place in the board room.

What these individuals seem to have forgotten is that there are shareholders out there who haven't had decent representation over the last 6 months or so during a possible sale of the company. The 2 offers that were turned down outright by the board, Dubai Aerospace and the original Canada Pension Plan scenario should have been put to shareholders and then put to the vote.

Instead directors fell to local and national political interference and public opinion when the property rights of AIA shareholders should have been given preference for it is they who own the company.

The new board need to keep this uppermost in their minds every board meeting and business dinner and lunch that they have.

Disclosure: I own AIA shares


Auckland International Airport @ Share Investor

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c Share Investor 2007

Tuesday, November 20, 2007

Pumpkin's expansion comes at a cost

The mood at today's Pumpkin Patch Ltd [PPL.NZX] AGM seemed a little dire.

Talk of extra expenses due to expansion seemed the main theme of the day and a weaker US dollar and stronger Kiwi having a big impact on profit repatriated back to New Zealand.

The "Patch" is expecting earnings growth to come from local markets, increased interest charges, store opening costs and market development costs in the USA and UK continue to have an impact the on the company's results short to medium term.

Like Burger Fuel Worldwide Ltd [BFW.NZX] the initial costs of establishing a sustainable global brand are a necessary evil and in my opinion will increase before they start to decline. If you are invested in Pumpkin Patch to make a buck short term unfortunately the big bucks for this investment are more likely to be realised long term.


A 3,200 ft² shop at 77 Clarence Street, Kingston, UK
leased to Pumpkin Patch Ltd on a new 10 year lease
at a headline
rental of £333,330 p.a.x.

If you unhappy with that as an investor then clearly you should have your money elsewhere.

Quite often, when establishing a brand such as this, companies make losses, so it is to the credit of the management of Pumpkin Patch that as yet this hasn't been the case.

Carefully building up a profitable Australasian business before moving to new overseas markets has put the company in a great position to use cash flow to allow them to borrow to grow their new business.

Michael Hill International Ltd [MHI.NZX] has used the same strategy in building their brand in Canada and like PPL they are still running at a loss there.

Store numbers are now at 200 and management look to add around 20 new stores this financial year, down from last years 35 stores, so associated costs should be ameliorated.

The only real threat seems to be from the currency swap from the strong Kiwi dollar if it continues long term but it is something management will have to deal with if it stays strong, perhaps make it a side issue and not give it the significance they seem to every reporting season, simply because there is nothing they can do about it.

Short to medium term though shareholders like me could be in for a bumpy ride.

The market punished the gloomy outlook by cutting the share price by 16c to NZ$2.72 on good volume.

Disc I own PPL shares in the Share Investor Portfolio


Pumpkin Patch @ Share Investor

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Pumpkin Patch profits flatten
New Zealand Retailers ring up costs not tills

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Allan Hubbard: Man Out of Time - By Virginia Green

Hubbard: A Biography of Allan Hubbard



c Share Investor 2007

Thursday, November 15, 2007

Share Investor Friday Free for all: Edition 11

Fonterra front footing it





The announcement yesterday of a possible listing on the NZX by New Zealand's biggest company, Fonterra, is the best news the New Zealand economy has had in generations.

Fonterra, a global milk products producer, manufacturer and exporter is a huge contributor to NZ Inc and the company has become a dominant force in the Global Dairy products boom.

It has now got to the point though, that it needs some serious capital to allow it to grow larger and compete with the likes of Nestle, Danone and Kraft. Fonterra's cooperative structure doesn't allow the company to raise the capital needed to foot it with the other big boys as the dairy industry players grow in size, through acquisitions and mergers.

There has been much bleating by Unions and the NZ First Political Party that the proposal isn't a good idea but frankly as Unionists and pollies what the hell would they know about business.

This is great news for Fonterra and its long term future and excellent news for New Zealand investors as they will be able to participate in an industry that dominates our export revenues and economy and contribute to the investment of a great business.

The NZX is going to be more indicative of our economy by having Fonterra listed, possibly sometime in 2010, and the index will get the much needed boost that it has lacked all these years simply because of the impact the company has in our economy.

A cash cow indeed.

Sky City twiddling thumbs in the back row

http://www.newzealandnz.co.nz/touring-guides/sky-city-tower.jpg
Sky Tower, Auckland, NZ

News this week that Sky City Entertainment(SKC) is not likely to be able to tell the market anything about the 3 companies currently looking over SKC's books and what their intentions will be until "after Christmas" leaves this writer wondering how far management can stall shareholders any longer.

The timetable initially stood at an announcement at the end of October, then mid November and now after xmas. It makes me wonder how serious prospective bidders might be and doesn't inspire confidence in a good price for the company or a sale at all.



In other company news, contenders for SkyCity Cinemas - which could be worth as much as $116 million - are understood to include Australian firm Greater Union, US-based Reading Cinemas and Hoyts, previously a partnership between PBL and West Australian Newspapers, which was purchased by Australia's Pacific Equity Partners.

The vagaries of management speak are truly alive and well at Sky City, this from the company November 14:

SkyCity said yesterday it did not expect to progress with the cinema sale before the end of November.

What the hell does that mean, will they give a bloody deadline?

Sky City Management surely must be nominees for the worst board for 2007.


Morrison speaketh with forked tongue



I'm having trouble taking Lloyd Morrison seriously.

Morrison, the chief executive of Infratil, a director of Wellington Airport and a backer of a second airport for Auckland at Whenuapai has $300 million invested in Auckland Airport(AIA) on behalf of Infratil and the NZ Super Fund.

The trouble with this though is that Morrison's directorship of Wellington Airport and backing of a second port in Auckland put him in direct conflict with his large ownership of AIA shares and his ambition to get a seat on the AIA board.

Morrison says there is no conflict but it doesn't take a genius to figure out that he is staining credibility paper thin if he thinks that.

He was caught out today on National Radio Business today and last week when he said that the Canadian Pension bid was too low at $NZ3.65 and mentioned a price north of 4 bucks per share as being fair value for the company.

Interesting take when you consider than Infratil was involved in a bid, earlier this year, that was rejected by the board as too low, probably below the Canadian bid.

Morrison is a savvy investor and he is using subterfuge, doublespeak and attacking competitors in his bid to get some sort of control in the Auckland Airport deal/s.

While the AIA board hasn't been straightforward with shareholders over the last 8 months of this protracted bid for control of the port, Morrison's intentions are not clear and he cannot be trusted and shouldn't be elected to the AIA board on November 20.

In takeover news, Canadian Pension Plan Investment Board (CPPIB) has made a formal bid for AIA today.

The key terms of the offer are as follows:

Offer Price: The consideration offered for each Outstanding AIAL Shares taken
up under the offer is $3.6555 in cash.

Partial Offer: The Offer is for 39.53% of the AIAL Shares not already held or
controlled by the Offeror

Closing time: The Offer closes at 5.00pm on 13 March 2008
Partial Offer: The Offer is for 39.53% of the AIAL Shares not already held or
controlled by the Offeror

Closing time: The Offer closes at 5.00pm on 13 March 2008




Hollow words, hollow competition

The owner of Share Trader and many other financial based sites in New Zealand threatened to "take legal action" over this revelation published in the Share Investor Blog a month ago and insisted it be removed and an apology made but as yet has failed to serve me with a writ.

This individual also made a threat of "legal action" over my use of "Good Returns Bookstore" banners on my site back in July even though I was legitimately using them as a genuine affiliate.

Now I don't take kindly to threats and I am justly annoyed by this pest, but I guess threats ring pretty hollow when you use them as your modus operandi when doing business and don't follow through.

Good Returns Bookstore, owned by Tarawera Publishing, continues to spam me with emails to buy their books, even though I canceled my affiliate membership and Tarawera's Sharetrader continues to host my contributions on their site, even though I didn't sign up to their new draconian membership terms and conditions (see the fee for spamming!!) as part of Tarawera taking over the site.

*Incidently you can buy all types of finance books from my Share Investor Bookstore, the range is many hundreds of times larger and at least 30% cheaper than Good Returns Books.

Sort yourself out Phil!



Learning to love China

http://upload.wikimedia.org/wikipedia/commons/thumb/f/fa/Flag_of_the_People's_Republic_of_China.svg/800px-Flag_of_the_People's_Republic_of_China.svg.png

World markets have been nervous again over the last few weeks. The Dow has slipped from over the 13600 mark to just above 130000, oil has reached almost 100 bucks, gold is over US$800 and the US dollar is doing an impression of a tiger moth with one wing.

Shakiness over future sub prime losses for banks and financial institutions have been blamed and to be sure there is more to come once sweetheart mortgage deals end but like any market jitters the market tends to overreact.

I think what could be happening now and we wont really know it for sure until we look back, is that we are partially seeing the start of the transition of dominance from the US as the financial and economic powerhouse to China. To be fair it ain't there yet but early signs seem to be showing the genesis of something akin to an economic transition.

The low value of the Yuan and the Chinese economy powering ahead means their economy will only power ahead in the future, while the US, a massive importer of foreign made goods is struggling as their dollar sinks and imports cost more.

Also the US as a safe haven for foreign investment is being eroded as their interest rates plummet and the cost of repaying debt to China gets ever more expensive.

The transition of America from a manufacturer to their home market and huge importer to a bigger exporter must come and will be easier to do as their dollar drops against their main trading partners.

It is then China will be seen as an opportunity to US manufacturers instead of a threat and the whole cycle of economic change will start again.

Let us remember that China was an economic powerhouse once before.


NZX Market Wrap



The NZSX-50 index, closed up 1.1 points at 4114.2, on turnover valued at $138.5 million.

Auckland Airport fell 3c to 301, after Canada Pension Plan Investment Board (CPP) submitted its formal cash bid for 39.53 per cent at $3.6555 per share. The airport company has also asked its advisers to seek other offers.

AIA shares had earlier risen to 308 before profit takers moved in. Turnover was a heavy $46.8m.

Fisher & Paykel Appliances rose 4c to 364, having gained about 30c since its first half result last week. The company is also considering selling its finance company to focus on its whiteware manufacture and retailing businesses.

Market heavyweight Telecom gained 4c to 425, Fletcher Building was up 8c at 1166 after being caned for most of the last week or so, and Contact Energy lost 5c to 885.

F&P Healthcare was up 3c at 328, Sky City gained 5c to 537 after getting knocked about yesterday after a broker downgrade. Sky TV lost 8c to 562, and Vector recovered some of yesterday's 6c loss to close up 3c at 233.

Air NZ, which has had a rough ride recently due to rising fuel prices, rose 1c to 202.

Among other stocks to gain, NZX was up 5c at 961, Freightways rose 2c to 380, Infratil was up 2c at 293, Nuplex gained 5c to 725, and carpetmaker Cavalier was up 3c at 315.

Hellaby Holdings lost 2c to 271, despite news it was trading ahead of last year, when it posted its first loss since re listing in 1994.

Rakon fell 5c to 515, Tower was down 4c at 204, Hallenstein Glasson lost 3c to 445, Mainfreight was 5c lower at 710, and The Warehouse was down 2c at 522, marking time while waiting for a decision by the Commerce Commission as to whether Woolworths or Foodstuffs can make a bid to takeover the company.

On the NZAX , Burger Fuel International was down 2c to 60c.


NZ Dollar Wrap

Reuters currency rates
(5pm today - 5pm yesterday, NZ time)

NZ dlr/US dlr US75.43c - US76.47

NZ dlr/Aust dlr A85.28c - A84.97c

NZ dlr/euro 0.5162 - 0.5210

NZ dlr/yen 82.96 - 85.14

NZ dlr/stg 36.93p - 36.17p

NZ TWI 69.72 - 70.48

Australian dollar US88.46c - US89.99c

Euro/US dollar 1.4613 1.4679

US dollar/yen 110.00 111.29


Disclosure: I own Sky City and Auckland Airport shares


C Share Investor 2007