Pumpkin Patch's North American Downsizing a Prudent, Overdue Move

News out today that Pumpkin Patch [PPL.NZ] are going to ditch 20 of their 35 United States stores is good news for the company and investors.

It means investors will have less pain in the short term and that there is also still a base in North America from which it can expand again when economic conditions are far more rosy. The uncertainty of retailing conditions in the US and just how long things are going to be dire cannot be ignored.

As a shareholder am pleased about management's move but given that the retail sector in the US has been behaving like a WW2 Zero pilot on a suicide mission for an extended period, one could be a little critical that this move wasn't made 6 months ago. Having said that the exit seems to have been well planned.

Of course the US and New Zealand is littered with collapsing retailers, so Pumpkin has done well to survive, let alone make a profit.

Trading in New Zealand and Australia has been surprisingly resilient and my hunch and anecdotal evidence is that very high birth rates in both countries stimulated by welfare targeted at families having kids (a story for another day on another blog) means that demand in this region has been artificially raised - Thank's Aunty Helen!

There will be costs to exit the 20 stores and this will clearly make the bottom line look awful next reporting period in October but in amongst that bad news is one key piece of good news, 11 of the remaining 15 stores in the US have had their leases re-negotiated in a southerly direction. This is one of any retailers biggest sustained costs.

On a personal note, much of my reason to buy this company was its expansion plans in America and I am pleased the company is still going to pursue that market some time in the future. Without that avenue for growth I would have exited the company when the share price recovered.

The share price moved strongly upward on this news mainly because losses in the US will be far lower than previously pegged by analysts.

Look for an opportunity to buy on lower share prices when the forthcoming book entry loss is announced in October.


Pumpkin Patch @ Share Investor

Digging at Pumpkin's Profit
Long vs Short: Pumpkin Patch Ltd
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I'm buying
Why did you buy that Stock? [Pumpkin Patch]
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Buyer of large piece of Pumpkin Patch a mystery
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Broker downgrades of PPL lack long term vision
Pumpkin's expansion comes at a cost
Pumpkin Patch vs Burger Fuel
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Michael Hill: Interview with Ian Fraser

You may have missed an interview with Michael Hill yesterday with Ian Fraser. I only caught it by accident while turning the dial.

Michael is currently on a media blitz to sell his book and this is another but more interesting leg.

The interview covers off his personal background and motivation to get him where he has.

It is very interesting to hear that up until the infamous house fire when he was 43 he wanted to "do more" in life but, like most of us, was fearful of making that step out of the comfort zone we place ourselves in. After that incident he reacted in a way that most wouldn't - he calmly decided that there was more to life than what he had experienced thus far and he was going to "go for it".

The fire somehow was the impetus that removed that block and allowed Hill to face new things without fear and that we all face that moment when a choice can be made that will change our lives but we don't always take it. -he did.

There was also an interesting admission, he mentioned that he has made a mistake by buying Whitehall Jewelers Holdings-based in the Chicago out of bankruptcy last year - not usually something that CEO's would readily admit to and he says he has learnt from it, the struggling US business has taught the company as a whole how to respond to the current tough economic times, he said.

I would recommend a listen, the interview is 46 minutes long, 16 MB and can be downloaded at Share Investor Forum here. You have to be a member to download, its free and quick - register, it takes less than a minute.


Disclosure I own Michael Hill International shares.


Michael Hill International @ Share Investor Blog

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Buy Toughen Up: What I've Learned About Surviving Tough Times



$NZ 33.82 -15% off - from Fishpond.co.nz


c Share Investor 2009

A Note to Prospective Restaurant Brand's Shareholders

There has been market talk in the past and more out today about how positive things look for Restaurant Brands [RBD.NZ] profit next year.

Yes, profit will be up marginally from last year and substantially from the last few years but this company really has had a dreadful past, so any increase in profit will look good.

I am not sure whether anyone follows this company closely in the broker/choker set but if they do they were either in nappies when the company listed back in 1997, too lazy to analyze the company's history properly, or ignoring the bleeding obvious simply because the stock will be back in the NZX 50 next week and brokers will have to add the stock to their index funds - read pump and dump.

While South African CEO Russel Creedy has done a much better job than any leader the company has had, he has gotten the company out of the fast food graveyard by focusing on cutting costs, speeding up service times and levels of service (my experience from gorging at KFC for the last 15 years and being a large RBD shareholder in the past) the industry that his company operates in is notoriously cyclical.

Fast food is currently undergoing a renaissance of sorts because of dire economic circumstances and people are looking for cheaper places to eat. RBD is now in the upper part of the fast food cycle, in fact I mentioned about ten years ago that its business cycle is up and down more than a cheap Krd hooker, anyway, that aside, my bet is that the stock may even race up to one and a half dollars or more from its current 1.02.




It has moved over the last couple of months ago from a low of 57c a stock price it last reached in the late 90s.

My point is if you are interested in buying into this stock, be warned that you should be there for the long-term because its stock price will come down again when it moves back off the peak of its economic cycle and once again struggles to maintain profit.

You have been warned dear readers but as always, do your own research.

Restaurant Brands @ Share Investor

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Danny Diab & Restaurant Brands
2008-2009 KFC sales figures mislead investors
KFC Finally Flying
Starbuck's New Zealand Cup doesn't runneth over
RBD gives KFC a push
McDonald's playing chicken with KFC
Restaurant Brand's Pizza Hut faces increasing competition
RBD sales analysis
RBD saga continues: CEO leaves
The secret recipe is out
2007 FY profit analysis
Delivering increased profit in October 2007
No reason for optimism in latest sales figures

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Long VS Short : Auckland International Airport

In this eight installment of the Long vs Short series I am once again going to take look at the chart comparisons for a stock from the Share Investor Portfolio and compare the 10 year return (chart above) to the turmoil of the last year with a 1 year return chart (large chart at bottom of post).

In this series I want to show the merits of investing, using charts, for the long-term vs short term gains or losses. I will use the longest available data to me for the long-term view (10 years )and will make a comparison against the NZX50.

In this segment of Long vs Short I will take a look at Auckland International Airport Ltd [AIA.NZ] .

I currently hold 3000 Auckland Airport shares after buying 1000 of them in November 2006 and 2000 in April of this year. (see small chart below for detail)

My Portfolio
Symbol	Price	Value	Earned
AIA.NZ	$1.600	$4800	$-540
You own 3000 [AIA.NZ] shares purchased at $1.78 [$5340]

This stock has been performing well fundamentally over the last 10 years and steady over the last 12 months. Its share price though has been fluctuating wildly over the last few years. From a high of over $3.60 during a competing bid to seize control of the company in 2007-2008 to $1.54 recently.

If I had held this stock for the full 10 years (see large chart at top) my return would have been a whopping 210%-including dividends, tax credits and minus brokerage, the NZX is a gross index of stocks.

By comparison if I had held the stock for just this last year (see large chart below) my return would have been a loss of just over 35%.

My total return after 2.5 years or so of holding AIA stock is a loss of just under 10% (see small chart above) That is after dividends and tax credits are added and brokerage applied, not bad considering the market drubbing of every listed NZX share but there is an 8c gain from the 2000 shares I bought in April at $1.70 each.

Having said that this exercise proves, once again, that the long-term bet is the only one to take.

Long-term, 8 in this series, short term 0.





Long vs Short Series

Michael Hill International
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Pumpkin Patch Ltd
Fisher & Paykel Healthcare
Mainfreight Ltd
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Auckland International Airport @ Share Investor

Auckland Airport needs main focus on its core business
Marketwatch - Auckland International Airport
Why did you buy that stock: Auckland International Airport
Cullen's move on Auckland Airport has far reaching effects
Cullen's move on AIA tax plan Anti-Business
AIA profit stays grounded
Softening opposition to CPPIB bid for AIA
Directors of AIA bribe brokers not to sell
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Second bite at AIA by CPPIB might just fly
AIA new directors must focus on shareholders
Auckland Airport merger deal nosedives
The Canadians have landed
AIA incentive scheme must fly out the window
Government market manipulation over AIA/DAE deal
DAE move on AIA: Will it fly?

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Pizza Hut sell-off provides opportunities all-round

The finalisation of details yesterday of a decision made last year by Restaurant Brands [RBD.NZ] to ditch their company owned Pizza Hut restaurants and flog them off to owner/operators brings to an end the long running saga of this money losing brand in RBD's stable of 3 - KFC & Starbucks being the two others - brands.

For many years Pizza Hut has dragged down the company bottom line while KFC has struggled at times to hold up the whole company - Starbucks has also been a money loser since its introduction in 1999.

Many of my readers will know that I was a early shareholder of RBD and actively pushing management back in 1998 to ditch Pizza Hut and sell them to owner operators as that was how their competition was kicking Pizza Hut's backside.

Better late than never!

This latest development will be good for RBD shareholders. Not only will RBD get one-off money for selling Pizza Hut stores but they will also get ongoing management fees for each store that is sold-a sub franchisor of sorts, as YUM! still remains the big daddy franchisor.

All Restaurant Brands shareholders need is the double -Starbucks to be sold off - and the company will be much more able to withstand the highly competitive fast food market with KFC as the big star.

Of course the Pizza Hut sell off provides a good opportunity for individuals to buy a run down business and develop it into a good one.

A franchised pizza business like Pizza Hut, if run well, is a great way to make money.

Domino's Pizza owners in New Zealand have done this well over the years and this has left Pizza Hut as the also ran after being the dominant pizza force in New Zealand for years.

If you have a couple of hundred thousand free cash and access to debt you might well want to give RBD a call right now.


Restaurant Brands @ Share Investor

Danny Diab & Restaurant Brands
2008-2009 KFC sales figures mislead investors
KFC Finally Flying
Starbuck's New Zealand Cup doesn't runneth over
RBD gives KFC a push
McDonald's playing chicken with KFC
Restaurant Brand's Pizza Hut faces increasing competition
RBD sales analysis
RBD saga continues: CEO leaves
The secret recipe is out
2007 FY profit analysis
Delivering increased profit in October 2007
No reason for optimism in latest sales figures

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Market Watch: Sky City Entertainment/Freightways Ltd

Interesting that both Sky City Entertainment Group [SKC.NZ] and Freightways Ltd [FRE.NZ] respective share prices are both approaching the price at which their recent capital raisings were issued at.

Lets have a wee look at Sky City first.

Today the stock closed at NZ$2.62 (see 2 month SKC chart below) just 1c above the $2.61 Share Purchase Plan (SPP) price, a purchase plan that I participated in just a month ago.

At the time I moaned and bitched that my current Sky City shareholding was going to be diluted, only getting just shy of 2000 shares in the offer. I had a feeling that the share price was going to take a dip because of economic circumstances (gee I am a genius), so I am going to take the opportunity to grab a few more thousand shares to top up my holding to 40000 or more .

Naturally I am very pleased about this turn of events in the market.

Likewise Freightways. I got gypped there too, and will be looking for at least another 1000 more shares to top up my holding to 10000. The current share price is $2.84 as of market close today so there is still another 40c to go before it will trigger a buy at the SPP of $2.44 but if you look at the Freightway's 2 month chart below you will see, like Sky City, the share price trajectory is in a downwards direction, so is possible that my buy price will be reached.



Time to put some cashflow to good use.


Freightways @ Share Investor

Freightway's Capital Raising more of the same crap for small shareholders
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Freightway's packages up a good result


Discuss this company @ Share Investor Forum


Sky City @ Share Investor

Sky City share offer confusing and unfair for small shareholders
Sky City CEO doubles down
Sky City Entertainment 2009 Interim Profit Review
Sky City Entertainment 2009 Interim Result Preamble
2008 Sky City profit analysis
Sky City Entertainment 2008 Full Year profit results , NZX release, 2008 full year presentation, result briefing webcast, financial statements
Sky City 2008 profit preamble
Sky City outlines a clear future plan
As recession bites Sky City bites back
Sky City Assets: Buy, sell and hold
Why did you buy that stock? [Sky City Entertainment]
Sky City Share Volumes set tongues wagging
Sky City half year exceptional on cost cutting
NZX Press release: Sky City profit to HY end Dec 2007
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New Broom set to sweep
Sky City Management: Blind, deaf and numb
Sky City sale could be off
Opposition to takeover
Premium for control
Sky City receives takeover bid
Sky City Casino Full Year Profit to June 30 2007
Setting the record straight
Sky City CEO resigns
Sky City Casino: Under performing
Sky City Casino 2007 HY Profit(analysis)
Sky City Casino 2007 HY Profit

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c Share Investor 2009

Stock of the Week: Burger Fuel Worldwide

This Stock of the Week will be a surprise to many because I have been very critical of this company since its IPO listing in July 2007. Burger Fuel Worldwide [BFW.NZ], the "gourmet" burger franchisor company that collects royalties off franchisees as a means of revenue -but currently derives more than half its revenue from food and beverage sales at two company owned stores-and has limped from a failed, over-priced IPO and incurred big but dwindling losses along the way.

Its cash reserves are almost exhausted and its stated reason for their IPO, attracting more franchisees to gain revenue growth for the franchisor, has come to a grinding halt because of "capital restraints".

All negative so far, but wait there's more! Some positive stuff!

There is a chance that Burger Fuel, management could pull things off sometime in the future and make a good sustained profit.

One of the reasons I picked this stock was its share price. It is getting close but not yet at, its true value. At 32c it is roughly a third of its $1 IPO price. There is little interest in and few buyers lined up as at market close on Friday 19, with the first cab off the rank offering 10c a share and the lowest 1c - the lowest ever bids for this stock, so a clear opportunity exists.

Burger Fuel isn't one of those solid stocks you would buy and not expect to lose money, it is purely speculative and high risk but if you have, like me , been watching the trials and tribulations of this company over the last 2 years, and thinking about buying some, now would be the opportune time to start thinking about it.

Anything less than 15c would be a good starting point.

Good luck!


Stock of the Week Series

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Burger Fuel Worldwide @ Share Investor

Download full company analysis from Thomson First-Call
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Analysis - Burger Fuel Worldwide: FY profit to 31/03/09
Burger Fuel: Running on Empty
Burger Fuel leaves investors hungry
Burger Fuel management cagey over company progress
Burger Fuel cooks up Dubai deal
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Don't buy Burger Fuel, yet
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Burger Fuel's Daytime drama
Burger Fuel share price out of gas
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Director explains share price drop
Burger Fuel slims down in value
Burger Fuel and Coke
Marketing Burger Fuel's future
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Burger Fuel results and commentary

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c Share Investor 2009

Sir Robert Jones in his Autumn of Content

I am a contrarian investor of sorts. I say this because while I am buying stocks right now and looking at buying more, I also bought them while the market was at a higher level.

I have written about a couple over the last week, Michael hill and Doris Mousdale, and there are a couple of other New Zealand notables, Jan Cameron and Bricoe Group's [BGR.NZ], Rod Duke who are contrarians by nature.

Perhaps one of the worlds most famous contrarian investors is the world's richest man, Warren Buffett - he loves the current market turmoil, proclaiming such gems that he feels like a "Kid in a candy store" or a "Teenager in a whorehouse", when it comes to the prices he is paying for beaten down assets.

New Zealand has its own Waren Buffett in Sir Robert Jones.

He is as happy as a tar baby in a sandpit because the property tycoon has been buying property when everyone else is selling - NZ$100 million of deals done so far this year.

Some prescient quotes to a recent audience of property professionals show just how excited Sir Bob is:

"From a self- interest point of view, we look forward to a recession."

"We are not going broke. We buy buildings and those buildings are cheaper."

"Land developers go broke, building developers go broke, and for very good reasons, but they're too dumb to work it out for themselves."

"Why do banks keep financing them? Because the bankers get younger every year."

"I've survived more property cycles than most of you, so where's property going? Nowhere - property doesn't move."

You cannot get a more experienced commercial property man in Australasia than Sir Bob, as he points out he has seen this all before and no doubt capitalised on the troughs.

I recall him selling a large office block during one the boom times only to buy the same block back years latter for a much lower price - from memory it was a building in the 1980's Chase development, the full city block the "Finance Centre" in Auckland.

Sir Bob likens the economic cycles to the four seasons, with Winter the low point and Summer the high. He reckons we are in the Autumn of this cycle.

I think he is right and there is worse to come before it gets better but he certainly is making his autumn/early winter one of content rather than the alternative.

You should too if you have the cash.


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c Share Investor 2009

Burger Fuel Worldwide: Download full company analysis from Thomson First-Call

If you want to see how the Burger Fuel Worldwide [BFW.NZ] financial's stack up I have included a full collection of data out June 19, 2009 courtesy of Thomson Financial First Call Global/ASB Securities.

You will find balance sheets, ratios, charts, shareholder returns and all the Burger Fuel info you could poke a hot chip at. (see teaser below but download the full package at Share Investor Forum - you must join to download. It is free and takes less than a minute. I might do this for other companies if there is sufficient interest.

I only mention this because the company is getting close to my purchase price. Last sold at 32c and the next bid in at 10c (a low for the company) with one optimistic fellow offering 1c per share for 100,000 shares!

Key Measures for Burger Fuel Worldwide Value N/R Risk 2 Lower risk Growth N/R Income 5 Lowest VALUE Company Market Sector Aspect Earnings Model -- 0.89 0.88 P/E ratio -- 7.44 12.0 P/B ratio 4.38 0.85 1.68 P/E Growth Ratio -- 1.68 1.67 P/S Ratio 2.18 1.64 0.39 INCOME Company Market Sector Dividend Yield -- 7.7% 5.2% Franking -- -- -- Tax adj Dividend Yield -- 5.6% 4.1% Dividend Stability 0.0% 0.0% 89.3% RISK Company Market Sector Beta 0.67 0.98 0.74 Current Ratio 3.13 3.85 1.09 Quick Ratio 2.86 3.12 0.39 Earnings Stability -- 54.5% 53.7% Debt/Equity ratio 3.6% 0.0% 50.5% Interest coverage (x) -42.8 4.49 2.28 GROWTH RATES 10yr 5yr 1yr 2yr Fcst Sales -- -- 76.1% -- Cash Flow -- -- 52.6% -- Earnings -- -- 66.8% -- Dividends -- -- -- -- Book Value -- -- -16.4% -- Previous Close 52 week high 52 week low $0.32 $0.64 $0.20 P/E Ratio -- Sector Food & Staples Retailing Market Cap $17.0 Million Key Dates Listed 27/07/2007 Balance Date 31 March AGM -- Total Shareholder Return (avg annual rate) 1yr 3yr 5yr 10yr -20.0% -- -- -- Earnings and Dividends Forecast (cents per share) Curr -- -- EPS -1.3 -- -- PE(x) -- -- -- DPS 0.0 -- -- Yield(%) -- -- -- Source: Thomson First Call Global Estimates

Burger Fuel Worldwide @ Share Investor

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Burger Fuel Worldwide: Closer look at Company Accounts
Analysis - Burger Fuel Worldwide: FY profit to 31/03/09
Burger Fuel: Running on Empty
Burger Fuel leaves investors hungry
Burger Fuel management cagey over company progress
Burger Fuel cooks up Dubai deal
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Burger Fuel: Inside info?
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Burger Fuel share price out of gas
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Director explains share price drop
Burger Fuel slims down in value
Burger Fuel and Coke
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ING & ANZ duped "investors" can take their own action

Unfortunately this is about financial skulduggery again.

This time regarding ING and ANZ fund's products that have been frozen had investors put in financial limbo until they can decide whether to accept ING's latest offer of 60 or 62 cents in the dollar and five years in an ANZ call account at 8.3% , take matters into their own hands and take legal action or continue to hold units in their respective funds.

This is because it seems the Commerce Commission/Securities Commission doesn't have the balls/motivation to do anything about it in a sufficiently expedient manner.








Depending on the level of duplicity or what most would consider fraud, that your advisor/ING or ANZ sold you these higher risk products in the first place, if any, will motivate you to take your own action.

Most will probably opt to take the money and run but not me.

If you have been falsely sold a product and you have documentation then you have a case, you don't have to wait for various lobby groups or any Commission to do anything on your behalf.

Depending on your level of investment you can take a case to the disputes tribunal up to $7500 with scope to increase that figure if agreed upon between the two parties. It will cost you 50 bucks.

A breech of the Fair Trading Act is where you should start but consult a lawyer and if you cant afford one go to your free community lawyer through the Citizens Advice Bureau

If your investment is a large one you have a case against the defendant but it will cost you to go to court.

If you got your advice from ANZ your beef is with them NOT ING and if it is an "independent" financial adviser, you go after them. Straight from ING, you go after those bastards.

Too many of these pricks have got away with shoddy and corrupt financial practices in the past and it is time someone took a stand and made an example of these ***ts.


Timetable for ING/ANZ investors

* Investors have until Monday, July 13 to decide on ING's proposal.

* Investors who went through the ANZ Bank have until July 31 to make a formal complaint.

* Investors who accept the offer should gain access to their money by August 28.

* Those who don't accept the offer will continue to own units in the funds.

* Investigations by the Commerce Commission are ongoing but won't be completed by the decision deadline.

* Complaints have also been made to the Securities Commission asking it to delay the offer until the Commerce Commission has ruled but the commission said yesterday it had no ability to stop the offer going ahead because the offer is not misleading or deceptive.


Related Links

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Disputes Tribunal
Fair Trading Act


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• Burger Fuel doesn't rule out capital raising

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c Share Investor 2009

Morgan's book "After the Panic" timely

Media - Video | Text

It is a little too late when you look back having lost your life savings to get it back, but anything that improves investor education and puts the spotlight on dodgy financial practices so you don't perpetuate the same mistake has got to be a positive thing.

Gareth Morgan, the well known economist/socialist has finally come back on track, pulled his finger out of his backside after his embarrassing book on so-called "global warming" and produced a book the average investor should read called After the Panic: Surviving bad investments and bad advice.
His book names collapsed companies and those individuals who are responsible for some of the finance companies that have been buried, along with nearly NZ$ 2 billion of investor money buried along with them.

I am not sure if it includes names of "financial advisers", the financial world equivalent of global warming zealots, but these individuals take a large part of the blame.

The book provides documents from said finance companies that reinforced their "stability" to the investor public while behind the scenes trusts were re-organised, bank accounts were siphoned, money was given to mistresses and tickets to Australia were purchased -my emphasis.

This excerpt from the book is but one example:

"You can have peace of mind when investing with Provincial Finance as you're dealing with an experienced, dedicated finance company," Provincial Finance said in a prospectus in 2005.

"... when you invest with Provincial Finance you'll enjoy high levels of personal service, regular, easy to understand performance reports, attention to risk, and a good rate of return over the term of your investment".

Disclosure was only the beginning of the dodgy dealing of finance companies of course, there was also the massive inter-related party lending to bolster the books, the selling of property that didn't exist, money siphoned from company accounts to pay for lavish personal expenses and a whole host of small crimes and massive mis-demeanor's.

Gareth has written a book of its time and inexperienced/experienced prospective investors alike, in any asset class, should have a read of his book, if only to see where the bodies are buried.

You can be sure though, just as some of these individuals who have participated in this financial rape of the greedy, the hapless, the elderly and the mis-advised, came out of the ashes of similar shell games from the financial collapse of the sharemarket in the 1980s, they will rise again sometime in the future to do it all again.

Gareth's book looks like another tool that investors can use to stop them from becoming financial prey, again.

Related Video

Gareth Morgan Interview - One News

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• Stock of the Week: Michael Hill International
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c Share Investor 2009

Charlies Group: A Triumph of Style over Substance

There was much fanfare, overwhelming hype and plenty of free publicity when Charlies Group [CHA.NZ] listed on the NZX through the back door in 2005 and that has been the way the company has operated for the last 4 years.

They had Marc Ellis as its largely titular head and Stefan Lepionka in the back room squeezing the juice and running the business side.

Shareholders who got in at the entry point have lost millions and are unlikely to get it back and many of these same people would have participated in the 42 below IPO a few years back expecting Charlies to pay back the same way that deal finally did.

We have learnt that the company is looking at raising capital in some way to enable them to continue to function as a going concern and their original idea to build up the company to sell it off to a major beverage player has failed because they cannot get what they think it is worth in the current economic climate.

Burger Fuel Worldwide [BFW.NZ] which is contemplating capital raising itself, is another one of those flash harries that investors got hyped up in and ended up largely kissing goodbye to the 2 million that was raised from them in that particular IPO in 2007.

These companies all share a sense of style over substance and should be avoided at all costs by those without money to lose and that should be pointed out clearly before virgin investors plunk down their cash.

The fact that these sort of IPOs were pitched to those without much financial nous and got caught up in the hype is a testament to Kiwis lack of financial skill and those that were raising funds were counting on when they targeted the financially illiterate for their hard earned moola.

Fare enough for Ellis & Co to take a big risk in business but to pitch there IPO without spelling out there was a fair chance the business would fail is, once again, a triumph of style over substance.

Footnote: Charlies have just issued a press release to the NZX softening up shareholders for more money.


Charlies Group @ Share Investor Blog

Charlies juicing through Shareholder cash


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c Share Investor & Shareinvestor.net.nz 2009

MICHAEL HILL - Toughen Up: What I've Learned About Surviving Tough Times

I have been taking an increasing interest in Michael Hill the man and the Jewelry company that he runs over the last few weeks.

I picked his company Michael Hill International [MHI.NZ] as Stock of the Week this week and covered off an interview with him on TV3's 60 minutes aired last Monday.

His high profile in the media in the last week has been mainly due to a book of his, Toughen Up: What I've Learned About Surviving Tough Times that was launched today .

I received an advanced copy of the book and have read just a brief part of the first chapter.

Suffice to say it sounds like Michael from the get go (it has his "voice") - positive to the point of being unfashionably earnest and eager to tell his story to the rest of us.

As I pointed out in my comments about his TV3 interview and of course gaining much about the content of his book from the title, this book is not only revelation to today's economic condition's but also timeless in its old-fashioned approach to business and indeed life in general.

Hill sees our current economic valley as an opportunity to change, move forward and above all grow business and our economic livelihood in the process.

From the press release for the book:

Michael Hill believes the looming meltdown can be a good thing for businesses and entrepreneurs. It is possible to succeed in a downturn - in fact it is the perfect situation in which to perfect a business. Instead of fearing the side-effects of recession, wallowing in gloom and convincing ourselves the only safe haven is at home under the blankets, entrepreneurs can use this period to their advantage. With the right attitude, you can not only survive, but emerge from the crunch with a new feeling of prosperity and strength.

Over the years, Michael Hill has had just about every possible experience in business: from lie-awake-at-night nerves to the joy of unexpected success. He's reshaped the landscape under his feet and he has ventured into new territory. And at every moment, he has relished the excitement of it all. Once, he was an outsider in his industry; the cheeky startup whom nobody expected to succeed. The established players had no reason to view him as a threat. Now, his business is the establishment. It dominates the markets in which it operates. Michael Hill Jeweller is a respected part of the business culture in a large part of the world - and they are continuing to expand in both size and ambition.

Plain sailing through a business storm encapsulates the ingredients of Michael's philosophy. There are no secret herbs and spices. It is not a magic recipe - it is just a collection of solid ideas, firmly grounded in reality. All these concepts are remarkable only because they make common-sense - but you'd be amazed how rarely they are fully understood and embraced in the business world. Michael Hill believes the looming meltdown can be a good thing for businesses and entrepreneurs. It is possible to succeed in a downturn - in fact it is the perfect situation in which to perfect a business. Instead of fearing the side-effects of recession, wallowing in gloom and convincing ourselves the only safe haven is at home under the blankets, entrepreneurs can use this period to their advantage.

With the right attitude, you can not only survive, but emerge from the crunch with a new feeling of prosperity and strength. Over the years, Michael Hill has had just about every possible experience in business: from lie-awake-at-night nerves to the joy of unexpected success. He's reshaped the landscape under his feet and he has ventured into new territory. And at every moment, he has relished the excitement of it all. Once, he was an outsider in his industry; the cheeky startup whom nobody expected to succeed. The established players had no reason to view him as a threat. Now, his business is the establishment. It dominates the markets in which it operates. Michael Hill Jeweller is a respected part of the business culture in a large part of the world - and they are continuing to expand in both size and ambition. Plain sailing through a business storm encapsulates the ingredients of Michael's philosophy. There are no secret herbs and spices. It is not a magic recipe - it is just a collection of solid ideas, firmly grounded in reality. All these concepts are remarkable only because they make common-sense - but you'd be amazed how rarely they are fully understood and embraced in the business world.

I imagine this book is not just for those who are in business or have an interest in business but can be used as an inspiration by those who would like to get motivated, learn from someone who has been there and done that and made all the mistakes along the way and would like to put their ideas into action.

Like Michael, I would say all it takes is an idea - it doesn't even have to be a spectacularly bright one - very hard work and the tenacity to stick with if it is successful and know when to fold if it isn't.

Highly recommended. *

* just a wee footnote, a correspondent quite rightly pointed out in a comment below that how can I recommend a book if I haven't finished it and of course without explanation he is right. I answered thus:

CJ, what I should have said is that from what I have read and skimming over other parts of it I would recommend it-and I do -you know sometimes you start reading a book and you know it is going to be good. I have similar old-fashioned values and share much of his outlook on life, so I know I am going to enjoy the read.

I will of course finish it at some stage, and tell you if it disappoints. I doubt it will.


Disclosure I own Michael Hill International shares.


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Buy Toughen Up: What I've Learned About Surviving Tough Times



$NZ 33.82 -15% off - from Fishpond.co.nz


c Share Investor 2009

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c Share Investor 2009

Burger Fuel doesn't rule out capital raising

I took a look at the Burger Fuel Worldwide [BFW.NZ] profit for the Full Year to 31 March 2009 last week and one of the concerns for me was that the cash position was more than halved over the year to just over NZ$1.5 million.

Chris Mason, Burger Fuel CEO noted in the release in the "BFW Outlook" part of the document that:

The board of directors have advised that the BFW strategy remains consistent with the previous year. The group is focused on three main areas:

1) Continued growth of the total system sales in NZ, by way of increased store sales as well as an increased number of stores. However, the board is mindful of the current economic climate.

2) Continuing to build up trading in both Australian stores to ensure future profitable expansion can ultimately occur in Australia.

3) Negotiating Area Development or Master Franchise agreements in other identified countries to earn royalties and other revenue by licensing the BurgerFuel system.

Given the global and local economic situation, a key focus has been on reducing costs to ensure that the group can preserve cash and eventually reach profitability. In the last six months to 31 March 2009 the company was close to breaking even. Costs will continue to be managed in accordance with board policy, however further losses are expected in the 6 months to 30 September 2009, due to the requirement to support international markets and also continue to expand NZ. Chris Mason, Burger Fuel CEO.

With cost cutting and wise capital management a primary issue for BF management, I thought a few questions to Josef Roberts, a Burger Fuel Executive director, were warranted, concerning the subject of dwindling cash reserves and the possibility that extra capital could be warranted to continue IPO flagged expansion.

I had the following brief email exchange with Josef on the topic of capital raising.


Share Investor: Could BF investors learn how the company will expand as cash reserves are half what they were last year and getting very low as of 31/3/09.

Will the company have to borrow or ask for money from shareholders to grow?

Josef Roberts: As you aware I am not in a position to answer any questions like that. These are matters for public announcement if and when deemed appropriate by the board of directors.

S.I. That is fair enough but can you tell shareholders what expectations there are for growth given the rapidly dwindling cash position of BFW and therefore the possibility of a halt because of capital restraints?

J.R. Darren – like many company’s right now capital is scarce. We are no different and lack of capital affects growth – that’s for real, however, we have no debt and as you can see by our losses over the last 6 months, we can stem these by reducing investment. We would like more capital – of course we would – and it is certainly on our radar, we always wanted to raise $15M and we know that additional capital would speed up results. However, there are ways we can still grow on less capital and that’s what we are focusing on for now.

S.I. I am sure shareholders wouldn't mind investing more if there was a rights issue or some such capital raising. Now is a good opportunity to expand given cheaper leases and real estate costs.

J.R. You are right for sure – now is the time to invest in expansion. I will be sure to let you know if we decide to look at a capital raise and if this was done at a good price - well maybe we would get the uptake. Anyway - as I say these things are on the radar Darren.


Take it as you may readers but Josef is dead right, his company is in a position that many others are in and that some have faced already.

In my own portfolio for example 4 of my companies have already raised a total of more than $NZ 600 million in new capital and I have participated in 3 of them (1 2 3) to the tune of $7000.00.

Burger Fuel is no different.


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Share Investor Portfolio: June 15 2009

The Share Investor Portfolio now contains 17 stocks listed on the NZSX. The bulk of the portfolio started back in 2002 and I have added to the bulk of it by using dividends and some cash.

Since the last update in May 22 approx NZ $7000 was added due to 3 capital raisings. (1 2 3)

Fletcher Building Ltd [FBU.NZ] has added 114 shares | Freightways Ltd [FRE.NZ] 431 shares | Sky City Entertainment Group [SKC.NZ] 1915 shares.


The Share Investor Portfolio as at 15 June 2009

• Auckland International Airport [AIA] 3000
  
• ASB Capital NO. 2 Ltd [ASBPB] 10000
• Briscoe Group Ltd [BGR] 3000
• Fletcher Building Ltd [FBU] 1114
• Fisher & Paykel Healthcare Corp Ltd [FPH] 5000
• Freightways Ltd [FRE] 8631
• Goodman Fielder Ltd [GFF] 2000
  
• Halleinstein Glasson Ltd [HLG] 1000
• Kiwi Income Property Trust [KIP] 1000
• Mainfreight Ltd [MFT] 3125
• Michael Hill International Ltd [MHI] 3000
• Postie Plus Ltd [PPG] 2535
  
• Pumpkin Patch Ltd [PPL] 5000
• Ryman Healthcare Ltd [RYM] 5000
• Sky City Entertainment [SKC] 36915
• Steel & Tube Holdings Ltd [STU] 400
• The Warehouse Group Ltd [WHS] 8000

Share Investor Portfolio : May 22 2009

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Stock of the Week: Michael Hill International

In this Stock of the Week I am going to look at the multinational Jewelry retailer Michael Hill International [MHI.NZ]

Like every other business and especially retailers, Michael Hill is suffering somewhat from the economic downturn, its results to 31/12/08 (you need to join Share Investor Forum to view) reflect that, but this company has a long history of good returns to shareholders and spectacular revenue and profit growth and the drop in profit will not last forever.

Over the last year or so the company has shifted its direction from a pure jewelry discounter to a more upmarket player, with its own branded watches and a range of luxury branded products, starting with Michael Hill Perfume.

Expansion from its present base of over 230 stores is on the cards with a goal of 1000 stores by 2020, the bulk of them being in North America, which kicked off in Canada a few years ago and entered mainland America at the end of 2008 when MHI purchased 17 stores in Illinois and Missouri from Whitehall Jewelers who were in Chapter 11 Bankruptcy.

Of course this is risky, there are many retailers that have washed up on the retail rocks in the land of the free because of unwise and unsustainable expansion, many of them in 2009, but Michael Hill's (the man and the company) expansion strategy up till now has been carefully calculated every step of the way and so far has paid off.

Canada has proven a tough nut to crack thus far but prospects were improving until the recession hit late 2008.

Michael Hill (the man) thinks this is a perfect time to expand and I am with him there - cheaper start-up costs makes for a good base to grow from and gives leeway to get through the tough times.

Which brings me to the share price. The stock hit a low of 45c earlier this year but has risen up to 69c market close on Friday. The stock has been as high as $1.25.

I am looking at buying more on share price dips, and they will come.

Good Luck!

Disclosure: I own Michael Hill International shares.

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Contrarian Investor: Doris Mousdale

A few months ago I decided to get all Pollyanna-ish, to stop writing about the economy in the doldrums, because it is going to do what it is going to do and instead focus on stocks, business and as some in the financial world say look at things "going forward". The contrarian investor approach if you like.






Doris Mousdale

A positive spin, because I am sick of the mind numbing daily focus, usually inaccurate and at its worst pure guess work, of talking heads telling us how bad it is and how long it is going to last.

With this in mind I am going to do a series on people or businesses that are doing the opposite to everyone else.

Growing instead of retrenching, starting business rather than closing and hiring instead of firing - you get the picture.

I suppose I was inspired by Michael Hill's interview on 60 Minutes this last Monday where he told us that he was more positive and excited about his Michael Hill International [MHI.NZ] Jewelry business than any time in his life.

The man is looking at the global economic downturn as an opportunity to expand, get cheap retail sites and reach 1000 stores by 2020.

With this positive theme in mind lets take a look at the book business and one person in particular that has been in the business for many, many years, Doris Mousdale.

She has had positions with Whitcoulls, Dymocks, Real Groovy. Made redundant from her position with Dymocks in April she has decided to open up her own bookstore, Anthology, in Auckland's Newmarket shopping district.

Now with a very competitive book market in New Zealand and with book chains downsizing, shutting and moving head offices to Australia, Mousdale certainly has taken the bull by the horns and gone in the opposite direction.

She thinks her personal touch as an owner operator and experience in the book industry will mark her out from other book retailers:

"I'm feeling quite confident about it, I think the independent bookstore has a lot to offer the surrounding community. There are still people out there who want the next best read, and they want it recommended to them." See full story.

I think she is right. A point of difference is crucial to survival in business, especially in retail, especially in the cut-throat book biz and most certainly during an economic downturn.

Mousdale has a niche to fill - experience and personal service- because she cannot compete on price and title range with the Borders of this world and her move to position herself where she is , is canny to say the least.

This comes on top of a broad downturn in all retail and a movement away from pricier entertainment and gift giving to more affordable product like a book to read or a movie ticket, instead of that weekend way in Taupo.

If Doris can get through the tough times, her business is going to go from strength to strength and she has certainly chosen a opportune time to make her mark. Contrarian investors have almost always had better returns than those who go with the crowds, as their start up costs are always cheaper -in Mousdale's case with on going business expenses negotiated at a time when relative bargains can be had.

Good luck to her.

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Burger Fuel Worldwide: Closer look at Company Accounts

Further to yesterday's analysis of the Burger Fuel profit to 31/06/09, which I thought was misleading for shareholders, because of largely meaningless comparisons made between 2009 and 2008 profit. If you want to get a better picture of how things are really going have a look at the brief company accounts. ( you need to be a Share Investor Forum member to see them - join here)

Look especially at revenue for the company and where it comes from and look closely at year to year comparisons.

On first look the NZX release makes Burger Fuel Worldwide [BFW.NZ] position look quite good (and the lower loss is clearly a positive) but it is a different story once you look closer and in more detail.

Nice management spin.

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Analysis - Burger Fuel Worldwide: FY profit to 31/03/09

Burger Fuel Worldwide [BFW.NZ] had their profit for the year to 31 March 2009 out today and I expected a poor performance but on the surface it looks like things are getting better. It is difficult to compare this years result to last years as operations for 2008 are for less than 12 months of operations.

Lets have a look at the results in a bit more detail.

Key Points

1. Revenue for the franchisor up 70% to just over NZ$ 8 million.

2. More than half of franchisor income derived from food & beverage sales of company owned stores.

3. Losses pegged back 67% to just over 700K.

4. Revenue for franchisee & company owned stores up by over 15% to nearly $26 million. (Food and Beverage sales)

5. 3 more stores added to take total to 28.

6. International agreements for 3 territories signed.

7. losses slowing in the last half year.

8. No "material" borrowings.

9. Cash on hand substantially lower from $3.5 million last year to just over $1.5 million.


There is good indication of improved sales and slowing losses at both the franchisor and at store level but it isn't clear as to how much of the slowing losses are due to the logical response of management to cut back on costs due to the global recession. These costs were higher in the last period and would have contributed to the higher losses.

Much of the excitement around the Burger Fuel IPO 2 years ago was in the growth for the company and spectacular growth was needed to achieve good profit for the franchisor. As this appears to have slowed in the last half, expectations would be that this growth and profit are going to be delayed somewhat until economic conditions make growth a good business proposition again. This is pointed out by an executive director of the company Josef Roberts, who has indicated that expansion has been slowed considerably in new territories in the Middle East and in Australia where consolidation and more branding will be done before any more expansion there.

High growth and profit is needed to justify the high capital value that is currently put on the company, in comparison to its profit and future prospects, and shareholders are unlikely to see any concrete sustained profit until economies of scale are reached and unfortunately that means more money being spent on building up the business.

A big worry is that more than half of company revenue is from food and beverage sales from company owned stores, the rest comes from royalties, licensing and franchise fees and advertising charges to franchisees, originally forecast to be the bulk of income for the company during pre-IPO publicity.

With just over $1.5 million of cash at hand, which is substantially lower than for the last comparable period , the company is going to have to either borrow money or go to shareholders when it wants to start expanding again.

Until then they are just marking time.

Please Note:

It must be noted that 2009 figures are difficult to accurately compare to last years because the 2008 period was only for 9.5 months and management haven't indicated whether adjustments have been made to reflect that in their own figures -it looks likely not to be the case so the large increases in sales and lower losses must reflect the two different reporting periods. In addition there are many accuracies in comparisons made because of less than two years in business and one off IPO costs other costs and other revenue included previously, making current year results look better than they should at first glance.


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Banks not participating in Recession

Bill English wants customers to "take banks to task" a nice attention grabbing headline and politically expedient but as I have found, my bank just isn't listening.

I mused a few months back as to why banks were not participating in the current recession, coming to the party and giving New Zealanders a break, considering taxpayers are now guaranteeing their own banks.

Lets face it, gone are the days when your bank manager knew your name and cared about the service they gave you and it seems even when it counts the most, in dire economic circumstances not seen for 70 years, they simply bury their heads in your money.

My bank's approach to the recession and what effect it might be having on me is to sack its staff, to make we wait longer in a line of other disgruntled sheep, falsely ask me at the counter what will I be doing in the weekend, ask if I want to buy insurance and then continue to punish me 25 bucks a time if I forget to have sufficient funds in my account when an auto payment is due. Its kinda like Robin Hood with a smile, except the taxpayer is paying for the arrows.

Short of forcing banks to play their part, and we don't want that, it seems the only pressure that might work is pressure from every bank customer on their bank manager.

The likelihood of that happening from the average passive Kiwi consumer is less than Lynda Carter coming back and playing the lead role in the new Wonder Woman movie.

It is worth a try though.

*Cartoon from Emmerson


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Air New Zealand wants another taxpayer bailout

Rob Fyfe has decided that having more than NZ $1 billion of taxpayer money in the Air NZ bank isn't enough.

Proving once again that he is the evil socialist I initially pegged him as he now wants more taxpayer money to subsidise his failing airline, Air New Zealand [AIR.NZ] for "marginal routes."

Jeez Rob, I thought in the real world if something is marginal you simply either cut your costs to regain profitability or if you cant make a decent return simply stop operating.

How bad are things at the national, taxpayer owned carrier then?

Well, the pressure is coming from a number of sides.

Yet another tourist downturn, and these happen frequently for a number of reasons and is why I would rather burn my money than "invest" in an airline, means that bums on seats are down.

This doesn't look like it is going to get better anytime soon. In fact it could get allot worse.

More competition from the likes of Virgin Pacific/Blue and Jetstar mean those margins that Fyfe talks about are getting thinner than the air in a depressurised 747 before a crash landing.

The cost of jet fuel is rising quicker than you can say the Arabs have got me by the family jewels. Every buck of extra cost on aviation fuel means millions off Air New Zealand's bottomline.

To be fair, everyone is being affected by this global pandemic ("swine flu" included) of economic circumstances and every airline is getting it up the tailpipe but having said that, why, with little money left in the taxpayer pocket, should we now be stumping up more borrowed money from China to keep a failing business in the air?

If you are a Air NZ shareholder (apart from the taxpayer) you should be very worried.


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Michael Hill TV3 60 Minutes Interview

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Tue, 09 Jun 2009 10:24:00 +1200

'Lord Of The Rings' - 08 June

I just watched the Michael Hill interview on TV3's 60 Minutes.

I know little about the man but the usual stuff: he bought his first Jewelry shop in the late 1970s when his house burned down. He was 43.

Along the way he wrote down his goals that he would have x number of Michael Hill International [MHI.NZ] stores by a particular date. He has achieved every goal he set in that respect and now has well over 200 stores in New Zealand, Australia, Canada and from late last year the USA.

His future goal is to have 1000 stores by 2020, with the bulk of them being in the United States.

His recipe to get there is to brand himself and his company as "desirable" brand that everyone would want -a tough proposition in these tough times considering that other luxury brands are floundering with sales drops of up to 50%.

The image change has started in Australasia, with flash new stores that sell cut price jewelry as they traditionally have but alongside that higher end bling and Michael Hill branded watches and his own perfume line.

He seems very excited about current economic conditions, seeing it a an opportunity rather than a curse. The opportunity is, as he sees it, is that these dire conditions will allow him to reach his goal of 1000 stores just that much sooner, and cheaper.

I think he is going to get there.

Oh, he also has a book coming out called Toughen Up.


Disclosure I own Michael Hill shares.


Michael Hill International @ Share Investor Blog

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c Share Investor 2009

Stock of the Week: Contact Energy Ltd

In this Stock of the Week I am going to look at the electricity generator and retailer Contact Energy Ltd [CEN.NZ]

The company has had short-term profit speed bumps, with another profit downgrade out today, but long-term the company will continue to grow its profit.

A part of a quadopoly, its generation assets alone should put it in anyone's bottom draw. Its attractiveness in today's turbulent stockmarket background made it one of my picks back at the end of last year and the solid nature of its profit, during an economic downturn and in better times should make it the backbone of anyone's portfolio.

There is another good reason to own the stock, especially if you have a short financial attention span. Origin Energy, Contact's majority owner, is likely to make another play at getting control of the whole company. Origin would have to pay close to double today's market capitalisation.

Beware though, there are drawbacks to owning shares in the company-the management, inside Contact and those that hold the purse strings at big daddy Origin are awful managers of this asset.

Yes a monkey could run an electricity company and that is exactly what you get with these guys but they will always make money under good and poor management.

Good luck!

Disclosure - looking at buying


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c Share Investor 2009

MarketWatch: Contact Energy

Contact Energy Ltd [CEN.NZ] have come out with a profit warning this morning, lower than guidance made by the company in January 2009.

Profit for Contact’s 2009 full year is expected to be 30 –33 per cent less than the year ending 30 June 2008.

With the share price finishing at $NZ5.80 at market close on Friday there is going to be a good opportunity to get shares today a sale price - the market is going to savage Contact.

Keep in mind though that the market should have anticipated the downgrade as all the signs were there for a slight profit drop from Contacts own guidance in January 2009.

A great chance to stock up for this good long-term company.

Remember, it is still making a profit and will only continue to increase those profits over the long-term.

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c Share Investor 2009

Another reason to ignore Rod Oram

Make no mistake Rod Oram is a mad bugger. I loathe his socialistic/political slant on business and economics and quite frankly a third form economics student who is deaf, dumb, blind and insulated from reality with a 100 mile layer of pink batts would know more than him about the subject he thinks he is so proficient at.




The man buys carbon credits to offset his "carbon footprint" for goodness sake!

The reason for my vitriol this time?

His nonsensical piece on National deferring payments into the Cullen Fund in Stuff today.

This master of economic sleight of hand wants our Government to borrow billions to fund pensions:

They are wrong on both points. This is a once-in-a-generation time to be investing, particularly if you are an entity with low debt, secure cashflow and a long-term strategy. The great global economic contraction has savaged prices of shares, property, businesses and other assets. Buyers might have to ride out some short-term corrections but they can reasonably expect handsome long-term gains.

Oram would have us borrow to buy investments? Its a MAD, MAD, MAD MAD ... plan! In these current times debt must be lowered. Oram is 100% correct when he says people should buy assets when they are beaten down in value. I have over the years but not with borrowed money Rodney! Higher debt to fund this scheme will increase interest rates for New Zealand borrowers.

In addition to this Oram is really making a mountain out of a molehill on the decision to defer payments to the scheme. What he fails to mention is that the scheme funds a very tiny portion of what is needed for retirees:

Connecting it with superannuation, though, was entirely political. Even Dr Cullen made clear there was no link to future entitlements and future taxpayers were always going to have to meet 89% of costs.

Bill English’s decision not to borrow for the fund will increase that by just 3%.

Moreover, in national-income terms, Mr English’s decision relates to just 0.2% of GDP from 2030.

It is ridiculous to worry about such a number. The smallest economic shock over the next two decades – positive or negative – could double or eliminate it, as could small productivity changes. Matthew Hooton, NBR 2009.

The vast bulk of retirement funding then will come from the tax base at the time and that is where growing the economy comes in and is clearly vastly more important than taxing workers heavily now to fund such a small addition to retirees income in 20 years time.

The best solution of course is for individuals to save and pay for their own retirement. With a taxpayer funded scheme payments are subject to interference from all political colours and with the tiny contribution from the Cullen Fund that is subject to inefficient bureaucracy and cost and inexperienced individuals investing money on your behalf - something that Rodney skirts over without nary a whisper- there is no guarantee that any money will be there when you retire anyway.

Labour would have deferred payments into the fund. That economic dipstick Michael Cullen designed the fund for such economic circumstances as we are suffering under now.

Oram's columns have been quoted by Labour in Parliament ad nauseum recently so it is clear Labour are taking their playbook from commentators like Oram or vice versa:

Hon PHIL GOFF: It made $1.75 billion. There is nobody in this House who does not understand that the best time to invest funds is when the market is at, or close to, the bottom. By the National Government’s theory, New Zealand homeowners should be selling their house now and buying it back when the prices have risen! That is National’s philosophy. Kiwis know that it makes no financial sense, so why cannot the Prime Minister and the Minister of Finance see that? Parliamentary Budget Debate, May 2009.

It doesn't really make allot of sense now does it? Would you borrow right now to buy shares?

The answer, if you are sane, is a clear NO.

Both Labour and Lefties like Oram are politically motivated and economically illiterate. We cant borrow and hope, we must instead grow the economy and accept personal responsibility for funding our own retirement.

Any other way is dishonest and as history has shown us will fail.

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c Share Investor 2009

Share Investor House Keeping

O.K. First just a list of the New URLs that you can reach the various parts of Share Investor from.

I have culled some of the ones that have proven useless and confusing.

You can find everything Share Investor at shareinvestor.biz

The following are individual URLs for Share Investor's main sites.

Share Investor Blog

- Shareinvestorblog.com

Share Investor Forum

- Shareinvestor.net.nz
- Shareinvestorforum.co.nz
- Shareinvestorforum.com

I added the .co.nz address for the forum to make it known to visitors it is New Zealand centered.

Just a footnote. As far as the business part of Share Investor goes, readers might be interested to know that it is now financially self sustainable (I hate that word but use it here in its true meaning) and advertising is paying its way.

I hope you keep reading.

Cheers, Darren.

Share Investor.

c Share Investor 2009

Danny Diab & Restaurant Brands

Well, he has finally done it.

Over the years Danny Diab, franchisee of a number of Pizza Hut stores in Sydney and a director of Restaurant Brands Ltd [RBD.NZ] has managed to cobble together a holding of 5% in the company that he works for.

He hasn't had to shell out a huge amount of money to get his holding of almost 5 million shares, as the share price of the company has been predominantly below NZ$1.50 since he has been on the board and well below $1.00 for the best part of a year.

We know he is a successful Pizza Hut operator in Australia but there is alot we don't know about the man and his possible motivations for owning such a large stake of RBD.

Lets have a look at his investment strategy first.

He owns his RBD holding through his investment vehicle Diab Group and we can understand his motivation for getting into RBD as an investment because he has experience in the QSR industry, through hands on experience and through his investment philosophy:

Our investment philosophy is to deliver long term growth while managing risk. Relying on detailed research data and a proven approach to investment success, we:

• Construct a portfolio that manages risk while maximising long-term performance.
• Establish optimal asset allocation.
• Select a mix of investments to provide the best possible return for our level of risk tolerance.

To ensure we stay the course during a variety of market conditions. Diab Investments seeks long-term capital appreciation by committing equity to:

• high-quality companies with superior management
• high-quality index products with significant downside protection
• high-quality interest bearing warrants / convertible notes
• By leveraging the capabilities broadly available within the group, we aim to generate superior returns.

The Diab Group integrates a diverse portfolio of companies which operate in the advisory, quick service restaurants, manufacturing and investment markets.

We already know Danny is a long term investor because he has been with RBD for around 7 years as an investor and latter as a non-executive director but what of his continued future with RBD?

We can only guess but it would be natural to assume that he would want to continue to increase his shareholding in the company and there is nothing that motivates an individual to do more or work harder than owning a large financial stake.

His continued presence on the RBD board and as one of the largest investors in the company is something that should encourage long suffering shareholders.

RBD shares were up 1c yesterday to 99c on reasonable volume.

*while Danny has a big presence on the internet he must be camera shy because I couldn't find a photo of him.

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c Share Investor 2009

"Government Motors" unlikely to survive

Even big companies with "enduring brands" that have been around for a long time die.

Being big and around for 100 years certainly didn't help General Motors or what is now being cleverly dubbed "Government Motors" from heading towards the abyss.
No matter which way you cut it the big GM is certainly in an abyss it will find its way impossible to climb out of, without even more massive amounts of cash to keep it afloat.

Lets face it, the company has been a basket case for a long time and hasn't made a profit for around 5 years. The nail should have gone into the coffin eight months ago but that great economist Barrack "I have a Plan" Obama decided he knew more about cars and how to build them than Henry Ford and proceeded to sink 10s of billions of American taxpayer dollars into it in the hope that doing the same thing it had been doing over the last few decades was going to turn the company around - amazing how resuscitive other peoples money is eh folks!

Ain't socialism a wonderful thing.

Here we are now 8 months later and there is talk of sacking thousands of highly overpaid car workers, killing multiple brands, ditching 2000 dealerships and even selling the car that beats the Toyota Prius for being ecologically sound, The Hummer, to a Chinese company.

But is that going to save it?

Short answer, NO.

But why?

For a start dropping 2000 dealerships simply isn't enough, they have 6,426, to be exact, to Toyota's 1,461, so try dropping another 2000 to reduce those massive overheads that are dragging GM down. Start with that and in combo with some of the other cuts - especially the gold plated pension plans - that just might work.

The big problem that GM has though is that it is now effectively a Government department and we all know that politicians and business equal failure with a capital F.

Some of us my age (43 years young) remember British Leyland being "rescued" by British taxpayers in the 1970s. Where is it now ?

It no longer exists.

It made poorly designed and built cars that politicians had influence over building and nobody wanted to buy them.

Mr Obama wants cars to be built that are "greener", whatever the hell that means and instruction on high from mad socialists like him will result in the same fate that was visited on BL 30 years ago.

Success for GM is almost impossible under its present ownership and Obama's "plan" to get the company out of the crapper seems to be a combination of the ability to sell cars to Americans that they don't want from a company that they already own by using taxpayer money(again) to bribe them to ditch their old cars, so they will buy the new ones from Government Motors.

This will apparently allow the company to sell 10 million cars a year, make the cash flow (out and in and out again of taxpayer wallets) and then they will be able to make a profit.

Again, ain't socialism wonderful!

No plan yet from Obama about just when that 50 billion loan is going to be paid back to Americans.

It never will.

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c Share Investor 2009

Stock of the Week: The Warehouse Group

In this Stock of the Week we are going to be looking at New Zealand's dominant general retailer The Warehouse Group [WHS.NZ].

Its a stock that hasn't been in the news recently although it probably should be, for a number of reasons, the least not being a sale process that appears to be in some sort of credit crises limbo.

It has been trading at a pretty steady share price for the last 6 months (marking time until news about its sale is forthcoming) at a range between NZ$3.00 - $3.75 and represents value whether you want it for a quick buck for its probable sale or if a sale falls through and you want a good solid company for the long term portfolio.

On its long-term merits the company has a dominant position in its sector of the retail market and a great cash flow that helps contribute to a gross dividend north of 8%. Spectacular in these days of 3-4% returns for term deposits or 5-6% for rental property.

Retail is struggling these days but that isn't going to last forever and The Warehouse is coping well with the current recession. It historically does well in recessions because of its low price perception.

The company has recently met its own forecast for profit in its March release of its 2009 interim profit and its forecast for FY 2009 is on track to meet last years profit of $90.76 million.

Good luck!

Disclosure - I own WHS shares


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c Share Investor 2009

Freightway's Capital Raising more of the same crap for small shareholders

I have been moaning, bitching and hitting my head against a brick wall recently because of how totally unconscionable a number of NZX listed companies have been towards their shareholders when it comes to the flurry of capital raisings that have happened over the last few months.

Scant little care and only lip service has been given to small shareholders like you and me.

The three capital raisings that I have participated in so far : Sky City Entertainment [SKC.NZ] , Fletcher Building Ltd [FBU.NZ] and Freightways Ltd [FRE.NZ] have all favoured the larger shareholders or in fact recent interlopers who haven't been shareholders at all. They received concrete shareholdings at a definite price, without having to stump up "lost cash" that stays in someone else's bank account until credited back to the recipient with their meagre allotment of shares.

Small shareholders have had to stump up the maximum amount of cash to get a scaled down number of shares at a price they are unsure of until after the offer is closed.

The latest stinker has been the Freightway's share offer that wanted NZ$5,000,000.00 from small shareholders but was over subscribed by 1040%!

As Kelvin Hartnall points out institutions got a great deal:

The total amount provided by small investors was $57 million, which is more than the total capital raising combined. This shows that it was completely unnecessary to dilute the share-holdings by giving institutions such a great deal. Essentially the institutional investors have received a great bargain at the expense of small investors.

I sent in the maximum $12500 and will get less than 500 shares. I needed around 1200 to avoid dilution. Here, from Kelvin Hartnall again is an approximate breakdown of what Freightway's shareholders can expect to get some time next week:

Aggregate pool	$5,000,000
Number of share-holders	6,423
Pool available per share-holder	$778.45
Issue price	$2.44
Shares available per share-holder	319

This favouritism to the big boys is more of the same we small guys have expected and we have little protection from securities law, the NZX or any independent body. Bruce Sheppard from the Share Holders Association has been vocal as usual but has been met with the typical stoney silence or bullshit from company management along the lines of "well that is the best we can do in this economic environment".

Clearly that is wrong. Share offers for every good company that has made one so far have been wildly over-subscribed, so the moola is out there.

Other companies have at least made an attempt to even the financial playing field in their capital raisings by using rights issues to raise money. As rights issues are structured, a non -renouncable rights issue is one where shareholders are given the right to purchase new shares according to the number of shares they hold or they can forgo those rights if they wish. On the other hand a renouncable rights issue would allow shareholders to trade those rights to others should they not want to take up the rights offer.

In my opinion a renouncable share offer is the fairest way of raising capital because you get to buy in proportion to the shareholding you have and if new shareholders wish to participate in the capital raising they can buy the rights off you.

After that if there is a capital shortfall then and only then should institutions get a crack at stumping up some cash and the incentive to offer them a better deal, at the back end, would not only be appropriate but more than warranted.

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c Share Investor 2009