Friday, April 29, 2011

Contact Energy Rights Issue: Management Sells Company Short

Rights issues are typically done when a listed company needs more capital to repay debt or needs money to expand their business when more debt is inappropriate. In the case of Contact Energy Ltd [CEN.NZX] their $350 million rights issue, announced yesterday, will go towards expanding geothermal power facilities.

The only question raised by the announcement though is why the rights issue was set at such a massive discount to the current share price. It is usual to discount rights issue placements but not to the extent CEN shares have been discounted. The $5.05 rights issue price is almost 15% less than the trading price of CEN the day before the announcement.

For some reason management have opted to heavily undervalue the issue and one can only speculate as to why. My cynical side is thinking Origin Energy Ltd [ORG.ASX], the current majority owner of the company at around 51%, is looking to creep their share of the company through the rights issue process - they will take up their full entitlement - but my practical side is thinking that the company already has a massive debt burden of nearly $1.3 billion so simply cannot sustain increased borrowing based on their dwindling customer base and subsequent lower profits, so are choosing to dilute shareholding (if rights are not taken up) to finance normal business activities.

Long term investors need to consider their participation in the rights issue in the following manner. If they do not take up the 1:9 rights offer their current shareholding will be diluted but they are likely to be able to sell them on the NZX. However, joint managers Deutsche Bank Craigs and Goldman Sachs will aggregate the rights which are not taken up in June and sell the unwanted shares in a book-build process.

If shares sold through this process go at a premium to the $5.05 being offered to existing investors, those who opt not to take part in the rights issue will get the difference, proportionate to their entitlement.

Those not currently CEN shareholders thinking of buying CEN shares to participate in the rights issue might want to wait until after the extra shares are issued to see if they can buy at a level closer to the $5.50 issue price but some investors will be gambling that demand for the rights to participate will propel the main shares higher and make the whole process a profitable one.

CEN shares initially increased by 15c on the news yesterday but finished down 1c to finish at $5.85.

CEN Rights Issue Documents


Contact Energy @ Share Investor

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Rights Issue Documents


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Thursday, April 28, 2011

Share Price Alert: Goodman Fielder Ltd 2



I have to admit Goodman Fielder Ltd [GFF.NZX]is not one of my better investments. It has returned roughly zilch in the 5 years I have held it.

Never mind, this piece isnt about my poor investment choices but about timing your purchase at the right price.

An opportunity to buy has arisen today after a profit warning marking down FY 2011 profit to a range between $140 - 150 million. The share price has retreated today by 13c or just above 8% to close at $1.44 today. It reached an intra day low of $1.40 and this is the 52 week low. A high of 2 bucks back in November 2010 shows how much value the company has lost in just 6 months.

Profit has been impacted by higher commodity prices and unfavourable exchange rates - a common theme for this company for the last few years - and management have seen fit to move prices for their brands higher to recover those increased costs but too late to recover for the full year outlook.

Consumer pressure on price is going to make it hard going for the company to recover these costs as long as the current recession bites and consumers are tending to settle for non brand goods instead of buying some of the pricier brands that GFF offers.

All is not lost though, these Goodman brands are some of the best in the business, are staples on the family table and will continue to be sold and increase in sales when the economy returns to some sort of "normality".

The current share price returns a gross dividend of slightly over 9%, which is clearly a very attractive income given term investment rates of less than half this.

I am picking more softness in this share though and if you have been looking to buy this stock anyway patience is going to get this stock into your portfolio for less than the current share price.


Share Price Alert Series


Telecom New Zealand Ltd 2
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Charlies Group Ltd
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Steel & Tube Ltd
Telecom New Zealand Ltd
New Zealand Stock Exchange Ltd
Mainfreight Ltd 2
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Pumpkin Patch Ltd
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Fletcher Building Ltd
Restaurant Brands Ltd
Mainfreight Ltd
Tourism Holdings
Goodman Fielder Ltd
Pumpkin Patch Ltd
Hallenstein Glasson Holdings Ltd
NZ Refining Ltd
Freightways Ltd
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Sunday, April 24, 2011

NZX 50 in Two Year Bull Run

Chart forNZX 50 INDEX GROSS (^NZ50)

The NZX 50 Gross Index reached a low point of 2418 on 3 March 2009 and since that point has risen 1074 points to close at 3492 on April 21 2011. A rise of 44.5% in just over 2 years.

Almost half that gain has been since mid 2010.

One definition of a bull market (there are others) is that it has moved by 15 - 20% over an extended period and the more than 40% rise in the last 2 more than covers the meaning of a bull market for me.

One way of looking at this is that the market as a whole has come off an incredible low after the October 2008 financial crises and that it is still far from the high of 4333 reached in May 2007 but 2007 was a heady time for stockmarkets the world over and they were set for a correction from these levels as P/E multiples and other crucial financial data were fast separating from any semblance of real value on the stockmarket.



I prefer to look at it as more of a realistic valuation of the companies listed on the NZX and anything north of current levels risks going over real valuations. Of course there are some companies that are undervalued still and others that are well overvalued but as an average the NZX is fully priced and at the right level.

Of course the market can still add points from the closing prices last week and it remains uncertain as to whether the current bullish sentiment will remain over Winter without signals driven by results. Look for positive August results to propel the market higher but a good indication of where Winter 2011 was will be profit results out in February 2012.

My stab in the dark 3 years ago on a bullmarket run for 2011 (albeit for different reasons than a 2011 World Cup and post a financial collapse) still looks like a 50/50 call to me.

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Friday, April 22, 2011

Share Investor Portfolio: Value @ 22 April 2011

The Share Investor Portfolio was slightly up in the third week of April. The portfolio was up by 0.48% or $1274.09 on the April 15 update . For the first 16 weeks of 2011 the portfolio has increased by 10.02 % or $25387.37 . This weeks rise was due, primarily, to a 2c rise in SKC, and a 3c rise in WHS and smaller rises across the board. Most of the remaining stocks were down marginally.

The total of unspent dividends and interest in the bank from the 2010 - 2011 earnings years is $23479.21 at close of reporting season for 2010 and near the end of the 2011 year. There are also approx $50000.00 in tax credits earned from the portfolio since it began in late 2002.

The Share Investor Portfolio has increased in value by 14.81% or $39144.62 since I began tracking it for this blog on October 11 2010.


Share Investor Portfolio
as at 17:30:00, Friday 22 April, 2011 (NZT)


Stock
Quantity
Cost price
Total cost
Market price
Market value
Change
%
AIA

2,000 $1.700 $3,400.00 $2.240 $4,480.00 $1,080.00 31.76%
AIA

2,000 $1.510 $3,020.00 $2.240 $4,480.00 $1,460.00 48.34%
AIA

558 $0.000 $0.00 $2.240 $1,249.92 $1,249.92
AIA

754 $2.150 $1,621.10 $2.240 $1,688.96 $67.86 4.19%
ASBPB

3,027 $0.000 $0.00 $0.680 $2,058.36 $2,058.36
ASBPB

6,973 $1.000 $6,973.00 $0.680 $4,741.64 $2,231.36 32.00%
BGR

619 $0.000 $0.00 $1.470 $909.93 $909.93
BGR

2,381 $0.990 $2,357.19 $1.470 $3,500.07 $1,142.88 48.48%
FBU

284 $0.000 $0.00 $9.210 $2,615.64 $2,615.64
FBU

830 $9.750 $8,092.50 $9.210 $7,644.30 $448.20 5.54%
FPH

3,000 $2.350 $7,050.00 $3.090 $9,270.00 $2,220.00 31.49%
FPH

541 $0.000 $0.00 $3.090 $1,671.69 $1,671.69
FPH

1,459 $3.720 $5,427.48 $3.090 $4,508.31 $919.17 16.94%
FRE

2,054 $0.000 $0.00 $3.360 $6,901.44 $6,901.44
FRE

6,577 $3.630 $23,874.51 $3.360 $22,098.72 $1,775.79 7.44%
GFF

586 $0.000 $0.00 $1.610 $943.46 $943.46
GFF

1,414 $2.330 $3,294.62 $1.610 $2,276.54 $1,018.08 30.90%
HLG

299 $0.000 $0.00 $3.980 $1,190.02 $1,190.02
HLG

701 $2.530 $1,773.53 $3.980 $2,789.98 $1,016.45 57.31%
KIP

190 $0.000 $0.00 $1.010 $191.90 $191.90
KIP

810 $1.480 $1,198.80 $1.010 $818.10 $380.70 31.76%
MFT

1,000 $7.960 $7,960.00 $9.290 $9,290.00 $1,330.00 16.71%
MFT

1,838 $8.000 $14,704.00 $9.290 $17,075.02 $2,371.02 16.13%
MFT

657 $0.000 $0.00 $9.290 $6,103.53 $6,103.53
MFT

1,505 $4.200 $6,321.00 $9.290 $13,981.45 $7,660.45 121.19%
MHI

1,646 $0.860 $1,415.56 $0.910 $1,497.86 $82.30 5.81%
MHI

7,000 $0.630 $4,410.00 $0.910 $6,370.00 $1,960.00 44.44%
MHI

494 $1.050 $518.70 $0.910 $449.54 $69.16 13.33%
MHI

860 $0.000 $0.00 $0.910 $782.60 $782.60
PPG

31 $0.000 $0.00 $0.250 $7.75 $7.75
PPG

1,500 $0.440 $660.00 $0.250 $375.00 $285.00 43.18%
PPG

1,004 $0.800 $803.20 $0.250 $251.00 $552.20 68.75%
PPL

1,000 $3.090 $3,090.00 $1.280 $1,280.00 $1,810.00 58.58%
PPL

1,000 $2.870 $2,870.00 $1.280 $1,280.00 $1,590.00 55.40%
PPL

939 $4.200 $3,943.80 $1.280 $1,201.92 $2,741.88 69.52%
PPL

975 $0.000 $0.00 $1.280 $1,248.00 $1,248.00
PPL

1,086 $1.530 $1,661.58 $1.280 $1,390.08 $271.50 16.34%
RYM

459 $0.000 $0.00 $2.480 $1,138.32 $1,138.32
RYM

4,586 $1.970 $9,034.42 $2.480 $11,373.28 $2,338.86 25.89%
SKC

5,750 $7.430 $42,722.50 $3.460 $19,895.00 $22,827.50 53.43%
SKC

1,000 $7.600 $7,600.00 $3.460 $3,460.00 $4,140.00 54.47%
SKC

2,750 $7.700 $21,175.00 $3.460 $9,515.00 $11,660.00 55.06%
SKC

1,431 $8.750 $12,521.25 $3.460 $4,951.26 $7,569.99 60.46%
SKC

272 $4.720 $1,283.84 $3.460 $941.12 $342.72 26.69%
SKC

25,712 $0.000 $0.00 $3.460 $88,963.52 $88,963.52
STU

78 $0.000 $0.00 $2.600 $202.80 $202.80
STU

303 $4.740 $1,436.22 $2.600 $787.80 $648.42 45.15%
WHS

4,500 $3.730 $16,785.00 $3.550 $15,975.00 $810.00 4.83%
WHS

6,979 $6.000 $41,874.00 $3.550 $24,775.45 $17,098.55 40.83%
WHS

15 $3.710 $55.65 $3.550 $53.25 $2.40 4.31%
WHS

3,506 $0.000 $0.00 $3.550 $12,446.30 $12,446.30

26.64%


Total cost Market value Change

$270,928.45 $343,090.83 $72,162.38


Share Investor Portfolio @ Share Investor

Share Investor Portfolio: Value @ 15 April 2011
Share Investor Portfolio: Value @ 8 April 2011
Share Investor Portfolio: Value @ 1 April 2011
Share Investor Portfolio: Value @ 14 March 2011
Share Investor Portfolio: Value @ 8 March 2011
Share Investor Portfolio: Value @ 28 February 2011
Share Investor Portfolio: Value @ 21 February 2011
Share Investor Portfolio: Value @ 14 February 2011
Share Investor Portfolio: Value @ 7 February 2011
Share Investor Portfolio: Value @ 31 January 2011
Share Investor Portfolio: Value @ 24 January 2011
Share Investor Portfolio: Value @ 17 January 2011
Share Investor Portfolio: Value @ 10 January 2011
Share Investor Portfolio: Value @ 3 January 2011
Share Investor Portfolio: Value @ 27 December 2010
Share Investor Portfolio: Value @ 20 December 2010
Share Investor Portfolio: Value @ 13 December 2010
Share Investor Portfolio: Value @ 6 December 2010
Share Investor Portfolio: Value @ 29 November 2010
Share Investor Portfolio: Value @ 22 November 2010
Share Investor Portfolio: Value @ 15 November 2010
Share Investor Portfolio: Value @ 8 November 2010
Share Investor Portfolio: Value @ 1 November 2010
Share Investor Portfolio: Value @ 25 October 2010
Share Investor Portfolio: Value @ 18 October 2010
Share Investor Portfolio: Value @ 11 October 2010
Share Investor Dividends


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c Share Investor 2011