The Warehouse: The Solution; Sell Sell Sell !!

Part The Warehouse team on the lawn at their head office in Akoranga Drive.
They needn't have 1200 working there though. 200 would be sufficient.

The Warehouse Group Ltd [WHS.NZX] was last visited on February 20th when it was trading at $2.64c.

I sold 4900 shares on Friday March 10 for a loss of about $2000 at a consideration of $12020. I kept 100 just for fun and to cause trouble if I want - it could sell one day.

While a teeny tiny part of my portfolio, it kind of stuck in my craw a little bit. Having that Sword of Damocles hanging over me when I knew I should have walked away from it about 3-4 years ago.

Ill leave the woe is me I lost money on this one behind cause I left that particular kind of thing behind on Feb 6 2012 - except to say this money is destined for lawyers again because my Ex wife is being rather nasty with our child - should have followed my passion into the law cause my current lawyer has now got a vast amount of my money. 

Never fear.

Anyway.

What sort of psycho babble keeps a person holding onto a share when they know they should have sold some years ago?

I think it is fear. Fear that you made a mistake buying it in the first place. Fear that you held on for too long and fear that you finally have to crystallize your loses making it feel somehow real.

I don't feel that now though. I just feel relived. Relived that I have preserved some capital and I could pursue other purchases with it - briefly AIA shares although might sort of wait a bit to see if it will go lower.

Yeah, I think relief from the constant niggle in the back of my head that really should be rid of that little monster the WHS. 

I will give them 2 years. 

If they havent cleaned out head office of 800 folk and gotten rid of the hundred of lines of useless junk taking up space on their shelves - who the hell sells DVD'S these days - then they will be confined to history. 

Avoid at any cost.



The Warehouse Group @ Share Investor

The Warehouse: Is it Time to Bow Out?
Share The Warehouse: What the Fuck is it Doing?
Share Investor Q & A: The Warehouse' Ian Morrice  
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 soon

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

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c Share Investor 2017

August - October reporting season should sort out fact from market fiction

The looming New Zealand reporting season that rolls out at the beginning of August is going to be a very good differentiator of fact from fiction.

Has our stockmarket got it right with its wild mood swings and huge markdowns in stock prices for most of our listed companies or has it gone way off track as usual and over reacted to the incessant bad news about the economy and some companies that have had particularly bad recent results and a large number that have had profit warnings?

I tend to err on the side of over reaction.

One stock in the Share Investor Portfolio that has been particularly hard hit over the last few months in terms of share price, Sky City Entertainment Group [SKC.NZ], didn't really participate in the recent upswing in stock prices across the board but its profit is going to be inline with last years result and its market update earlier this year - as it has been for the last 2-3 years when its share price was more than double its current levels. Go figure. Its share price was up 10c this last Friday at market close, on very large turnover, indicating that the result coming out late in August might be even better than indicated.

As investors and market watchers, we already know which companies are likely to underwhelm. The retail market sucks a kumera ; The Warehouse Group [WHS.NZ] , Pumpkin Patch Ltd [PPL.NZ] and Hallenstein Glasson [HLG.NZ] are going to disappoint the market, and that is clear if you just walk around the malls and ask your friends what they have been buying lately, but their respective stock prices have either been steady or up slightly in the last few months. Companies such as Contact Energy Ltd [CEN.NZ] and Goodman Fielder[GFF.NZ] have forecast lower profit this reporting season but their share prices have maintained relative value. Most export related businesses are suffering except for a notable one of two which are doing better than ever -like my own Fisher & Paykel Healthcare [FPH.NZ]. In comparison to Sky City's good February results, this shows little good judgment when it comes to picking companies with good medium term future profits when you look at what value Mr Market puts on them.

A stock that has simply rocketed in share price over the last few months is Restaurant Brands Ltd [RBD.NZ]. That has been an over reaction to a claw back to profit for the fast food operator where its share price has almost doubled from its early 2009 lows in the 50 - 60c range. Clearly this sort of stock movement is a major departure of fact from reality - its profit is no higher than it was 10 years ago and forecasts show only a small rise in profit from current levels, but the market has forgotten the poor financial history of this company and given the stock price a Viagra like status when it comes to valuing what the company is worth.

Telecom New Zealand's [TEL.NZ] stock price seems to have accelerated in share price of late but all indications are that profit is going to be well down on last year and a sense of uncertainly has enveloped company operations because of regulatory and economic restraints and the expense of rolling out their new XT mobile service. Will the market react in a realistic way when the bad bottom line figures finally surface in their accounts in August?

Ahh but you forget about Telecom's big dividend Darren! Attractive to international market watchers and Kiwis alike. Yeah OK, but how long can that last.

Reporting season is always a good way to sort the wheat from the chaff- if you can understand most of the gobbledygook in company reports - and this coming reporting season will be more relevant to that mantra than any other year in recent memory simply because of the economic uncertainty that currently prevails but the time for some caution should come now, when deciding to buy stocks. It looks to me that some are piling into stocks simply because they see stock prices rising and that isn't a clever way to buy, especially in a beaten down market.

I have been buying recently but not all stocks should be bought because they appear to be "on sale". I bought for my own reasons because I consider them cheap and good companies.

I bought more Michael Hill International [MHI.NZ] and Auckland International Airport [AIA.NZ] recently because I like the good management of the former and the monopoly status of the latter.

The stock prices of these two are interesting. Michael Hill's is probably trading at fair value given the dire nature of the retail industry, especially for discretionary stuff like jewelery (I saw nobody in my Albany MH on an otherwise busy retail day last week and they were offering free coffee) but Airport shares are trading at a heavy discount to value given that looming profit will only be slightly down from last year. The yang to that particular ying is that less than two years ago the Canadians and the Arabs offered over NZ$3.65 per share to buy the company, probably then overvaluing the company based on similar profits to this years one.

In my not so humble opinion Auckland International Airport is worth way more than $3.65 per share in the long term, (5 years plus) see monopoly status again for an explanation of that exuberant statement.

Yes, it is a good time to buy stocks because company share prices are on sale but fundamentals still do apply and it is worth looking even closer today than usual because of the x factor of the economic downturn. The reporting season will tell us if we have been right over the last 6 months, at least in the short to medium term, rather than betting on market whims.

I have only a short market experience (around 12 years) but now more than ever the disconnect between the current profit, future prospects and health of our NZX listed companies and its sharemarket value is more pronounced - and that occurred when the market over accelerated in the earlier part of this century as well. Some companies are being way under valued and vice versa.

I guess that is what makes this game interesting, but the rules will change as the profit season reveals its hidden cards.

Disclosure I own SKC, FPH, HLG, AIA, MHI, WHS, PPL, & GFF shares.

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c Share Investor 2009

CEO Spotting

While out doing a little pre-Christmas shopping at the Albany Warehouse at the crack of 8.30am this morning who should I happen to notice during a meeting of the staff on the shop floor was the cuddly little CEO of The Warehouse [WHS.NZ] , Ian Morrice.

The Warehouse is New Zealands largest general retailer and is currently subject to a possible takeover by either Woolworths Australia or the New Zealand supermarket cooperative Foodstuffs.

After purchasing my $4 hex keys-on my credit card no less- I made my way through the checkout and was about to head out the door when I decided I would regret not meeting Ian and having a word with him.

So I did.

I only mention my meeting him because I was impressed that he was so approachable and listened to some of the feedback I had about my experiences in his stores. Mostly negative on my part.

I made a couple of observations about a couple of items and he knew exactly the products I was talking about within seconds-shame his staff are not as knowledgeable-like he had an inventory of every product in his little Scottish CEO head.

Great big firm handshake too!

Asked him, "how is business Ian", "doing well", came his reply.

He looked relaxed coming up to Christmas.

A few more pleasantry's, and apology for breaking up his meeting then I was back out the door into the early summer morning Auckland sunshine, glad I met him.

Disclosure: I own WHS shares


The Warehouse @ Share Investor

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 soon


Related Links

Audited Results for the financial year ended 27 July 2008.pdf (1MB)
Warehouse Corporate profile
Shareinvestorforum.com -Discuss this company


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c Share Investor 2008

Why did you buy that stock? [The Warehouse Group]

The Warehouse Group [WHS.NZ] has been in the news over the last week, with a Court of Appeal case being heard over its possible future ownership. This saga has been going on for nearly two years now.

That aside, my history of share ownership with this company goes back to 2000 when I first bought a small holding and stupidly sold them on September 11 2001. I then bought more in 2002 and have added to my holding since then.

The main reason I bought this share was that I spent an awful lot of money buying stuff there and noticed lots of other people doing the same. Not a good reason to buy a share, on its own but there are other reasons as well.


Why did you buy that stock?

Why did you buy that stock? [Freightways Ltd]
Why did you buy that stock? [Kiwi Income Property Trust]
Why did you buy that stock? [Hallenstein Glasson]
Why did you buy that stock? [Briscoe Group]
Why did you buy that stock? [Fisher & Paykel Healthcare]
Why did you buy that stock? [Pumpkin Patch Ltd]
Why did you buy that stock? [Ryman Healthcare]
Why did you buy that stock? [Michael Hill International]
Why did you buy that stock? [Mainfreight]
Why did you buy that stock? [The Warehouse Group]
Why did you buy that stock? [Goodman Fielder]
Why did you buy that stock? [Auckland Airport]
Why did you buy that stock? [Sky City Entertainment]

Discuss Fletcher Building at Share Investor Forum


The Warehouse and its dominant position in the market made my decision to buy even clearer. I cant ignore the fact that the company is the largest seller of various products on the New Zealand retail landscape: Music, books and gardening items are among the categories it kills.

This dominance has been impossible for other retailers to chip away at over the company's 25 year history and its low cost business model: goods straight into the store, with "just in time" delivery and sophisticated logistics make it hard for other retailers to compete on price.

It owes alot of its success to the company it is modeled on, Walmart, and apart from an awful execution of an expansion into Australia in 2000 management have been good managers of the business.

Like the other companies in this series, The Warehouse runs a business that is easy to understand and being a rather simple fellow myself that appeals to my investing genes.

The question I always ask, would I buy this share today? The answer would have to be a resounding yes. I am slightly put out that Woolworths or Foodstuffs would want to buy my shares off me because as my readers would know, I like to hold for the long term.

Being part of a larger group or on its own as a publicly listed company The Warehouse look likely to continue to dominate the New Zealand retailing scene.


The Warehouse Group @ Share Investor

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 soon

Share Investor Forum-Discuss this topic


Related Links

The Warehouse Financial Data

• Summary
• Charts
• Dividends
• News
• Announcements
• Price History
• Related Securities

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c Share Investor 2008 & 2009

Share Investor: Best and Worst of 2007

Its the time of the year where I look back on the good, the bad and the ugly in the business world during 2007, with the Inaugural Share Investor best and worst of 2007.

While there was very little good about it; finance companies going bust, management spinning stories till investors got sick with dizziness and a sharemarket that failed to catch afire, some ugliness: Helen Clark and her mates increasing taxes again and not returning them till election year 2008, and few bright sparks, Micheal Hill glittering with gold by returning healthy gains for investors.

Enough verbal diarrhea.

Lets kick it off then with the biggest prick of the year.

Wanker of the year

Little Timmy Saunders and Origin/Contact Energy win this award for steadfastly refusing to step down the aforementioned Tim Saunders and other board members on Contact Energy's board for pursuing Origin's objectives rather than the wishes of Contact Energy shareholders who wanted him gone.

Arrogance and failure were the hallmarks of Saunders reign and his failure at the head of Feltex Carpets seemed to be of benefit for his reelection to the Contact Board at the end of 2007.


IPO Disasters

While there were a number of notable failures in 2007, Xero and Carmel Fisher's Marlin, the IPO that made the biggest headlines this year was Burger Fuel.

Burger Fuel had the highest hit count on this blog on Google so while it is a favourite subject, that doesn't make it a favourite for investors when they decided where they were going to put their cold hard cash this year.

The IPO was shooting for NZ$15 million but got less than a third of that.

The shares were issued at $1.00 and never sold for that figure and have continued to slumber in the 50-60c range, where they finished today at 59c.

It doesn't look promising for 2008, given the global credit crunch so best we all shut our eyes and wish the coming year away.


Leaders of the year

It is for a company that I have a shareholding in but I cant avoid name dropping it again.

Don Braid and Bruce Plested from Mainfreight control a company that is growing profits and sales globally while at the same time having a no nonsense approach to managing his people and his company.

He put the boot in during 2007 into the Labour Government for increasing business costs and interfering with private and public companies. Clearly not afraid of any possible political backlash, New Zealand business needs more no nonsense straight talkers like this dynamic duo.


Cant wait to see the back of you award

Head and shoulders above anyone would have to be Telecom's Teresa Gattung.

Presiding over a company that failed to plan for the future and is now counting the financial cost Gattung left with a hefty payday and never looked back on her years of shareholder destruction at the helm.

Restaurant Brand's Victoria Salmon finally got pushed and her emphasis on marketing and flash over service and substance had a marked affect on sales and profit at the restaurant operator.

Its current decline was somewhat slowed latter on in 2007 but it had nothing to do with new management, it was just another small upwards cycle until the next inevitable downward spiral.


Most battered sharemarket sector

While most NZX sectors got a hammering this year, head and shoulders above the rest, without a doubt, were the retailing stocks.

Battered by high mortgage rates, gas and electricity prices and new taxes, shoppers held off spending and only did so when enticed by increasing sales by retailers.

Retailer's margins were affected and competition by the likes of Hallensteins, Postie Plus, Pumpkin Patch, The Warehouse and others meant that share prices of these retailers sank like their store sales sticker prices.

Pumpkin Patch finished the year at around half its $4.95 high and others had more than 30% come off their market caps.


Losers of 2007

Investors in the myriad of finance companies that folded this year, putting well over a billion dollars of investors money at risk.

Investors ignored the risk or were advised to take the risk by "financial advisors" and were not given the required return for risk taken.

A lesson in investing that hopefully some can learn from.


Woolpullers prize

The prize for keeping its investors and the investor public at large out of the picture would have to go to management at Sky City Entertainment.

Its ability to string out takeover proceedings and its nonsensical market statements and erroneous time frames for deadlines is a skill worthy of David Copperfield, not the manager of a New Zealand blue chip.

Hopefully the new head, Nigel Morrison, might be able to stop the boardroom table and investors heads from spinning in 2008.

Red tape award

The red tape award has to go to the Commerce Commission for first deciding to put the kybosh on the Warehouse takeover by Foodstuffs and Woolworths and then appealing the decision by the High Court to overrule that decision.

The commission have stretched out the whole process by more than a year and it looks likely shareholders will be none the wiser until well into 2008.


Conflict of interest prize

To large shareholders in Auckland Airport, Lloyd Morrison's Infratil, Auckland and Manukau city councils and their representatives on the board.

The conflicted board members are not serving other shareholders well and put their own conflicted interests before smaller shareholders.


Fairy tale award

For those in the Green Global warming religion whose adherence to fairy tales and junk science has cost New Zealand millions already in 2007 and is set to cost us billions in 2008 and for the NZX and Mark Weldon to latch onto it by starting up a "Carbon Trading" platform in 2008.


Thank you for 2007

If it wasn't for those connected with Sharetrader getting my old share investor forum site removed from its host in July because they were afraid of a little healthy competition, this blog wouldn't have been the success it has been in the latter half of 2007.

The competition has pushed me to expand and enabled a much more immediate and larger audience than before and at this rate of growth it will easily surpass sharetrader's audience by mid 2008.

Blogging really is the way and I want to thank Philip Mac Callister for his help there!


Disclosure


I  own shares in The Warehouse,Sky City,Auckland Airport, Mainfreight, Ryman, Fisher and Paykel Healthcare, Contact



 c Share Investor 2007

Retailers are having a Christmas sale

New Zealand Retail stocks are getting a real bashing at the moment and it seems the market sentiment for this is a lot of media attention about "price slashing" sales before Christmas.

Of course there is good reason to believe that margins will be affected because of discounts. Couple that with the high interest rates, a low US dollar impacting on NZ retailers with an international presence, uncertain seasons driving apparel retailers crazy and gas prices that have had a negative impact on sales through 2007 and you are going to see downward share price movements.

A Hallenstein's store interior

2008 probably isn't going to be much better, with more of the same experience from 2007, so you could see retail share prices continue to go south.

In my opinion though the market has overreacted to the negative news and there are some bargains to be had in retailing stocks.

Hallensteins Glassons, which I'm thinking of adding to my portfolio and has a dividend of over 10% net, hit a low today of NZ$3.84 after hitting the mid 5 bucks earlier this year, while Pumpkin Patch has sunk to $2.60 after almost reaching the magic $5.00 mark only months ago.

Before the High Court dismissal of the Commerce Commission decision to reject two prospective buyers of The Warehouse, its share price was drifting below 5 bucks and that companies sales have slowed and margins contacted and 2008 looks flat to ordinary.

Postie Plus made a loss earlier in the first half of this year and directors are pessimistic for the festive season, while Briscoe Group took a hit to their profit with a 15% dip in recent earnings.

The pressure hasn't hurt the likes of Michael Hill or Restaurant Brand's share prices too much in comparison to others, in fact RBD share prices has gone up while MHI share price has come off recent highs even though profit is up for the year.

That surely shows that market sentiment is punishing retailing stocks down too far.

Like every other sector of the economy retailing has its ups and downs and it is flat to negative at the moment but it wont last. Just like the sales that the retailers are having now and will have over the summer period, retail stocks are having their own sale.

Its up to you which retailer you are going to buy but it really makes sense to add to the long term portfolio when there is a sale happening.

Disclosure: I own Micheal Hill, Warehouse, Postie Plus and Pumpkin Patch shares


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c Share Investor 2007

Share Investor Friday Free for all: Edition 10

Ian gets a Bargain



The Warehouse in Hamilton


Ian Morrice , the head of The Warehouse(WHS) has received good news recently. It was reported in mainstream media today that he is to receive a total remuneration of $3.908 million for the 2007 financial year to June 29.

Nothing wrong with that, Morrice has done well to turn around company fortunes by selling the losing Australian arm and reinvigorating the shop floor by selling more consumer friendly brands in his stores.

Speculation by media in the case of The Warehouse is that one of those targets was an increased share price. Like Auckland Airport(AIA) a few months back managers were given incentives if certain performance targets were met and the link to share price performance was cited by that company.

Both AIA and WHS were/are under takeover speculation so the increase in share price is totally unrelated to the performance by management or the CEO and the incentives paid to those at AIA and Morrice at WHS are clearly undeserved.

If share price increases can be pinpointed to management's achievements then and only then incentives should be paid.

In a closely covered case by business media, the appeal by Foodstuffs, Woolworths and The Warehouse has finished today but a decision is not expected for several weeks.


Playing the game of Monopoly



A Waste Management Trash Unit

Proving that the Commerce Commission can make a ruling in favour of a virtual monopoly business in New Zealand they have cleared Transpacific Industries to buy some businesses off Envirowaste Services.

The company have been trying to buy parts of Envirowaste for some years after being turned down by the CC to buy the whole company a few years ago. That decision followed the purchase of Waste Management by the Australian trash giant and the approval of that purchase by the commission.

Transpacific was yesterday cleared to buy EnviroWaste's solid waste collection businesses in four centres and solid waste businesses in two others.

That decision could shed some light on a decision pending before the commission on whether The Warehouse could be purchased by two dominant retail industry players.

Oils Well?

The recent climb in the price of oil from the low of $US70 per Bbl to over $96 today and the worry over the price is a complex tale of inflation and increases in productivity and technology.

While the price is clearly just below the inflation adjusted April 1980 record price of US$101.70 there are reasons why we shouldn't worry too much, yet.

Since those heady days individuals and companies have increased productivity manifold times and the technology that we now use, for industry and personal use, allows the consumption of far less of the black stuff.

Our cars get more millage to the gallon/litre for a start and vehicles are one of the biggest users of oil, especially you Americans!!

As a footnote to this story, no the world isn't running out of oil. The "Peak Oil" theory is as mythical as global warming and the tooth fairy The left are mining P.O. to advantage their nonsense and collect more taxes.


Acres of Shopping


The new 210 million dollar Westfield at Albany, New Zealand


The expansion of retailing in New Zealand looks set to continue for the foreseeable future if the plans of the mall giant Westfield (WDC) are anything to go by.

Westfield has just opened a giant mall, a former apple orchard from where the "Albany Beauty" apple gets its name, in Albany, just a stones throw from where I live.

That new mall has 5.2ha of indoor floor space and although it was opened yesterday, the 1800-seat Sky City(SKC) Cinemas, will not open until next year.

The company have 12 malls in New Zealand and look set to continue expansion of not only Albany, where there are acres of land to do so, but malls in Newmarket, Auckland and Christchurch as well.

Construction of other shopping precincts unrelated to Westfield, in the Albany area, are going ahead stridently as the population in the area expands rapidly.

Westfield look to have a great future in this country as its covered mall shopping areas don't have the same dominance as they do in such regions as its home market, Australia and the home of the mall, the USA.



NZX Market Wrap

New Zealand shares dropped more than 1 per cent today following significant declines on Wall Street, but the local market's fall was smaller than for those around the region.

The benchmark NZSX-50 index closed down 53.8 points at a one-and-a-half month low of 4154.13. Turnover totalled $113.4 million, with 24 rises and 80 falls.

Telecom shed 2.6 per cent, or 11c, to a more than two-month low of 417 after its quarterly result today. The company said net profit for the three months to the end of September were $225 million, unchanged from a year earlier. But profits from continuing operations were up 29 per cent.

The mobile outlook wasn't good, some of the ways they got some profit seemed to be from lower tax and one-off things like the Southern Cross dividend. Obviously the combination of a bad day and a poor result.

Air New Zealand was one of few leaders to post a rise, up 3c at 215 despite ongoing oil price rises.

Fletcher Building fell 32c to 1168 and continued its dramatic fall over the last week, Contact Energy was down 4c at 900, Fisher & Paykel Appliances lost 8c to 348, F&P Healthcare was 6c lower at 317, and Auckland Airport lost a cent to 287.

Sky City was down 6c at 539, while Sky TV rose a cent to 570.

Smaller stocks to rise were Methven, up 6c at 246, NZX, up 8c at 948, Nuplex, up a cent at 756, and carpet maker Cavalier, 2c higher at 310.

Pumpkin Patch was down 6c at 293 after I bought some earlier this week at 309, Michael Hill lost 20c to 1025, Ebos fell 8c to 537, Freightways was down 7c at 383, and Mainfreight fell 3c to 732.

C Share Investor & NZPA 2007

NZ Dollar Wrap


Reuters currency rates

4.45 today 5pm yesterday

NZ dlr/US dlr US76.25c US77.11c
NZ dlr/Aust dlr A82.99c A82.91c
NZ dlr/euro 0.5277 0.5335
NZ dlr/yen 87.60 88.99
NZ dlr/stg 36.65p 37.13p
NZ TWI 70.61 71.32
Australian dollar US91.90c US93.08c
Euro/US dollar 1.4444 1.4462
US dollar/yen 114.90 115.37

Disclosure: I own WHS Shares

C Share Investor 2007

Share Investor's Friday Free for all: Edition 5

Spin the Wheel

The start of the week saw a possible buyer named as the purchaser of Sky City Entertainment (SKC) after a “mystery buyer” was announced as a bidder last Friday.

Providence Equity Partners was named but then latter on in the week TPG Newbridge a private equity fund with ownership of multiple casinos around the world and a buyer of the Harrah’s Casino empire was fingered instead.

While TPG looks the most likely bidder, it looks like you could be more accurate if you used one of Sky City’s roulette wheels with just as much accuracy to find a suitor.

The final act this week in the saga came with a release from Sky City today that they were going to allow due diligence from the secret party and also actively seek other bidders. Shares closed up 17c today to NZ$5.22 on big volume of over 15 million shares.

The bonus laugh from last week though comes from brokers selling client’s shares before SKC shot up sharply in price on the Friday the announcement was made. Brokers only read the misleading headline of the announcement in which Sky City management “hid” the possible bid in an otherwise inconsequential company blurb.

Affected brokers and most probably their clients have been fuming all this week.

That will teach you to be lazy next time huh?

Slap on the wrist with a wet five dollar bill

Share brokers ABN AMRO Craigs were this week fined by the NZX for trading in shares in 2006 without gaining authorisation from the firm's compliance manager. In a statement to the NZX exchange, NZX Discipline, which rules on matters of market conduct, described the breach as "a serious matter."

ABN had been warned several times regarding the same breach.

In July the NZX Discipline panel's annual report showed that two broking firms and their advisers paid sums of money to the NZX this year for breaches of stock exchange rules.

The brokers and advisors were not named and were fined to the tune of $161,000 and $80,000.

The largest settlement was for Rakon (RAK) shares bought for advisors rather than allocated clients.

Another case named related to NZ Oil and Gas (NZO) shares that were purchased to “influence closing prices.” And brokers were fined a total of $80,000.

Makes me wonder what one has to do in this town to get an appropriate punishment for breaching “serious matters” when brokers go astray.

The old boys network keeps on keeping on and Mark Weldon and co have to take a harder look at breaches such as this to give the public confidence in a market lacking the bulls.

Perhaps the breaches happened late on Friday after lunchtime drinks. We could understand this couldn’t we?

Telecom Splits

News on Wednesday that Telecom New Zealand(TEL) was given concrete news that the New Zealand Government was going ahead with its original plan to split the company into three separate operational units.

The split will occur in March next year but take at least 4 years to fully realize. Where have we heard that one before, I thought Teresa had gone?

With internet speeds on average about 1GB per sec New Zealand languish near the bottom of developed countries for speed.

Ranked number one for speed consumption this writer speculates.

Countries like North Korea have entry level broadband speed at 24 MB per sec and more advanced nations are well over 100MB per sec.

Approaching Telecom reforms at dial-up speed isn’t going to get real broadband here anytime soon and it is one reason why this writer still uses snail-net.

Oldies not Goodies

ING’s Real Living retirement village float has joined AMP’s Somerset float that was cancelled last month.

Before the market turmoil of the last few months the AMP float looked like a promising investment.

ING had questions to ask about participants organizing the float anyway. Proponents within the deal were involved with dodgy dealings back in the roaring 80s.

A shame the AMP IPO went South, this correspondent was interested in buying a stake but I’m guessing that the other two oldie home retirement companies still listed on the NZX, Metlifecare (MET) and Ryman Healthcare (RYM) are going to do better considering the two oldie IPO’s are now dead.

Hopefully the AMP Somerset will go ahead in the future. Let’s hope for a resurrection.

Auckland Airport VS The Warehouse: Which one will fly?

Having taken a sizable stake in The Warehouse(WHS) last week, New Zealand’s largest listed general merchandise operator and also having a very small piece of Auckland Airport(AIA) I am left wondering when stacked next to each other , which stock is going to do the biz when and if buyers make offers that sellers cant refuse.

Both possible sales are not exactly straight forward ones, with AIA mired with local and central government impediments and the WHS weighed down with regulatory issues.

In October the case to allow Foodstuffs and Woolworths to buy the WHS will be heard by the Commerce Commission but the AIA transaction lacks any certain information with updates to the market few and far between.

In my opinion the Warehouse sale is likely to go ahead with conditions attached.

Buffett dines on Bear?

Finally speculation abounds that Warren Buffett, the world’s wealthiest investor, has been sniffing around Bear Sterns, the Wall Street investment bank.

Speculation of course sent Bear stock up strongly but stock for the company is trading at a considerable discount to its highs for the year.

Buffett of course is the master of the bargain, and companies like BS, who have recently been going through hard times during the market turmoil of failing sub prime loans might be a perfect candidate for some of the big man’s billions.

He has already got big stakes in Bank of America and Dow Jones so Bear Sterns would be a perfect fit in his portfolio.

The scenario described above has been refuted by contacts within Bear Sterns but who are we to believe?

NZX Market Wrap

The benchmark NZSX-50 index fell 6.91 points to 4268.90, on turnover totaling a high turnover of NZ$212.7 million.

Sky City (SKC) shares leaped today after the management announced it had agreed to due diligence by what it called a "credible" party interested in a potential takeover.

The company's shares hit a high of $5.41 before closing up 17c at $5.22, on turnover of 15.3 million shares. Other blue chips were mostly weaker, with Fletcher Building (FBU) down 17c at $12.69, Contact Energy (CEN) off 15c at $9.19, and Auckland Airport (AIA) down 3c at 313 .In the face of a continuing stronger New Zealand dollar, Fisher & Paykel Healthcare (FPH) fell 4c to $3.30 and F&P Appliances (FPA) lost 1 cent to $3.56, while Sky TV (SKT) fell 14c as it buys it product in $US.

Telecom (TEL) was up 3c at $4.47, as investors mulled over the Government recommitment this week to split the company into three units.

Air New Zealand (AIR) raised 5c to $2.47, following positive operating numbers for last month, and with shareholders approving its fleet purchase. The stock is running away from fair value with investors ignoring the market volatility of the airline industry.

Other stocks on the rise were Tourism Holdings (THL) up 10c to $2.40, PGG Wrightson (PGG) up 3c at 193, Nuplex (NPX) up 8c at $7.34, and Sanford (SAN) 5c higher at $4.35.

On the downside were Infratil(IFT) down 7c at $2.97, Steel & Tube(STU) down 19c at $4.30, Port of Tauranga(POT) down 5c at $6.70, and Mainfreight (MFT) continues its recent slide down 10c at $6.70.

Disclosure: I own SKC, WHS, RYM, AIA shares

C Share Investor 2007

Share Investor's Friday Free for all: Edition 3

Fast Food Company keeps its Head

Restaurant Brands (RBD) the operator of KFC, Pizza Hut and Starbucks in New Zealand has appointed, Russel Creedy, the man who has been acting chief executive since Vicki Salmon's departure to the permanent position as head.

Creedy has been with the company since 2001 and has run company supply chains and Pizza Hut in that time.

Unfortunately Creedy is part of the lack of service culture that pervades RBD's operations and his appointment comes in the wake of his failure at the Pizza Hut division to stem sales drops in the face of competition and the continuation of that as acting head.

His placement as the top Colonel seems to me to be a default kind of appointment and smacks of nobody else outside the company with enthusiasm and fresh ideas being attracted to the sinking ship that is Restaurant Brands.

As an aside but related story Mac Donald's in the US is making inroads into Starbuck's territory with better product and cheaper prices. This author wonders how the local bean crusher is faring against the big Mac.

Retail Therapy

Two of the countries larger retailers reported profits today, with similar results.

Clothing retailer Hallenstein Glasson (HLG) reported a 1.3% fall in net profit to NZ$21.4 million.

Sales were marginally up to just over $200 million with New Zealand operations struggling and Australian sales up a solid 8.1 %.

Expansion of OZ and Kiwi stores were on the cards for the previous 12 months with a Glassons opening in a new Westfield Mall 2 weeks ago in my local area. The store manager tells me it seems to be doing very well and foot traffic while I was there seemed to reflect the managers statement.

The Warehouse (WHS) New Zealand's largest retailer, has announced an annual net profit after tax of $115.5 million. Sales were up 2.4 per cent to $1.76 billion.

The profit included almost $20 million from asset disposal from which a 35c special dividend will be paid. There is to be a normal 5.5c dividend on top of that.

The Warehouse is in a state of flux at the moment. Expansion plans are on hold and ownership is in limbo as Foodstuffs and Progressive look to fight out ownership bids for the company in the courts early next month.

Both retailers will find the going tough for the medium turn, as high government spending has lead the economy into a tail spin raising interest rates and inflation.

Post 2008 election a new frugal, tax cutting regime will help stimulate this sector again.

Pumpkin Patch (PPL) the trendy global kids fashion retailer, will report Monday 17 September(NZ time) and judging by the spectacular fall in share price of the last several weeks insiders seem to know that the result isn't going to be pleasing.

Fonterra headed to a new Frontier?

As canvassed here a few weeks back the speculation about New Zealand's largest company being listed surfaced again this week.

Fonterra's brands business could be worth more than $4 billion if floated on the share market and analysts say it would be an eagerly awaited float.

Fonterra's brands business - including Anchor, Mainland and Tip Top - had an operating revenue of $4 billion.

This puts it above the scale of companies with similar strong brands, such as Goodman Fielder (GFF) which has approximate $2.5 Billion in sales.

With the NZX bereft of such large listings a partial float of Fonterra would give confidence to a sagging undervalued New Zealand stock market.

Good news and bad news for Fonterra this week.

Rachael Hunter, the girl form Glenfield and the Tip Top Trumpet ice cream girl from 22 years ago this week launched the Jellytip Trumpet, a fusion of two classics.

Pictures of Rach' licking the new cone shaped concoction immediately reminded one that perhaps Rod Stewart might have seen the original picture of the pretty 16 year old doing exactly the same thing all those years ago. He of course latter married her.

The bad news, the milk that they base most of their products on has been implicated (again) for causing health problems.


Stupid is as Stupid does

Alan Bollard, the Reserve Bank Governor, has left the official cash rate at 8.25% this week.

Just when he should be lowering the rate because of a downturn in the New Zealand economy, with international markets likely to cut interest interest rates ,Bollard sits on his hands.

Bollard's possum in the headlights, hand on the tiller approach didn't work when he was raising rates and now he appears to be riddled with confusion as to what to do next.

"...This would be offset by the sharp rise in dairy prices and the decline in the New Zealand dollar in the past month..."

So he was critical of the Dairy industry when using it as an excuse to raise interest rates and now he is expecting the same industry to get the economy going when he did the best he could to destroy it with the highest interest rates in the developed world.

Cant have it both ways Forrest.


The Song Remains the Same

Finance companies are in the news again this week.

Geneva Finance, the latest company to strike problems in the financial sector crisis, yesterday gave its trustee assurances about its financial fitness.

On Tuesday, Standard & Poor's put Geneva on negative "CreditWatch" saying it was having liquidity problems.

This writer cannot believe the amount of money being spent by this Finance company and others on saturation advertising trying to soothe prospective customers that their company's stability can be assured.

One could equate the quantity of any advertising of a particular company with the amount of trouble they might be in.

I certainly wouldn't come to that conclusion though-sound of one hand clapping.

Geneva insist things are hunky dory.

Jumping Ship at Telecom a good Call

Another Telecom (TEL) exec is about to head West. Telecom's CEO of its consumer arm, Kevin Kenrick, is resigning in December.

His departure follows the resignation of another senior Telecom exec, CFO, Marko Bogoievski.

Teresa Gattung was the first to get the heave-ho earlier this year when her dismal results as the CEO finally caught up with her.

Considering the pressure Telecom is now under because of Government regulation and the need to spend large capital sums replacing aging infrastructure it seems that head office has morale at the same levels as Telecoms dropping share price and future prospects.

The departures are well timed.

NZX Market wrap

The NZSX-50 index rose 20.25 points, or 0.5 per cent, to 4162.68 on turnover of $83.5 million.

It was a weak trading day which capped a week of the same slim trading.

Giant retailer The Warehouse(WHS) was flat at $5.95 after posting an annual net profit of $97.9m.

Clothing retailer Hallenstein Glasson(HLG) fell a cent to $4.59 after saying annual profit fell 1.3 per cent, to $21.4m.

Top stock Telecom (TEL)was down 2c at $4.35.

No 2 on the NZX board, Fletcher Building(FBU) increased on yesterday's 22c gain with a 14c rise to $11.99. Contact Energy(CEN) fell 2c to $8.97.

Fisher & Paykel Healthcare(FPH) was up a cent at 360, while F&P Appliances(FPA) rose 10c to 365. Auckland Airport (AIA)rose a cent to 311 with no more news of takeover talk, Sky City Entertainment(SKC) lost 2c to $4.38, and Sky TV(SKT) rose 17c to $5.60.

Air New Zealand(AIR) was up 4c at $2.29 ahead of a large dividend payout, Infratil (IFT)was up 8c at $2.80 and investment company Hellaby(HBY) was also up 8c, at $2.74.

NZX increased 15c to $9.75, PGG Wrightson(PGG) was up 2c at $1.78, Vector(VCT) the Auckland Lines company rose 5c to $2.58, and Tower(TWR) was up 5c at $2.25.

Going down were, Pumpkin Patch(PPL) was down 9c at $3.25 ahead of next weeks profit announcement, Nuplex(NPX) fell 13c to $6.97, Port of Tauranga (POT) lost 7c to $6.90, and Cavalier(CAV) was down 3c at $3.30.

c Share Investor 2007