Share Investor: fletcher building

Showing posts with label fletcher building. Show all posts

Wednesday, January 11, 2012

Share Price Alert: Fletcher Building Ltd 5

1 year FBU Chart

Fletcher Building Ltd [FBU.NZX] shares are showing more weakness as the New Zealand economy limps on and the Christchurch earthquakes continue and hold up that city's rebuild (see FBU 1 year chart above) and they have gone below late Novermber 2011 levels since the last FBU Share Price Alert.

FBU shares have dropped by approximately 40% since a late April 2011 high of just a tick over $9.50 and even more interestingly are at close to lows of just over 5 bucks (see 4 year FBU chart below) reached at the height of the Global Financial Crises back in February 2009.

http://chart.bigcharts.com/custom/fairfax-com-nz/chart.asp?rnd=0.5678863549533573&style=2242&symb=FBU&size=1&type=64&time=4yr&freq=1dy&comp=&compidx=&ma=&maval=&lf=268435456&lf2=&lf3=&uf=16384&arrowdates=&arrowlegend=&country=NZ&sid=506033

FBU 4 Year Chart

Buy Every Bastard Says No - The 42 Below Story, by Geoff Ross & Justine Troy & more @ Fishpond.co.nz

c Share Investor 2012

Wednesday, November 23, 2011

Share Price Alert: Fletcher Building Ltd 4

Fletcher Building Ltd [FBU.NZX] has taken a considerable dive since its previous share price alert in mid October. At that time the share price was trading at $6.92c.

At closing of the bell today the share price finished trading at $5.92c, just under a 15% drop in share price.

This is primarily due to delays in the start date to the Christchurch rebuild but also pressure from slowing homebuilds in New Zealand, Australia and the potential for impacts from their busineses in Asia and North America as housing starts in the US have lowered demand for its laminates business there and the slowing Chinese economy looking to impact on the Asian region as a whole and the rest of the world during 2012 and beyond.

Look for sub 5 bucks early in 2012 and sub 4 bucks if the Christchurch rebuild is delayed past the previous mid 2012 start date and the above mentioned impacts from the various parts of FBUs business weigh heavy on market sentiment for the company and of course an impact on the bottomline.

Fundamentals

P/E	13.140
EPS	$0.451
NTA	$2.709
Gross Div Yield	6.680%

The numbers are currently looking good with a low P/E ratio and a good yield of close to 7% gross.

As always be patient on this and you could probably park this for a few months and watch closely for your entry point.

Disc I own FBU shares in the Share Investor Portfolio

Share Price Alert Series

Buy Every Bastard Says No - The 42 Below Story, by Geoff Ross & Justine Troy & more @ Fishpond.co.nz

c Share Investor 2011

Thursday, October 13, 2011

Share Price Alert: Fletcher Building Ltd 3

Fletcher Building Ltd [FBU.NZX] came out with a profit downgrade yesterday for the coming 2012 first half year, down by around 10% on the 2011 year interim result. The stock was down by over 12% and at one stage down by nearly 14%. It finished down 98c to close at $6.92.

This of course provides more opportunities for investors as the market assesses the constantly changing timeline for the Christchurch rebuild but I don't think FBU it is near its lows because the property cycle isn't at bottom yet - and the Christchurch rebuild has and will contribute to that cycle - before it begins its climb to the next peak. Christchurch staying still is a big influence for the medium term and if doesn't FBU could be alot lower 12 months from now.

If the shakes stop soon the late part of 2012 to 2013-2014 and onwards for 10 years will mean good things for the company as rebuilding takes place.

For the wider building sector, outside the Christchurch earthquake rebuild, in New Zealand and other markets that FBU does business in, the recovery of the building sector looks well off and uncertain and FBU management have confirmed this.

It looks reasonably negative currently, with demand for their services and products outside of the company and its control. The only negative from the company's point of view are the reasonable debt levels they carry which should be paid down in these uncertain times given the market as a whole and its fear of the debt bogeyman.

Given all this uncertainty, the share price will be impacted, so investors wanting a share of this company should bide their time, research and most of all be patient.

Keep the cash handy and buy on further weakness.

Disc I own FBU shares in the Share Investor Portfolio

Share Price Alert Series

Ecoya Ltd
Port of Tauranga Ltd 2
Contact Energy Ltd 5
Contact Energy Ltd 4
The Warehouse Group Ltd 2
Contact Energy Ltd 3
Contact Energy Ltd 2
Xero Ltd 2
Pumpkin Patch Ltd 4
Pumpkin Patch Ltd 3
Hallenstein Glasson Holdings Ltd
Telecom New Zealand Ltd 4
Telecom New Zealand Ltd 3
Port of Tauranga Ltd
Freightways Ltd 3
Goodman Fielder Ltd 2
Freightways Ltd 2
Telecom New Zealand Ltd 2
Ryman Healthcare Ltd
Charlies Group Ltd
Fletcher Building Ltd 2
Contact Energy Ltd
Steel & Tube Ltd
Telecom New Zealand Ltd
New Zealand Stock Exchange Ltd
Mainfreight Ltd 2
The Warehouse Group Ltd
Pumpkin Patch Ltd 2
Hallenstein Glasson Holdings Ltd 2
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
Xero Ltd

Fletcher Building @ Share Investor

Fletcher Building: Crane Takeover Offer Well Timed
Fletcher Building Ltd: 2010 Full Year Profit Analysis
Fletcher Building: All eggs in one basket make for big risk
Long Term View: Fletcher Building Ltd
Hugh Fletcher: Silver spoon no recipe for success
Long VS Short: Fletcher Building Ltd
Fletcher Building's Commercial arm keeps their head above the tunnel
Sweetheart deal for Fletcher Building's Friends
Fletcher House built on hard times
Fletcher Building down tools in the short term
Why did you buy that stock? [Fletcher Building Ltd]
A solid foundation for the future
Fletcher Bu ilding raises profit through canny management
Fletcher's got game

Discuss Fletcher Building @ Share Investor Forum - Register free
Download FBU Company Reports

c Share Investor 2011

Monday, September 6, 2010

Canterbury Earthquake to Stimulate Fletcher Building's Fortunes

Any worries that Fletcher Building Ltd [FBU.NZX] might have had a few weeks back about gaps in their order book will have collapsed over the weekend as the big earthquake hit Canterbury and the centre of Christchurch.

I expressed a concern of the lack of work on the books back in August.

There is talk that there could be around $2 billion or more worth of damage to city infrastructure and add to that domestic and commercial buildings and we are looking at a major bill to rebuild Christchurch city and surrounds.

With the current under-use of resources at FBU and other building firms, companies will be ready, able and willing to get to work.

For FBU the whole chain of their business will be involved. From raw materials that they supply to the contracts for sewerage, roads, commercial and residential building this should be a boom time for them in the Mainland.

On top of the $1.7 billion recently shelled out by taxpayers for investors in the failed South Canterbury Finance company, the injection of more billions into this economy will be good news for the area and for companies that can ride of the coattails of more than 4 billion being injected into the region.

Fletcher Building will be well placed to take a large slice of that money.

My best to you all down there. Keep well.

FBU 2010 Profit in detail

Listen to audio of profit presentation - 18/08/10
Presentation in PDF - 18/08/10

Fletcher Building @ Share Investor

Fletcher Building Ltd: 2010 Full Year Profit Analysis
Fletcher Building: All eggs in one basket make for big risk
Long Term View: Fletcher Building Ltd
Hugh Fletcher: Silver spoon no recipe for success
Long VS Short: Fletcher Building Ltd
Fletcher Building's Commercial arm keeps their head above the tunnel
Sweetheart deal for Fletcher Building's Friends
Fletcher House built on hard times
Fletcher Building down tools in the short term
Why did you buy that stock? [Fletcher Building Ltd]
A solid foundation for the future
Fletcher Bu ilding raises profit through canny management
Fletcher's got game

Discuss Fletcher Building @ Share Investor Forum - Register free

Download FBU Company Reports

Recommended Fishpond Reading

Buy The Intelligent Investor & more @ Fishpond.co.nz

c Share Investor 2010

Thursday, August 19, 2010

Fletcher Building Ltd: 2010 Full Year Profit Analysis

The 2010 full year profit for Fletcher Building Ltd [FBU.NZ] is a solid result considering the recession has hit the building sector so hard over the last year.

Small and big building companies are going to the wall faster than you can say "rip that drywall out before the receivers come in" so the fact that FBU is still here and in good health is positive. The worry for FBU shareholders is surely what levels of work lay ahead for the company in the 2011 financial year and will they survive if they don't win future big Government infrastructure projects which they have an 85% reliance on for revenue.

Australia makes a big infrastructure contribution to Fletcher's revenue take as well.

While the 2010 net profit of $272 million (after the one-off government tax changes for 2010) was up strongly on the 2009 $46 million loss, due to asset writedowns in the Formica division, it was on revenue down 4% to NZ$6.8 billion.

Key Points

•Net earnings before unusual items $301 million.

•Unusual items of $29 million due to NZ tax changes.

•Net earnings $272 million

•Operating earnings¹ of $521 million.

•Cashflow from operations $522 million.

•Revenues down 4% to $6.8 billion

•Higher insulation and construction revenues

•Lower sales volumes in most business

•Adverse impact from exchange rate movements

•15 cents per share final dividend, 29 cents for the year

•Dividend reinvestment plan not operative for final dividend

The Formica division, bought for nearly NZ$ 1 billion in 2007 has still failed to fire and continues to drag on overall company performance. It is probably around break even net profit-wise so the money borrowed to finance the purchase continues to drag on the bottom-line with interest payments sucking out cashflow from the balance sheet. I don't see this dog paying back long-term, if at all, for a considerable time.

Like the fortunes of Steel & Tube Ltd [STU.NZ], FBU's steel division sales are well down and needs the commercial sector, which has impacted all areas of their commercial businesses, to turn the slump around.

Management say their residential building sector in New Zealand, Australia and North America shows some promise but it is only small and has so far failed to show any sort of sustainable pattern and could be just a blip on an otherwise downtrend - my emphasis.

Interestingly there is commentary that the emissions trading scheme passed last month will have an impact on the company and its bottomline. Management say a small dent currently but it will be much higher as we descend into the madness of this rort on business and the average Kiwi.

The company is understandably vague about 2011 with no profit indications or expectation, but in New Zealand they see a gradual continuing recovery in residential building activity, with commercial construction expected to remain weak.

Like my good self they see infrastructure spending likely be down in 2011 before growing in 2012.

A similar outlook is expected for Australia with their businesses in Europe, Asia and North America having a level of diminishing expectations from their Australasian business units.

2011 is going to be a difficult year for FBU.

FBU 2010 Profit in detail

Listen to audio of profit presentation - 18/08/10
Presentation in PDF - 18/08/10

Fletcher Building @ Share Investor

Fletcher Building: All eggs in one basket make for big risk
Long Term View: Fletcher Building Ltd
Hugh Fletcher: Silver spoon no recipe for success
Long VS Short: Fletcher Building Ltd
Fletcher Building's Commercial arm keeps their head above the tunnel
Sweetheart deal for Fletcher Building's Friends
Fletcher House built on hard times
Fletcher Building down tools in the short term
Why did you buy that stock? [Fletcher Building Ltd]
A solid foundation for the future
Fletcher Bu ilding raises profit through canny management
Fletcher's got game

Discuss Fletcher Building @ Share Investor Forum - Register free

Download FBU Company Reports

From Fishpond.co.nz

Buy Bird on a Wire: The Inside Story from a Straight Talking CEO & more @ Fishpond.co.nz

c Share Investor 2010

Thursday, August 12, 2010

Fletcher Building: All eggs in one basket make for big risk

Fletcher Building Ltd [FBU.NZX] look to me to be in dire trouble. Mark Binns, chief executive of infrastructure and construction for FBU came out yesterday and confirmed what the market had been thinking for a long time that the reliance by the company on State spending was high.

It was higher than most thought at 84% of all work on their books:

"I like (PM) John (Key) spending money and if he stops, we're in trouble because the private sector has no gas in the tank. I think it will be quite a while before it changes. The Government will be dominant for the next two to three years. For that to change and the private sector to return, we need underlying demand in retail, residential housing, offices, commercial, industrial - and demand is on the floor at the moment". Mark Binns, NZ Herald

For Fletcher shareholders this figure should set off the alarm bells because clearly relying on one client to bolster your company fortunes in a depressed building market is a recipe for future financial calamity - especially when that client is a fickle, political, unplanned cash strapped one.

I do remember CEO Johnathon Lim trying to reassure shareholders a few years ago that the company was diversified in its income streams (he meant geographically as well as the residential and commercial sector) but having this much work coming from one client isn't wise at all.

Most of the big work for FBU is nearing the end and has largely been factored into the company's books: Mangere Bridge, Newmarket Viaduct, Eden Park and Dunedin Stadium and a whole host of other major State funded projects.

This leaves a big gap for FBU for 2011 and beyond and it will probably rely again on the State to fund its books in the future.

This of course means winning some of the big contracts up for grabs in the near to medium term.

The Waterview Tunnel (see animation of project)and associated road works, building a National Conference Centre in Auckland somewhere and a large number of national roading projects.

There is favouritism in the National Government for using private business more to do state projects and there has been much talk about future building work for many possible infrastructure projects in the future.

Fletcher Building's past has been built on State funding. From big state housing building projects starting in the 1930s (isn't that ironic) through to electricity infrastructure and everything in between, the taxpayer has kept the money rolling into the company.

The trick will be to win some of these big projects and also be ready to move when the private sector gets ready to spend money on building again. This is unlikely to be for many years to come so we are back full circle where the danger lies in having all your eggs in the State basket.

It isn't wise, should be pegged back from the current 84% of all projects if possible and leaves Fletcher's vulnerable for the medium term should the State either turn off the tap or put off work due to lack of money.

Fletcher Building @ Share Investor

Long Term View: Fletcher Building Ltd
Hugh Fletcher: Silver spoon no recipe for success
Long VS Short: Fletcher Building Ltd
Fletcher Building's Commercial arm keeps their head above the tunnel
Sweetheart deal for Fletcher Building's Friends
Fletcher House built on hard times
Fletcher Building down tools in the short term
Why did you buy that stock? [Fletcher Building Ltd]
A solid foundation for the future
Fletcher Bu ilding raises profit through canny management
Fletcher's got game

Discuss Fletcher Building @ Share Investor Forum - Register free

Download FBU Company Reports

From Fishpond.co.nz

Buy Bird on a Wire: The Inside Story from a Straight Talking CEO & more @ Fishpond.co.nz

c Share Investor 2010

Sunday, December 6, 2009

Hugh Fletcher: Silver spoon no recipe for success

In an interview with Kim Hill on National Radio a few weeks back Fletcher Building Ltd [FBU.NZ] former CEO Hugh Fletcher gives his views on the history of the business and his time there.

Fletcher followed in the footsteps of his father and grandfather at what was then Fletcher Challenge. He remains a director of Fletcher Building to this day.

He is currently on the board of the Reserve Bank of New Zealand in 2002 and chairs the board of directors of IAG New Zealand and is a director at Vector Ltd [VCT.NZ], and a board member of Insurance Australia Group.

The interesting part of the interview is the glossing over by Hugh of his failure as CEO in the 1980s-1990s. Under his reign the company limped towards oblivion in the 1990s as failed expansion attempts led to the breakup of the company into 3 different divisions in 2000.

He made many enemies along the way, notably Sir Ron Trotter, Sir Ron Brierly and Dr Rod Deanne, a former director at Fletcher Challenge and failed former CEO of Telecom NZ [TEL.NZ].

A very interesting view from Mr Fletcher on the history of what is now Fletcher Building and it is ironic that the company went back to its roots in the building industry after its failure under the grandson of the founder.

It just goes to show, leaders and business are not born but made from hard work and ability and often separated from parentage.

Disc: I own a small FBU holding in the Share Investor Portfolio

Fletcher Building @ Share Investor

Long VS Short: Fletcher Building Ltd
Fletcher Building's Commercial arm keeps their head above the tunnel
Sweetheart deal for Fletcher Building's Friends
Fletcher House built on hard times
Fletcher Building down tools in the short term
Why did you buy that stock? [Fletcher Building Ltd]
A solid foundation for the future
Fletcher Bu ilding raises profit through canny management
Fletcher's got game

Discuss Fletcher Building @ Share Investor Forum - Register free

From Fishpond.co.nz

The story of his family and their company is told in Fletchers: a Centennial History of Fletcher Building by Paul Goldsmith

c Share Investor 2009

Tuesday, July 14, 2009

Fletcher Building's Commercial arm keeps their head above the tunnel

Fletcher Building Ltd [FBU.NZ] getting a large part of the NZ$406 million contract to build the road tunnel under Victoria Park in Auckland is not only evidence of their dominance in contracting in this part of the world, it is an indication of its underlying strength in the recession hit market.

That underlying strength lay in the ability of the company to fall back on its commercial/infrastructural arm while its residential building group has been hit by the big slowdown in the residential building sector.

Not only does this Auckland roading project provide revenue from actually building the tunnel but it also provides revenue for Fletcher's add-on divisions. Concrete, steel, aggregates and more can be provided from FBU's various businesses.

There is more of this infrastructure building to come. Stadiums around the country are being built or refurbished in time for the 2011 World Cup and Fletchers will probably have a hand in somewhere building most of them.

The other road tunnel to be built, in the Waterview part of Auckland, will also no doubt get FBU input somewhere.

The company is one of a few large enough the ability and infrastructure themselves to be able to build these sorts of large projects and Fletcher stand above most when it comes to the tender process.

They are big, have the expertise, knowledge and relationships and that will help them through the next few recession hit years.

Shareholders just need to be patient.

Disc: I own a small FBU holding in the Share Investor Portfolio

Fletcher Building @ Share Investor

Sweetheart deal for Fletcher Building's Friends
Fletcher House built on hard times
Fletcher Building down tools in the short term
Why did you buy that stock? [Fletcher Building Ltd]
A solid foundation for the future
Fletcher Bu ilding raises profit through canny management
Fletcher's got game

Discuss this stock @ Share Investor Forum

Related Amazon Reading

Project Management in Construction (McGraw-Hill Professional Engineering) by Sidney M. Levy
Buy new: $71.96 / Used from: $60.71
Usually ships in 24 hours

c Share Investor 2009

Monday, June 1, 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.NZX] , Fletcher Building Ltd [FBU.NZX] and Freightways Ltd [FRE.NZX] 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.

Related Share Investor Reading

Discuss this topic @ Shareinvestor.net.nz

Relevant Links

Kelvin Hartnall's Blog
NZ Shareholders Association
NZX

Freightways @ Share Investor

Share Investor's Total Returns: Freightways Ltd
Share Price Alert: Freightways Ltd 3
Share Price Alert: Freightways Ltd 2
Freightways Ltd: 2011 Half Year Profit Commentary
Share Price Alert: Freightways Ltd
Freightways Ltd: 2010 Full Year Profit Analysis
Long Term View: Freightways Ltd
Freightways Ltd: 2010 Half Year profit commentary
Freightways Ltd: 2009 Full Year profit commentary
Freightway's Capital Raising more of the same crap for small shareholders
Long VS Short: Freightways Ltd
Freightway's keeps delivering
Why did you but that stock: Freightways Ltd
Freightway's delivers
Freightway's packages up a good result

Discuss FRE @ Share Investor Forum
Download FRE company Reports

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

Join the Share Investor Facebook Group

c Share Investor 2009

Wednesday, April 22, 2009

More Moola Please!

Back on the agenda for this week is the capital raising that is sweeping NZX listed companies.

Apart from the fact that they have been carried out without the permission of shareholders and the NZX has granted them waivers to allow management to do so, there seems to be a pattern forming.

The latest capital raising to be announced was Sky City Entertainment [SKC.NZ] who came out today with an underwritten offering of 71 million shares to institutions and a further NZ$50 million or around 20 million shares in an offer to smaller shareholders like me.

The company really doesn't need the extra funding because its current debt servicing doesn't have to be re-negotiated for a number of years.

This is much like the deal offered from Fletcher Building [FBU.NZ] and Freightways Ltd [FRE.NZ] for extra capital over the last couple of weeks.

Just doing very rough figures in my head the dilutionary effect for shareholders for these 3 companies is around 15%.

What that means to me is the followng to avoid dilution of my shareholdings:

1. Fletcher Building - additional 150 shares

2. Freightways Ltd - additional 1230 shares

3. Sky City Entertainment - additional 5250 shares

What I have decided to do is the following:

1. Fletcher Building - additional 500 shares @ 5.35 per share approx

2. Freightways Ltd - additional 1800 shares @ 2.44 per share approx

3. Sky City Entertainment - maximum of 6000 shares @ 2.52 per share approx

An additional $NZ 22,000 approx that I must find. Not a problem for me and I don't have a big issue with stumping up the cash because as part owner of these businesses sometimes you extract money from them and sometimes you have to put it back in.

As I mentioned above what I do have a big issue with is the lack of consultation with shareholders like me and the NZX's collusion with company management to allow them to bypass owners rights and give institutions preferences that smaller shareholders dont get. I would have said yes to company requests (sans the institutional favouritism) for more capital but I nevertheless should be asked in the first place.

I own part of these companies after all !

It has sent me into a kind of Bruce Sheppard mode on speed but there is very little I can do except make it known here that I am an unhappy camper.

As I said back in early January capital raising is set to become popular this year and it has by no means finished yet.

Nuplex Group [NPX.NZ], Fisher & Paykel Appliances [FPA.NZ], Kiwi Income Property Trust [KIP.NZ] and a whole host of other companies have already had out the begging bowl and I fully expect to have to fork out more myself although the bulk of my extra capital allocations have already revealed themselves.

Recent Share Investor Reading

Discuss this topic @ Shareinvestor.net.nz

Monday, April 6, 2009

Sweetheart deal for Fletcher Building's friends makes small investors sick

Bruce Sheppard had a go at it yesterday and now it is my turn to have a go at Fletcher Building [FBU.NZ] management for the cavalier attitude they have for small Fletcher investors.

At the heart of that attitude is the recent capital restructuring to raise funds to retire debt and reinforce cashflow.

Institutional investors basically got a sweetheart deal from Fletcher management when they got cut price shares at NZ$5.35 per share on a pro-rata basis. That is, in proportion to the shares they already hold. A deal apparently will be offered to smaller shareholders, but capped at NZ$100 million and not pro-rata, so we got the arse end of the donkey here.

Compounding this favouritism, apparently non-institutional "large investors" (whatever that means) have also got some cream on top of the sweetheart deal for institutions that makes it so sweet smaller investors are bound to chuck up after reading it. This particular deal will give special rights to those large non-institutional investors to ratchet up their holdings to reduce the diluting effects of the placement to institutions.

Now I don't know about you but if you are a small Fletcher shareholder (I am, I have 1000) you might be suffering a diabetic reaction to all this sweet favouritism to the big boys by now and wonder out loud to yourself again why the NZX might be an unfavourable place for New Zealanders to invest considering they are not on a level footing with the big boys that Mark Weldon's NZX has granted a wavier to to snap up more of Fletchers.

According to the NZX website the folk who may have participated in the $405 million placement of shares concluded last week are connected to Fletchers by virtue of the fact that some are "Associated Persons of FBU Directors by virtue of having a common Directorship with FBU and several placees participating in the Placement".

Those people are:

(a) ANZ National Bank Limited, by virtue of Sir Dryden Spring’s and Mr John Judge’s common Directorship;
(b) Westpac New Zealand Limited, by virtue of Mr Ralph Waters’ common Directorship; and
(c) the Accident Compensation Corporation, by virtue of Mr John Judge’s common Directorship.

So it gets even worse when you dig down into the detail. Its like a bloody incestuous Utah Mormon clan!

I haven't got the time to read through the pages of verbose detail but I guess some will be revealed at a latter stage. Most will be lost on the average small mom and dad Fletcher share holder because media are too lazy to do the research - all except Bruce Sheppard, I am sure we will be hearing from him again on this matter.

There is however a solution to this.

Strong demand from those mentioned above for shares in the capital raising aside, Fletcher Building still operates in an environment of weak business prospects and an uncertain future as far as sales go.

Global stockmarkets have raced ahead over the last month or so and there is downside to come.

Shares in the company have ranged from $5.11- $6.50 over the last six months (see chart above) and it is not unlikely scenario that smaller shareholders like me could pick up extra shares cheaper than the proposed $5.35 to stop dilution of their holdings by buying them on the open market. You don't have to participate in this madness and still stay undiluted!

That is just what I am propose to do .

Bugger them.

Fletcher Building @ Share Investor

Fletcher Building: Crane Takeover Offer Well Timed
Fletcher Building Ltd: 2010 Full Year Profit Analysis
Fletcher Building: All eggs in one basket make for big risk
Long Term View: Fletcher Building Ltd
Hugh Fletcher: Silver spoon no recipe for success
Long VS Short: Fletcher Building Ltd
Fletcher Building's Commercial arm keeps their head above the tunnel
Sweetheart deal for Fletcher Building's Friends
Fletcher House built on hard times
Fletcher Building down tools in the short term
Why did you buy that stock? [Fletcher Building Ltd]
A solid foundation for the future
Fletcher Bu ilding raises profit through canny management
Fletcher's got game

Discuss Fletcher Building @ Share Investor Forum - Register free
Download FBU Company Reports

c Share Investor 2009

Share Investor