Share Investor's Friday Free for all: Edition 6

Sign O' the Times




Monday morning I get an expensive looking flash black annual report in my mailbox from Auckland International Airport(AIA) and it comes festooned with the artistic equivalent of the anarchy symbol used by the punk rockers in the 70s and still used today by the wanna bees.

The logo is part of an expensive "re branding" exercise where the use of politically correct jargon and references to Maaoori and global warming are used liberally to suck up to just about anyone who is anyone, except if you are a shareholder.

This might give you some sort of idea:

Chairman John Maasland said the company has adopted a new vision of "representing our country, and new core values of being outstanding, uniquely Kiwi and welcoming".Do shareholders really need to shell out hundreds of thousands of dollars so AIA management can tell us what they will be doing but should have been doing all along anyway?

I have canvassed this sort of managerial mumbo jumbo before and it is nothing more than MBA spin, an exercise to make management feel better about themselves and submit an image to the public that is all surface and little substance.

Really an excuse for mediocrity.


Port in a Storm




In the wake of strikes this week at Ports of Auckland, POA, it seems owners of the now publicly owned port , Auckland Regional Holdings, ARH have refused to talk about the reasons why they put a buzz saw to the marriage between it and the Port of Tauranga (POT)

The Cameron Report, done by an investment banker, points to widespread efficiency gains from the tie up of the two ports. Efficiency gains would have resulted in more streamlined ports operations with bottom line benefits for customers.

Judith Bassett, ARH chair and ARC councillor has refused to release the report. Industry insiders say the possible gains were worth more than $50 million a year.

The Port of Tauranga is a much more efficient beast than POA and it seems jealousy over this and arguments that POT management wanted a bigger slice in the marriage because of their ports efficiencies may have sunk the merger.

As an outsider and ARC ratepayer myself one has to ask oneself what are ARC councillors hiding? It cant be good and clearly wont be released until after local elections in a week or so.

It probably wont be the end of port consolidation in the future between these two parties because it just makes financial sense to do so.

Ironically while POA's profit dived for 2007, POT's was up sharply.

Amazing what can happen to a company when it is abused by politicians.


Dow High?

The Dow hit an all time high this Tuesday (US Time), with the index up strongly by 191.92 points to close at 14,087.55.

It seems the banking and finance sector has made a comeback after the sub prime meltdown and all has been forgiven and forgotten as investors flocked to the sector.

The S&P 500 Financial Index rose 2.1 per cent, the biggest gain among 10 sector groups. Merrill Lynch, the third-largest securities firm, leaped US$2.59 to US$73.87. JPMorgan Chase, the third-biggest US bank, rose US99c to US$46.81.

Doubts still remain over how the "credit crunch" will really impact this sector as the bulk of "sweetheart" mortgage deals in the sub prime area that caused the meltdown, where lenders have a lead-in low interest rate on their mortgages for 6 months or so , have yet to fully hit the market.

Keep watching, I will!


Its a Mans World, Baby

Much fuss made in mainstream media circles this week over the apparent dearth of women CEO's running companies in New Zealand.

This in the wake of Di Humphries' decision to leave the top job at Glassons, a division of the clothing retailer Hallensteins (HLG)

Names such as Vicki Salmon, former head of Restaurant Brands(RBD) and Teresa Gattung, former head girl at Telecom New Zealand (TEL) were bandied about as examples to be admired.

Sadly these two were both monumental failures at their respective positions.

Gee, how about company heads being picked because they are good at what they do, if they happen to be men or women it doesn't matter, as long as you have the best person for the job.

Call me simple but I am just a man.

Humphries' is off to look after her young family. A very important job, if I do say so.


Financial Impact

The fallout from the dodgy finance company industry rolls on again this week.

Hanover Finance, one of New Zealand's biggest finance companies is to cut its Australian staff from 44 to 32.

Hanover has been busy rebranding itself with an expensive advertising campaign as a warm , friendly, safe and solid industry player.

I'm still a little wary over this and other companies and their long term future in lending.

Even Hanover's size wont protect it from going under and there are rumours going around about its stability.

Even the State Kiwibank, the loss making division of NZ Post, has reportedly done 6 million taxpayer dollars in the Northern Rock collapse in the UK. One has to wonder why it was invested there.

Auckland-based investment firm Clegg & Co Finance has been placed in receivership this week. NZ $15 million of investors money is at risk.

On August 28 Brian Clegg, the director of Clegg and Co, wrote to investors written under a Classic Finance letterhead:

He writes about the publicity surrounding the collapse of finance companies, but believes his company is one of the "safe" ones, because it was "still operating profitably and successfully in accordance with our lending policy", and had kept out of high-risk lending.

In yet another collapse, investors in Five Star Consumer Finance heard today that they would expect to receive back 26c to 40c in the dollar on money invested but nothing forthcoming until December.


Ladies and Gents, please place your Bets

By Reuters | 05 Oct 2007 | 12:39 AM ET with comments by Share Investor

New Zealand casino operator Sky City Entertainment Group(SKC) sees the possibility of more than one bid, as a potential buyer looks at its books over a deal that could be worth around 1.9 billion.

Executive Director Elmar Toime told Reuters on Friday that the unnamed bidder's decision to conduct due diligence could spark other bids.

"The interest is there, whether the timing is right, or people have the wherewithal is the great unknown," Toime said.

Sky City, which has a virtual monopoly on casinos in New Zealand and also operates in Australia, has been actively seeking buyers since receiving the approach in late September.

Earlier on Friday, the Australian Financial Review newspaper said private equity group TPG was the favourite to take over Sky City after another private equity firm rumoured to be interested, New York-based Providence Equity Partners, did not make a bid.

Australian competitors of Sky include Tabcorp Holdings, Tattersalls and Publishing and Broadcasting Limited. Tabcorp and Tattersalls have said they are not interested.

Shares in Sky City last traded unchanged at NZ$5.36, having gained 9.2% so far this year, compared to a 5.5% gain for the benchmark top 50 index.

Toime would not give the identity of the unnamed bidder, but said it was due to complete its due diligence on Sky City by the end of October. He also declined to comment on the Australian 

Financial Review article

Private equity and Asian gambling operators have been touted as the most likely source of bids.

The sector in New Zealand is tightly regulated, and Toime said he was unsure if a bid by a foreign party to takeover Sky City would attract political or regulatory opposition.

Citigroup has said in a report that recent Australasian casino deals had an average enterprise value to earnings before interest, tax, depreciation and amortisation (EBITDA) ratio of around 10 times.

That would indicate a private equity bidder paying about NZ$5.60 a share for Sky, valuing the company at $1.9 billion, said Citigroup analyst Andy Bowley.

In May, Sky City unveiled a programme to cut NZ$33 million in costs over 18 months, and said it might sell its Adelaide casino in Australia and one in Christchurch, as well as its cinema business.

Toime said indicative bids for the cinema business were expected by the end of October.

As I have said before, I wouldn't be willing to sell my SKC holding for anything like $NZ 5.60.

It is worth a substantial premium for control and an offer of $5.60 would be quickly rejected by shareholders.


NZX Market Wrap

New Zealand shares dipped today in light trading at the end of a quiet week.

The NZSX-50 index, which yesterday lost 0.6 per cent, was down 15.93 points or 0.4 per cent at 4284.05. Turnover was an unimpressive $NZ109.7 million, and falls outnumbered rises 53 to 35.

Top stock Telecom(TEL) which returned $1.1 billion to shareholders today and cancelled one share in nine, fell a cent to $4.56.

Sky City(SKC) rose 3c to 539. The Australian Financial Review said today that private equity group TPG was in the lead to buy the casino operator after Providence Equity Partners disclosed that they hadn't made a bid.

Fletcher Building(FBU) fell 31c to $12.20, continuing its pattern of large moves in either direction.

Contact Energy(CEN) was steady at $9.35 after dipping yesterday due to indirect regulatory scares, Fisher & Paykel Healthcare(FPH) was up 7c at $3.34, F&P Appliances(FPA)rose 2c to $3.55, and Auckland International Airport(AIA) dropped 3c to $3.09.

Lines company Vector(VCT) was up a cent at 238, having lost 10c yesterday after the Commerce Commission said in a draft determination it would impose 15 per cent price reductions on its gas distribution business.

Among other stocks to go south today, The Warehouse(WHS) lost 7c to $5.37, Ebos (EBO)was down 11c at $5.04, Air New Zealand(AIR) lost 2c to $2.36, and Rakon(RAK) was down 4c at $4.80. Pumpkin Patch(PPL) fell 5c to $3.05 today and has continued to spiral downwards over the last few weeks due to US dollar weakness. Hallenstein Glasson(HLG) was down 6c at $4.50.

Guinness Peat Group(GPG) was up 2c to $1.95, Port of Tauranga(POT) gained a cent to $6.96.

Dual-listed stocks posted bigger gains, with ANZ up 40c at $35.90, Lion Nathan(LNN) up 20c at $10.95.

NZ Refining(NZR) was down 9c to $7.81 on lower oil prices and refining margins.

Disclosure  I own SKC and AIA shares






c Share Investor 2007

Tortoise vs Hare: Missed opportunities of a short term view

It never ceases to amaze me how truly stupid some people are.

I'm talking about those investors who continue to bag long-term investors like me who don't have instant spectacular profits and have a view of investing longer than the space between their brain and their finger poised on the sell key on their computer.

True, money can be made short term, I have done it myself, but real long-term returns come after investing for years, certainly longer than 5 but hopefully much longer.

This is also true of property, bank deposits and direct business owning investments.

These profits come from dividend returns and buying more of good companies you already own should their market prices dip from day to day.

It is impossible to compare the long vs short-term investing because, hello, the short term profit is apparent very quickly and you have to wait for the long!

Those nervous Nellie's who sell because a company has a bad year or think they can beat every other sucker who is after a fast buck are fooling themselves if they don't fully know what they are doing.

Making your online broker rich by constantly trading isn't going to make you wealthy either.

In my current portfolio of 12 stocks 3 of them are currently under some sort of merger or takeover process.

I mention this because I was advised by a gaggle of short-termers to dump stock in the very 3 stocks that could be bought because the stock prices of these companies were going down!

One mental defective who has badgered me over holding Sky City Entertainment (SKC) for some time and so much of it, emailed me again about a month or so ago and told me I was "overweight" with this stock. Well na, na, na, na, SKC is now being looked over by buyers.

The Warehouse(WHS) is looking like it is going to be bought by one of 3 possible buyers after a Commerce Commission hearing this month.

I was told to sell up and run for the hills when they had problems some years back.

WHS is now doing much better and should get a good price when sold, thank you very much.

Auckland International Airport (AIA) is also under the sellers hammer.

Being short-termers though they cant appreciate or lack the knowledge that one day someone else is going to be interested in what you have(unless it is actually a turkey of course) and to hold like I do opens one up to the possibilities of a buyer for your share of the business.

Holding long-term of course opens up the inevitability that your company will do well and reward you with increased dividends and a higher share price.

It is unlikely that those who were poking the borax at me and long termers like me will now be patting us on the back but now that some years have passed the returns are apparent and will only get better with time.

Sorry but I just had to gloat.

c Share Investor 2007

Burger Fuel slims down in value

A quick note to inform readers of the fortunes of the recently listed Gourmet burger maker, Burger Fuel(BFW)

Listed at NZ$1 a few months back the share price continues to climb, in a southerly direction today, to a new post float low of 60c.

No comment today by management that they will be giving away shares with every fat bastard burger meal but analysts have speculated that owners who bought in the float will be able to buy a fat bastard meal without getting change with their minimum purchase of 1000 shares should they redeem them at a store near them. A twist on Burger Fuel's IPO tag line "do you want shares with that?"

The offer would be tempting considering how delicious a fat bastard is but a share price recovery could be an appetizing reason to hold the bun and fries.

That recovery seems as likely to happen as OJ being indited for armed robbery though.

Sad to see this disaster continue to develop like a train wreck in slow motion but what is happening now is as obvious as Paris Hilton's dearth of intellectual banter.

I will keep you posted when the share price hits my target of sub 20c.




Burger Fuel Worldwide @ Share Investor


Burger Fuel 2010 Full Year Profit Analysis
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Burger Fuel Worldwide: Closer look at Company Accounts
Analysis - Burger Fuel Worldwide: FY profit to 31/03/09
Burger Fuel: Running on Empty
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Burger Fuel cooks up Dubai deal
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Marketing Burger Fuel's future
Pumpkin Patch VS Burger Fuel
Burger Fuel results and commentary

Discuss BFW @ Share Investor Forum - Register free





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