Stock of the Week - Reprise: Telecom NZ Ltd

I picked this stock on December 8 as Stock of the Week because of its $2.36 share price. Since then the stock lifted to just below $2.60 on January 10 (around 10% gain so well done if you bought at the lower price levels) before tracing back to finish at $2.31 on close of market last Friday. This is why I have picked the stock again

Telecom New Zealand Ltd [TEL.NZ] is a good stock to trade rather than hold long term (see chart below for comparison with NZX50 gross index) simply because the trading volume is consistently the highest on the NZX so a good stock to make a quick buck on.

I am not a chart man myself or a short term trader but if you look at the one year chart above there has been a good deal of money to be made in the earlier part of 2009, going from around 10c per share right up to 60c per share profit.

The share price reached an 10 month low of NZ$2.31 Friday and has traded like a roller coaster (hence the trade possibilities) from a year low reached in mid January 2009, so one could assume that indicators are showing that an opportunity exits for a good trade at these stock price levels and a good range for profit made considering its recent trading history.

Please beware though, although I am picking this stock today to give traders a heads up (seasoned traders of course will already know about this opportunity) given the present volatility in global stockmarkets and the negative attitude to stocks at present the patient bargain hunters could well get this stock at a lower price than $2.31 but having said that, it is close to its all time low of around $2.25 reached December 2008. (see chart below)

I don't like the long-term prospects for the company, it still has a defensive, reactive culture with employees who are badly trained and informed on what they are selling and poor service levels but it has a 10% plus gross dividend and it isn't going to go out of business any time soon.

Shorties will win here.

Good luck!

Telecom @ Share Investor

Revisiting Telecom
Getting cute and fluffy with Teresa Gattung
Telecom NZ Hangs up
Business Gobbledygook puts up barriers to communication
A Rare Breed
Telecom NZ facing a watershed period
Biology a major key in "glass ceiling" for women
Telecom rewards Gattung for mediocrity

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Stock of the Week Series

Reprise - Contact Energy Ltd
Restaurant Brands
NZ Refining
Ryman Healthcare
Mainfreight Ltd
Fisher & Paykel Healthcare
Xero Ltd
Auckland International Airport
Sky City Entertainment Group
Burger Fuel Worldwide
Michael Hill International
Contact Energy Ltd
The Warehouse Group
Fisher & Paykel Appliances
Telecom NZ

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Hallenstein Guidance not indicative of wider retail recovery

News that Hallenstein Glasson [HLG.NZ] has had a good half year to 24 Jan 2010 in a profit guidance to the stockmarket, shows how good management at that company have been to weather the economic downturn but that must be put in the context of a particularity bad half for the corresponding 2008 period and of course this is only a six month period - lets not count our board shorts until they are sold sort of thing. With current sales and profitability it is very likely that the company will beat 2009 full year profit of nearly NZ$13 million and that was the worst year since the 2003 full year result.

The most important part of the update is that margins for the company have improved, not easy to achieve during the seemingly endless summer sales of its competitors, and that stock levels have been managed to levels that seem to have avoided the big prices cuts of competitors who have stock to burn. Management have seen fit to boost the dividend by 40% to 14c, so they seem confident that the good news is set to continue.

A good definite cold Winter season will bode well for the coming 6 months of operation and it is this traditional slower sales season that will define a good or excellent outcome come full year reporting in August.

Retail over the last 2 years has been hard going in New Zealand and is not likely to recover to pre-recession spending for many years to come in my opinion.

Over the last 6 months many retailers have fallen by the wayside, Stax, Hill & Stewart have been but a few and some independent retailers have gone to the wall as well and we are likely to see more over 2010, so the Hallenstein profit update is by no means an indicator of a wider retail recovery.



Meanwhile the stockmarket has overreacted in a big way to this positive news (see chart above), marking up the stock price by 35c on close of trading last Friday and 15c at time of writing this post. This is more than a 10% gain in 2 days and not a wise purchase at these prices considering the uncertain overall retail outlook, even though the dividend makes the annual return at the current share price of close to 10% net.

Long term investors in this company would well be advised to wait for another opportunity, while shorts termers could see some upside in dividend stripping as we come closer to the dividend payout date.

Proceed with caution.


Disclosure: I own HLG shares in the Share Investor Portfolio


Hallenstein Glasson @ Share Investor

Stock of the Week: Hallenstein Glasson
Hallenstein Glasson Australian expansion needs expert execution
Why did you buy that stock? [Hallenstein Glasson]


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VIDEO - Simon Moutter on Australian Airport Purchase

Source: ONE News, Thursday January 28, 2010.

Auckland International Airport [AIA.NZ] CEO Simon Moutter discusses the airport's strategy following its $166 million purchase of a stake in two Australian airports and its $126 million share offer announced on Wednesday.

Please keep in mind that Simon was the chief operating officer at Telecom New Zealand [TEL.NZ] for 12 years before becoming AIA CEO, so he and his cohorts at Telecom have a track record of a massive failure in Australia already with Telecom's ill fated purchase of AAPT, which continues to have negative financial ramifications for the Telco and its shareholders to this day.

He keeps talking about the Australian Airport as a "step out" from the ports main asset, their Auckland Airport asset.

As an AIA shareholder I don't feel as positive as Simon about our purchase and feel a little nervous considering all the business jargon he is using to explain his reasons for the buy.

Just a footnote, the new share issue at NZ $ 1.65 could provide the opportunity for new AIA investors to get in cheaper than the closing price last Tuesday of $1.92 as the share price finds a new level post capital raising.

Related links

Download the AIA offer prospectus and associated documents here.


Auckland International Airport @ Share Investor

Auckland Airport Capital Raising a fair call
Auckland International Airport lands Australian Ports
What Infratil sale of Auckland Airport stake means...
Is another Auckland Airport bid likely under a business friendly Government?
Latest Airport coverage
Cullen's move on Auckland Airport has far reaching effects
Cullen's move on AIA tax plan Anti-Business
AIA profit stays grounded
Softening opposition to CPPIB bid for AIA
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Second bite at AIA by CPPIB might just fly
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AIA incentive scheme must fly out the window
Government market manipulation over AIA/DAE deal
DAE move on AIA: Will it fly?

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c Share Investor 2010

Auckland Airport Capital Raising a fair call

The announcement today that Auckland International Airport [AIA.NZ] is going to raise NZ$126.4 million from shareholders to pay for two hick town airports in the middle of nowhere in Australia should be no surprise to AIA shareholders.


AIA defends its Australian airport purchase

The airport borrowed heavily to fund the purchase and now shareholders must take the brunt of what I see as a poor decision and bail out AIA directors who apparently have money to burn or risk having their share holding diluted - boy I am going to have to eat dirt if this buy is a success.

Anyway, bad business decisions aside, the structure of the capital raising doesn't look half bad.

Allocations of new shares will be attributed on the basis of one new share for every 16 shares held and no extra shares will be given to institutions or any medium sized shareholder will be scaled down their allocation. Every shareholder big or small will be treated in the same manner and for that management should be handed a bunch of fresh pansies. This approach contrasts the many capital raisings of 2009 which favoured smaller and very large shareholders but largely ignored medium sized players like myself who had no choice but to have their shareholdings diluted because of an inability to get a proportional allocation of new shares.

Incidentally AIA is a small shareholding in the Share Investor Portfolio and at 5000 shares my entitlement will come to 312 shares, of which I will take up in full. At NZ$1.65 per share the cost to me will be just over 500 bucks.


The only gripe that I have (I am only happy when I am moaning) is at $1.65 it is a pretty hefty discount to Tuesday's closing price of $1.92.

The capital raising will be fully subscribed.


Related links

Download the AIA offer prospectus and associated documents here.


Auckland International Airport @ Share Investor

Auckland International Airport lands Australian Ports
What Infratil sale of Auckland Airport stake means...
Is another Auckland Airport bid likely under a business friendly Government?
Latest Airport coverage
Cullen's move on Auckland Airport has far reaching effects
Cullen's move on AIA tax plan Anti-Business
AIA profit stays grounded
Softening opposition to CPPIB bid for AIA
Directors of AIA bribe brokers not to sell
What is Auckland Airport worth to you?
Second bite at AIA by CPPIB might just fly
AIA new directors must focus on shareholders
Auckland Airport merger deal nosedives
The Canadians have landed
AIA incentive scheme must fly out the window
Government market manipulation over AIA/DAE deal
DAE move on AIA: Will it fly?

Discuss this Stock @ Share Investor Forum - Register free

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c Share Investor 2010