Long Term View: Sky Network Television Ltd

In this series of posts I am going to be looking at stocks listed on the NZX in relation to their returns to shareholders over the life of their listing -what shareholders would now see in their back pockets if they had invested in the company IPO.

The calculation of returns includes dividends and tax credits.

Sky Network Television Ltd [SKT.NZ] has been good to its shareholders in terms of returns since its IPO in November 1997 (see 1997 IPO prospectus) at $2.20 and its subsequent listing in December of that year and even better for its owner Craig Heatly when founded in 1990. The company structure was reorganized in 2005 (see 2005 Prospectus) and relisted at that stage under the present name. 2006 was the first year it began paying a dividend. For the purposes of this column the return to shareholders will be calculated from the 1997 IPO. 54c in net dividends (see chart above - only available from 2005) paid and tax credits at an average of 30% plus a cash payment of NZ$1.28 per share as part of the 2005 restructure, gives SKT a slightly more than 215% return (see chart below for the share price percentage gain against the average of all NZX indexes) over the 13 year listing (for shareholders in the original SKT listed in 1997), an approximate annual net return just over 16%.

This is approximately a 30% better return when compared to the average of all NZX indexes.



Long Term View Series

Auckland International Airport
Air New Zealand
AMP Ltd
Briscoe Group Ltd
Contact Energy Ltd
Delegats Group Ltd
EBOS Group Ltd
Fletcher Building Ltd
Fisher & Paykel Appliances
Fisher & Paykel Healthcare
Freightways Ltd
Goodman Fielder Ltd
Hellaby Holdings Ltd
Mainfreight Ltd
Metlifecare Ltd
New Zealand Refining Ltd
Port Of Tauranga Ltd
Pumpkin Patch Ltd
Restaurant Brands Ltd
Ryman Healthcare Ltd
Sanford Ltd
Sky City Entertainment Group Ltd
Sky Network Television Ltd
Telecom NZ Ltd
Telstra Corp Ltd
The Warehouse Group Ltd


Sky Network Television @ Share Investor

Watching Sky Television
Market Quickie: Sky TV Worth Watching

Discuss SKT @ Share Investor Forum

Download SKT Company Reports


Recommended Amazon Reading


The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition) by Benjamin Graham
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c Share Investor 2010

Book Review: Popes and Bankers

Popes and Bankers: A cultural History of Credit & Debt, From Aristotle to AIG by Jack Cashill, sounds like the most mind-numbingly boring title for a book that you ever heard of and you would presume that the content would fit the title and for a great number of chapters it does as you read it, for me anyway.

Having said that what was mind numbing for 25 chapters suddenly comes into its own in chapter 26 when Cashill writes about the "Greed Decade" of the 1980s (my vintage) and what I previously thought was boring and mind-numbing takes on a more poignant meaning and I am then riveted.

You know where Cashill is taking you - on a historical financial journey - when you discover in chapter two that he begins quoting passages from the bible that will have relevance to the present day financial crises but to me the historical part only piques my interest in retrospect -I will have to read the previous 25 chapters again.

The Jewish factor in the history of banking, finance and associated subjects is sometimes hard to read. It doesn't place them in a good historical or indeed present day context. I came off thinking, were/are they really that bad or were and are they just more entrepreneurial than every other culture or race and those outside the "Jewish Circle" and "outsiders" are jealous because they were not as hard working or intelligent enough to do the same.

The chapter that held the most interest for me is Chapter 27, "The Age of Innocence". In it Cashill describes the genesis of the present day financial collapse and President Bill Clinton's central hand in it - something I was already aware of and have been for years.

Clinton forced banks and then Fannie Mae and Freddie Mac to lend money to individuals (Americas race based form of lending was extended even further than it was in the 1970s) who were poor credit risks to buy houses in the 1990s and Alan Greenspan (another evil Jew?) provided the cheap interest rates through the Federal Reserve that led to the frenzy of house buying that then led to the bubble and you know the rest.

You don't read a lot about the Democrats, Bill Clinton and their historical central role in the 2008 financial collapse but Cashill gives you the facts and lets the reader join the dots.

Popes and Bankers is a book of its time and gives the history that puts today's financial troubles - and every other crash before it - in context and with Cashill's perspective on how that fits.

If you can get past the mundane first part of the book and get to the meat at the end the first part is going to make a lot more sense and you will want to read it again.


I received this book gratis from Stephanie Marshall at MNS Publicity and wish to thank her and her company.


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c Share Investor 2010

Ecoya IPO: A Closer Look

It is great to have promising new companies joining the NZX and while the IPO of Ecoya Ltd [ECO.NZ] is promising it is pitched at the riskier end of the investing scale.

The valuation of the company also looks overenthusiastic on the part of the current Ecoya Owners.

With pro-forma revenue of around NZ$2.5 million for the year ended 31 March 2010 and projected income of around $3.9 million for 2010 (of itself a massive leap in sales and not comparable with any prior year because of pro-forma figures) the valuation of the IPO is $13 million. This figure is comprised of 10 million ordinary shares at $1 and a facility to offer over-subscriptions of 3 million shares.

The valuation is then inflated by the existence of 33 million further shares held by the current owners who were allocated them through various trades and sales within the Ecoya company, associated directors, family trusts and "The Bakery", an investment vehicle through which Ecoya has been operated and funded pre-IPO and an an entity which will receive substantial annual payments from Ecoya for "management expertise". There was mention in the prospectus that the 33 million shares were issued to The Bakery for "shareholder advances" made to Ecoya over the last 2 years but it looks like the total allocation was made for an investment of around $4 million.

A NZ$46 million valuation for a company with slightly more than $3.9 million in current revenue (and a more than $2 million loss) is cheeky to say the least.

The proceeds from the IPO are going to be used to expand the business, hire more staff, pay off a $1 million loan , $ 1.2 million in IPO costs, and provide nearly $800,000 in interest-free loans for directors to buy shares in Ecoya. This is explained as an "incentive" for these directors - nice work if you can get it.

Ecoya is going to operate in a sector that has many competitors, large and small, start-ups and established players and therefore has little competitive advantage. Its place in the body and bath and home fragrance business is apparently going to achieve the prospectus' aggressive stated sales growth by branding and marketing the company in the high end of this sector.

Whether this is achievable is of course a moot point but this is not a long-term investment for those interested in the IPO. The company was founded and is to be floated with the express purpose of eventually finding a buyer down the track sometime.

The Ecoya model is based on the reasonably successful float and eventual sale of 42 Below to Bacardi several years ago.

This IPO is for investors with a high risk profile, along the lines of the aforementioned 42 Below and the company Burger Fuel Worldwide [BFW.NZ] whose IPO was in June 2007.

I will not be touching it but good luck to you if you do.


Ecoya @ Share Investor

Ecoya IPO lights only one end of the candle
Ecoya Prospectus Requires free registration
Ecoya.co.nz

Discuss ECO @ Share Investor Forum


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c Share Investor 2010

Long Term View: Pumpkin Patch Ltd

In this series of posts I am going to be looking at stocks listed on the NZX in relation to their returns to shareholders over the life of their listing -what shareholders would now see in their back pockets if they had invested in the company IPO.

The calculation of returns includes dividends and tax credits.

Pumpkin Patch Ltd [PPL.NZ] has been good to its shareholders in terms of returns since its IPO in 2004 (see 2004 IPO prospectus) at $1.25 and its subsequent listing in June of that year and even better for its owners when founded in 1990. 47c in net dividends (see chart above) paid and tax credits at an average of 30% , gives PPL a slightly more than 125% return (see chart below for the share price percentage gain against the average of all NZX indexes) over the 6 year listing, an approximate annual net return just over 20%.

This is approximately a 600% better return when compared to the average of all NZX indexes.



Disc I own PPL shares in the Share Investor Portfolio.


Long Term View SeriesAuckland International Airport
Air New Zealand
AMP Ltd
Briscoe Group Ltd
Contact Energy Ltd
Delegats Group Ltd
EBOS Group Ltd
Fletcher Building Ltd
Fisher & Paykel Appliances
Fisher & Paykel Healthcare
Freightways Ltd
Goodman Fielder Ltd
Hellaby Holdings Ltd
Mainfreight Ltd
Metlifecare Ltd
New Zealand Refining Ltd
Port Of Tauranga Ltd
Pumpkin Patch Ltd
Restaurant Brands Ltd
Ryman Healthcare Ltd
Sanford Ltd
Sky City Entertainment Group Ltd
Sky Network Television Ltd
Telecom NZ Ltd
Telstra Corp Ltd
The Warehouse Group Ltd

Pumpkin Patch @ Share Investor

Pumpkin Patch's North American Downsizing a Prudent move
Digging at Pumpkin's Profit
Long vs Short: Pumpkin Patch Ltd
Pumpkin Patch Buyback shows Confidence in the Future
Pumpkin Patch takes a hit
Pumpkin Patch ripe for the picking
What is Jan Cameron up to?
I'm buying
Why did you buy that Stock? [Pumpkin Patch]
Rod Duke's Pumpkin Patch gets bigger
Buyer of large piece of Pumpkin Patch a mystery
Pumpkin Patch a screaming buy
Broker downgrades of PPL lack long term vision
Pumpkin's expansion comes at a cost
Pumpkin Patch vs Burger Fuel
Pumpkin Patch profits flatten
New Zealand Retailers ring up costs not tills

Discuss PPL @ Share Investor Forum

Download PPL Company Reports




c Share Investor 2010