Share Investor's Friday Free for all

Airport Merger with DAE finally crashes

The merger of Auckland International Airport(AIA) with Dubai Aeronautical Enterprise (DAE) has hit crosswinds with DAE finally realising that their deal to control around 60% of the company looking like it is about to crash and burn.

DAE said legal action filed by Air New Zealand seeking a judicial review of AIA's landing charges constituted a "prescribed occurrence" under the terms of the merger agreement.

DAE have stated if the parties were unable to come to an agreement by the end of five working days of mutual talks, either party could terminate the merger agreement.

As many, including myself have commented DAE look likely to fly the coop.

There are other prospective buyers of AIA in the wings and there is a possibility that a Canadian Pension Plan maybe ready to launch a bid.

Shares ended down to NZ$3.02 on the news today.

Don't leave town or sell your shares yet.

Finance Companies Folding

Finance companies continued to collapse with gay abandon this week. Five Star Consumer Finance disappeared with $80 Million and today a subsidiary of Dorchester Finance was wound up by Dorchester directors.

Dorchester claim the parent company isn't in trouble but we have heard that before haven't we.

The Securities Commission has asked all finance companies to respond to them with a state of their affairs. 18 stragglers were the last to report at 6.30pm today but we have yet to hear the health or otherwise of these companies. It looks likely that we will hear of others going south next week.

Micheal Cullen, the Labour Minister of Finance, has come out to reassure the public that the Finance company mess hasn't spread to the banking sector. His comments are far from reassuring. They scare me.

Two Titans bow out

Sir James Fletcher , the driver behind the incredible growth of Fletcher Challenge from the 1940s-1980s bowed out this week.

Born into privilege and wealth James Fletcher took the reins of his fathers building company in the mid 1940s and turned it into what was to become one of New Zealands largest companies.

His management style , capacity for hard work and ability to communicate with and respect people are aspects of upper management that are sadly lacking, with a few notable exceptions, in this country today.

Nick Nobilo, the founder and head of Nobilo Wines will be remembered for introducing New Zealanders to wine and also for transforming large areas of West Auckland into quality Vineyards where exports of his product have now become commonplace.

Another hard grafter, this immigrant had a vision, had a backbone and got down and let his hands get dirty. Sadly these traits seem to be missing from many of us today.

Burger Fuel share price rises

Josef Roberts explained to me this week that his companies share price was dropping because of poor liquidity and negative world markets. The price was trading at .65c at the time. Burger Fuel shares were up to 70c yesterday and closed today at the same price. Go figure.

Wasted Opportunities

Transpacific Industries, the Australian parent of Waste Management, reported a 117 per cent rise in net profit on the back of a year of aggressive expansion.

Transpacific, an Australian company, bought Waste Management a few years back at what alot of market commentators and directors of Waste Management said was a good price for shareholders. I was one shareholder who thought the price paid was poor and clearly I didn't want to sell.

My stance was vindicated with today's Transpacific announcement.

A shame my detractors seem silent now and so are the former directors of Waste Management.

Short term thinkers can only see just that. Short term.

NZX finishes up

The benchmark NZSX-50 index closed up 0.3 per cent, or 11.37 points, at 4118.97.

Contact Energy(CEN) was down 12c at 915 after swinging very wildly this week and reporting a good profit. Fisher & Paykel Healthcare(FPH) was down 2c at 338, F&P(FPA)Sky Television TV(SKT) shed 3c to 558.

Port of Tauranga (POT) lost some of yesterday's gains to close down 10c at 700 after reporting a stellar profit increase yesterday, Air New Zealand(AIR) rose 5c to 206, Freightways(FRE)was up 5c at 395, and Mainfreight(MFT) lost 2c to 707.

Sanford (SAN) was up 15c at 455, Tower(TWR) rose 7c to 231, Rakon(RAK) was up 7c at 489, and The Warehouse(WHS) rose 3c to 564.

ANZ shed 60c to 3350, Westpac was up 45c at 3145, AMP gained 14c to 1215, Lion Nathan(LNN) rose 5c to 1055, and Goodman Fielder(GFF) was up 10c at 300 after earlier this week reporting a solid profit result. It is at near historical highs.

Till next week.

*Disclosure: I own AIA, FRE, FPH,GFF, MFT, SKC, Shares

c Share Investor 2007

IPO Quality indicative of poor economy

The poor number of IPO's listed on the New Zealand Stock Exchange in 2007 reflect the lack of confidence that the business sector and therefore market investors have in the NZ economy.

This is a good indicator of where our economy might be going, considering share markets usually anticipate real economic factors months before they happen.

Michael Cullen's tax, spend and welfare splurge has finally come home to roost. His huge taxpayer funded surplus has meant Kiwis have used credit to buy consumer goods instead of the cash that is theirs and the Labour Government's contribution to the current finance company mess must be stated clearly.

The quality of some IPO's listed this year have left investors a little bit cold. Xero [XRO.NZ] the software company listed at over NZ$1 and now languish at around 70c, Burger Fuel International [BFW.NZ] listed at $1 and are currently getting grilled at .70c (up 5c today!!!) Pike River Coal [PRC.NZ] , the biggest IPO this year started trading at $1 and is now selling at just above 80c.

We have had several prospective IPOs canceled this year because of investor nervousness. One of them, AMP's listing of their Summerset Retirement Village unit has been canned but ING's Retirement unit will still be listed later this year, even though some of its directors have been involved in major business failures and losses for investors in the past.

The New Zealand share market is lacking a big IPO that would possibly kick off a new wave of investing. One remote possibility would be this countries biggest company, the Dairy giant Fonterra. There has been talk around the traps from time to time about this happening but nothing concrete or with any substance as yet.

It would make perfect sense to list Fonterra, especially now as the Dairy business is doing historically well, more investment is needed to increase capacity and listing would allow farmers to free up capital more easily than currently and using the proceeds to reinvest in their business, pay back debt or buy that new Holden or Ford.

IPO's can be a good indicator of how well the business community sees the economy going. The dearth of good ones in 2007 indicate that the brakes have already been applied to the economy.

Lets hope the impact isn't too hard.

The resumption of some good IPO's will be one indicator of a turnaround.

Related Amazon Reading


IPOs for Everyone: The 12 Secrets of Investing in IPOs by Linda R. Killian
Buy new: $33.06 / Used from: $4.37
Usually ships in 24 hours


c Share Investor 2007

Business Gobbledygook puts up Barriers to Communication

At the end of the day, when all is said and done, with all things considered, in the fullness of time and taking the long-term view-urrrggghh-all we want is a straight answer in the simplest way possible.

Nowhere is this more appropriate than in the business world. While speaking to customers, talking to employees, and communicating a message to shareholders. Your message should be clear, precise, unambiguous and be free of unnecessary verbosity and complicated language and "corporate-speak".

My piece today was inspired by two news items of late and they rekindled this subject which has been in the back of my mind for years. The first situation was some of the language used by Telecom New Zealand(TEL) to explain to customers why they had mismanaged a software upgrade to their Xtra Internet unit and the other news story was about Sky City Entertainment's(SKC) explanation of areas of last weeks complicated 2007 FY profit announcement and the confusion that it caused amongst analysts.

In the first instance with Xtra, a spokesman explained that customers were not let down or disappointed with the break in "service" but were instead suffering from "negative surprise". Callers to the Xtra helpline were told in clipped tones when they got testy with Telecom employees over the wait for resumed service that they were experiencing "service disconnection anxiety".

What this kind of language does of course, is to first of all fudge the real issue and spin the heat off the main protagonist, Telecom, and make the customer feel guilty, secondly it has the added bonus of frustrating the customer so much that he gives up on the reason for his call in the first place. This is exactly why this process is used of course because the offending company really doesn't care that much at all about your problem but cant really come out and say that straight.

Telecom are well known for using this kind of spin to run their business, within and outside the company when communicating with customers. For a communications company Telecom NZ don't communicate well at all and indeed there always seems to be a "negative surprise" waiting at the end of the line when one calls the 123 Help line.

Elmar Toime had to spin for his life today to explain issues surrounding last weeks Sky City Entertainment profit announcement:

"The information that was available when I stepped in as manager wasn't enough to assign budgets to individual responsibility areas of the business."

Translation: I didnt do my homework properly.

The SKC profit announcement contained such gems as this one:

"A strategic development plan has been completed for SKYCITY Adelaide which has verified the value of this business and established the path for delivering incremental shareholder value from this property."Huh? we really mean we will try and increase profit but it is going to take a long time and may never happen under my watch.

Don't laugh:

"...a peer review of the Auckland gaming performance and strategy has been undertaken and plans put in place to actively address opportunities..."Does Management usually inactively "address opportunities" ?The word incremental seems to have been carefully chosen because here it is again:

“Most importantly, we are now positioned to ensure that this delivers incremental value to our shareholders and a sustainable future for our people."

Websters dictionary meaning: A slight, often barely perceptible augmentation. In conjunction with the management speak word of the year , the meaningless "sustainable," this sentence really means that profit growth will be small and management don't really know what outcome that will have for the business.

I could trudge through this announcement and pick up more unnecessary management bullshit but even I have a life to lead. You get my point though don't you. Why jazz up communications to shareholders with hackneyed management spin and written clutter?

To be fair to Toime and his company though, this sort of language and company announcement is not rare in New Zealand or overseas. Some companies are much worse and some are better. Mainfreight(MFT), a listed New Zealand trucking company is one enterprise that doesn't indulge in this stuff and I am a well informed and happy shareholder as a result.

When a business, profession or individual chooses to communicate to others in an unnecessary way, as I have explained above, one has to suspect the motives of the communicator. Their verbosity and over complication is probably hiding something. When communicating to shareholders it could be glossing over profits or company prospects, in the case of Telecom ,spin and complication is used to frustrate or fob off customers because of shortcomings in the business structure and with professions such as lawyers, doctors and real estate agents complicated communication is often used to exclude others for economic reasons. If one cannot understand what others are saying someone usually gets paid to decipher this information and it is usually you that pays!!

Politicians are masters at it and we all know they have to be because the skeletons they are hiding require a fair degree of verbal and written dexterity.

In business though, it is most important to "cut the crap" and get to the point quickly and in the most efficient way one can.

In my opinion one can tell the quality of a business by the way they communicate to shareholders, customers and employees. If the communication is fast and efficient the company is likely to be run in the same way.

Of course the opposite is also true.



Related Share Investor Reading


A Rare Breed
Mainfreight keeps on truckin

Disclosure: I am a shareholder in SKC and MFT




c Share Investor 2007

Mike Moore: Return to Muldoonism?

Poor Mike Moore still has most of his lefty ideals intact but at Political Animal we agree that his sentiments below regarding the Prime Minister Helen Clark and her girlfriends in the Labour cabinet slagging off John Key without any substance or truth are spot on.

I made the comment about Clark and comparing her tenure at the helm of New Zealand with Muldoons reign of terror in the 70s-80s.

Seems the similarities of both Governments are apparent to more than just moi.

Clark usually has responses to such outbursts in the media but has refused to comment on this matter.

In combination with her rorting in the polls 2 days ago the Prime Ministers silence has been deafening.





Mike Moore Wednesday 29 2007

In the 1980s, a cruelly funny cartoon appeared of David Lange. It had four panels - the first displayed a smiling picture of David, then slowly, over the next two panels, David's face morphed into a picture of Roger Douglas.

I'm expecting a cartoon of Helen Clark to appear, morphing into an angry Robert Muldoon. He used SIS files on opponents, perfected the nasty technique of personally destroying opponents, intimidating the media (not that you have to muzzle sheep), and used the levers of Government to create stunts, diversions, and buy votes in marginal seats.

Now there's menacing changes to the electoral law to outlaw legitimate funding that could be considered political in an election year. I will publish a book next year, will that be covered? Absent is a necessary rule to disclose who's donating to political parties. Why?

The attacks on possible, probable enemies of the state has even gone overseas to attacks on Australian Foreign Minister Downer for speaking at a National Party conference, when Labour regularly has overseas politicians speak to the troops. The media breathlessly talked of a "secret" meeting.

Downer said he thought it more appropriate to have a private family Tory meeting. He said he advised the New Zealand Government, no big deal, but this was denied. Who do you believe?

Now Labour, as predicted, has tried to put a blowtorch down National leader John Key's 'Y' fronts. Calling him a "rich guy" coming from people, many of whom went to exclusive schools, enjoyed a comfortable upbringing, and didn't even have to work during university holidays is a bit much.

Even the normally sensible Phil Goff has joined the chorus, hoping to ingratiate himself with left-wing MPs for later. Aspirational politics, an inclusive economy and social mobility was once Labour's strongest economic and social policy credential.

This politics of personal destruction is fearful. Why is Labour so good at it? Because we practise on each other.

Helen Clark is superb at it, she's destroyed more National leaders than any other Labour leader. Come to think about it, she's dispatched more Labour leaders than anyone else too. Now Labour is planning a major re-shuffle. It's needed.

We have the largest Cabinet in the Western world per head of population. Killing the wounded is the hardest job in politics, particularly if they have been loyal subjects.

They are bled slowly, swirling rumours appear, planted from Beehive sources, then, when the victim is anaemic, too exhausted to fight back, someone is dispatched to put the pillow over their head. If Helen can replace half of her Cabinet and keep the show together, it will mark her out as one of the greatest political managers ever.

It's very hard. Muldoon's circle of close mates got smaller and weaker as he got older too. Exactly what does the "consort" Judith Tizard and the legion of Ministers outside Cabinet actually do?

Perhaps it's good they don't do much. They manage the remarkable feat of being self-important, expensive, trivial and irrelevant at the same time.

John Key just has to keep his head down, and is happy to campaign as "Labour with tax cuts", sort of like playing a vacuous political air guitar. As for Winston Peters, our Foreign Minister still seems to hate foreigners.

He can't speak about hospitals without talking of Third World diseases and Third World people, the Central Bank policies are about, he claims, promoting speculation and money-lenders (code word), Dubai investment in New Zealand is naturally bad, but at least the anti-Asian and Muslim stuff has been shelved for a while.

Rodney Hide seems to have rejected capitalism for narcissism and is destined to be a talk-back celebrity. The Greens and the Maori Party have locked up their small market niche and go unquestioned by the media.

The major political parties don't scrutinise them or test them in Parliament because they will decide who forms the Government. Labour could still form the next Government, even if we get fewer votes than National. Under MMP, a silver and a bronze trumps a gold medal.

Meanwhile, New Zealand continues to slip down the OECD ladder of successful economies. World growth is robust at 5 per cent, Australia will grow at 4 per cent. New Zealand half that. Labour productivity was close to zero in the last year, down from 2.7 per cent, 1992-2000. New Zealand's tax ratio is 43 per cent of gross domestic product, Australia's 35 per cent. Australia's spending on a ratio of GDP is 34 per cent, New Zealand's 41 per cent (close to France).

These are huge differences, and getting bigger. That's why an Australian will earn 30 per cent more than a Kiwi, and 500 Kiwis leave each week for better opportunities.

The Government's response? Run a media campaign in Australia telling people to come home!

* Mike Moore is a former Labour Prime Minister

c NZ Herald & Darren Rickard 2007