Sky City Cinemas no Blockbuster

Sky City Entertainment's share price took a 9c drop today on news that it was writing
down its cinema division by NZ$ 60 Million.



The announcement today of a write down in the value of Sky City Entertainment Group [SKC.NZ] division has been a long time coming and is probably the only positive decision that management have made in a long while.

The loss has finally been realised-a NZ$60 million write down- and an extremely bad decision years back to buy this pig of an asset for an over inflated sum has been dealt with. A shame though that the only casualty of that bad decision was Evan Davies, the CEO who was sacked last year. Members of current management clearly need to fall on their swords over this latest waste of shareholder cash.

That ain't going to happen in this day and age of buck passing though.

I have been bitching and moaning about the cinema business since it was bought many years ago.

I loathe the cinema business, long-term it doesn't make money and is subject to continual capital expenditure due to changing technology and fierce competition, from not only other cinema operators, in a saturated multi-screen race to build more seats, but from many other sectors of the entertainment industry.

Those faceless suits at Sky City should have known these facts and run kicking and screaming along with shareholders checkbooks, from any such wrong headed deal.

The cinema business must be sold, it has over 100 screens and has 10 screens in limbo at the moment at the new Albany Westfield Mall, pending a possible sale.

The write down today values the cinema assets at around $50 million but it is highly unlikely that it is worth that much to a potential suitor.

There has been talk of Hoyts buying the cinema company but I don't think that could possibly happen given the dominance it would give a combined company in the current market.

It is more likely a company like Berkely or Reading Cinemas would be a better fit given their relatively small sizes.

Sky City have had a turbulent preceding 12 months and still have a number of issues to deal with in the future. The company have just started proceedings against the South Australian State Government, in tandem with the TAB, because the State has reneged on a contractually agreed limit in charges and taxes when they sold the Adelaide Casino to Sky back in 2000.

The 2008 General Election in New Zealand is also likely to be of great interest to shareholders as well, If the Labour/Green nanny statists get re-elected, further regulation against perceived "harm" to casino customers and higher gaming taxes are a likely scenario.

All this turbulence makes the job of new CEO Nigel Morrison all the more challenging when he takes up his position at the end of March 2008.

The half year profit is announced on 25 Feb and will include the cinema write down in its figures. Dividends will not be affected.

Sky City Entertainment shares were down more than 2% today (FEB 12, 5.00pm NZ time) on low volume.


Disclosure: I own SKC shares in the Share Investor Portfolio

Sky City @ Share Investor

Sky City Entertainment Group 2010 Interim Profit Review
Are Insiders selling Sky City Stock?
Sky City Entertainment 2009 Interim Result Preamble
2008 Sky City profit analysis
Sky City share offer confusing and unfair for smaller shareholders
Sky City Entertainment 2008 Full Year profit results , NZX release, 2008 full year presentation, result briefing webcast, financial statements
Sky City 2008 profit preamble
Sky City outlines a clear future plan
As recession bites Sky City bites back
Sky City Assets: Buy, sell and hold
Why did you buy that stock? [Sky City Entertainment]
Sky City Share Volumes set tongues wagging
Sky City half year exceptional on cost cutting
NZX Press release: Sky City profit to HY end Dec 2007
Sky City Cinemas no Blockbuster
Sky City Entertainment share price drop
New Broom set to sweep
Sky City Management: Blind, deaf and numb
Sky City sale could be off
Opposition to takeover
Premium for control
Sky City receives takeover bid
Sky City Casino Full Year Profit to June 30 2007
Setting the record straight
Sky City CEO resigns
Sky City Casino: Under performing
Sky City Casino 2007 HY Profit(analysis)
Sky City Casino 2007 HY Profit

Discuss SKC @ Share Investor Forum
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c Share Investor 2008

Labour buys Tim Shadbolt's silence

c Blanch 2008


News out today that the Labour Party have caved in to the protestations of Tim Shadbolt over his promise to campaign against the anti democratic Electoral Finance Act should be no surprise to those of us with morals and standards.

Labour cut funding to various Southland education facilities because they didn't think anyone would notice or care.

Shadbolt, a former Auckland University colleague of a large number the current crop of Labour Socialists, including Aunt Helen herself, would have focused attention on the controversial Electoral Finance Act by publicly protesting, up until the general election, towards the end of 2008, so the fuse had to be short circuited and Labour backtracked by reinstating some of the funding. Something that Labour said at the time wouldn't happen.

It is a clear message to voters that the Labour Party are highly embarrassed over the Electoral Finance Act and will do anything to stifle the much warranted negative publicity over its introduction and inception on Jan 1 2008. An act that has already had a number of causalities, most notably the young man, Andrew Moore, who was threatened by the Electoral Commission to effectively close his website down because it criticised the Government-something those that voted for the Bill also said would never happen.


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C Political Animal 2008

Freightways packages up a good result

Freightways business diversification
should keep them in good stead for
the future.


The announcement today of Freightways Ltd(FRE) and that its profit is up by 2% should be welcome news to shareholders.

The local economy has been stagnant for some time now and severe pressure from increased business costs has had a clear impact on the bottom line, considering revenue was up 12% on last year.

Labour, fuel, electricity and other state imposed business taxes and costs have dragged the results down and will continue to do so until company taxes are slashed and the emphasis on new taxes, like carbon related "green" taxes have been removed from the lexicon of daily life.

The future will be tough but an effort a few years back to diversify revenue streams and invest in a broader range of businesses that Freightways owns has seemed to have paid off.

Document management business in Australia and New Zealand has offset the less rapidly growing traditional areas of delivery services throughout NZ.

Mr Market today didn't like what it heard and pushed the share price down 1.25% to NZ$3.15 but in my humble opinion, the market should be well pleased that the company managed to deliver a solid, but not spectacular result, considering the economic stress kiwi citizens are clearly under.

Management deserve a good 8.5 out of 10 for this last half year.

Disclosure I own FRE shares

Freightways @ Share Investor

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

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c Share Investor 2008

Bruce Sheppard: When the going gets tough...

If my readers haven't already read Bruce Sheppard's Stirring the Pot Blog his latest post is right on the money, so I have added to my blog below. It is essential reading and you need a gander at it before you invest in the sharemarket, or any business for that matter.

The focus by an investor on the quality of management, before anything else, is one of the main criteria for picking a good company to invest in.

If you have good management , it will follow that the business that they management will probably be a good investment.

It is at these times of market stress and economic downturns that good management can get through the tough times.

Bruce Sheppard in Stirring the Pot | 4:03 pm 8 February 2008

When investing in a share you are investing in a business. A business is an opportunity run by management with your capital.

But how do you judge the quality of management? It is easy to judge the numbers but hard to judge the resilience, integrity and determination of people, particularly if you never eye ball them.

You have one opportunity a year to do this and it is the annual general meeting. Once the prepared speeches are done, the response of management to shareholder questioning gives a wonderful opportunity for insight into these people who have the responsibility for the prudent and rewarding use of your capital.

Over the next 18 months, shareholders are likely to see reversals in profit performance and it may even flow though into reduced dividends. Mr Market, as imperfect as ever, is anticipating this and as a result share prices have fallen.

But the real entertainment, and the chance for insight, will come as our managers seek to explain the situation to shareholders.

The explanations will fall into these broad categories:

1. “The profit is down, and we know the mistakes we made. We have changed the way we do things to evolve our practices to adjust to the changed environment.”

2. Some will go a step further and analyse the mistake for the benefit of shareholders and will also advise the lessons learned.

3. A few, but not many, might actually admit that conditions are difficult but may still report improved earnings. Of this group, some might admit that it was luck more than good management. Others might share a little of the decisions they made to make their own luck, of course taking care not to give away operational secrets.

4. Some will seek to blame others for the earnings reversal. “It is all the fault of the economy and in due course earnings will improve.”

Those that adopt the fourth approach are useless tossers who should not be left in charge of running a bath. Their management style is reactive, they take what is given to them and if you are lucky make the best of it. They don’t try to alter their environment and or even anticipate it.

Businesses run by such people will never perform long term without luck, and luck favours those who make it. Hopefully the board will recognise this and move the management team on, replacing it with a more dynamic approach. But generally boards recruit people that are similar in temperament to them so don’t hold your breath waiting for the board to react.

Generally “blame others” management only gets moved on when the business is at or near the precipice. Such managers should not be provided by shareholders with the custody of the wealth of others, so sell. A difficult business with an inspirational manger will outperform a business with favourable economics and a tosser running it.

Those that prosper in recession, and are self aware enough to admit when it is luck, give shareholders the confidence to know that they will in future make their own luck. These are safe guys to back.

Those that are honest enough to admit their mistakes and tell you what they have learned are okay too. They are learning, and honest. Honesty is a really good start. If, however, as the years unfold they descend into a pattern of making new and distressing mistakes each year, they are honest fools and should also be avoided.

So in picking a recession proof investment, look for simple businesses run by honest, hard working people who over time will make their own luck and beat the market.

We have 160 listed companies, and not many fall into this category. And in reality you won’t know which do unless you analysis the history, review critically the prospects and understand the underlying strength of management. Sounds like a lot of work. Well it is to a point. But if you keep your focus and apply the work to five or 10 good businesses, and don’t waste your time on trying to adopt portfolio theory with hundreds of separate investments, it is not too hard, and what’s more it is fun.

In the words of Warren Buffett: “Modern finance theory teaches students to do average” with my addendum “less costs.” Just as you don’t want your mangers to do average, why would you aspire to it?

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C Share Investor & Stuff.co.nz 20o8

Telecom New Zealand facing a watershed period

Long term, the future of Telecom maybe uncertain but the share price has been
on a downwards trend for some time. The slight upticks in share price and reasonable
volumes make this share one for short term traders.


Long suffering shareholders of Telecom New Zealand [TEL.NZ] for a reversal of fortune for the company may have a long wait on their hands.

Friday's announcement that 2nd quarter profit was down 33% sent the share price down NZ 15c in trading, to close at $3.95 and also sent commentators into a flap about the future of the company.

Profit would have been higher if not for the sale of the lucrative Yellow Pages unit towards the end of 2007, and the continued poor showing of their Australian arm, with a drag on earnings in that competitive market.

I have been down on Telecom for many years for many different reasons and it is easy to knock one of the countries largest companies, if only for its extremely poor customer service, something it shares with the likes of alot of monopolies/duopoly's, like Vodafone NZ and the majority of the countries banks.

Telecom's problems though are multiple, deep set and are entrenched in company culture. From the top management, right down to the help desk in the Philippines or whatever the latest third world country has been used to cut costs.



Telecom must refocus their efforts on their
customers and spending more to update aging
technology to have good long-term prospects.

CEO Dr Paul Reynolds, said there had not been enough focus on customers.

"Telecom had made decisions about leadership, structure and focus that would help secure future momentum, based on a focus on customers".

This has been said before, Reynolds has been at the helm for 6 months but there is not yet evidence that the above has been acted upon.

Management, especially middle to lower supervisory level, still have an attitude that Telecom is a virtual monopoly, you know it, they know it and you can go elsewhere if you are looking to get decent customer service.

One specific which I encountered the other week, piling on illegal service charges(they call it a "convenience charge") for customers who pay by credit card and advising customers it is the credit card company charging it is certainly not a new and innovative way to win friends and influence customers. In a positive way anyway.

Other providers are taking customers off them though, as technology has allowed and Government imposed regulation bites, with the forced split of the group into 3 parts at the end of March.

The continuation of the "monopoly attitude" in the face of increasing competition is Telecom's biggest challenge. In the past that was great for shareholders and bad for customers, increasingly things have become bad for both parties.

The past has been filled with exceptional dividends paid out to shareholders, that was good for the first 8 or nine years, as costs were cut, from its initial inception as a government department, overloaded with excess staff, but as the last of the fat was trimmed from the company in the early 2000s the need for reinvestment of profits became even more apparent than it was years before.

Telecom's investment in their infrastructure is at least 10 years behind some of the international telcos. A plethora of 19 century copper wire is Telecom's answer to the road that 21st century technology and content must travel on and that road long ago gridlocked, to a point where we now have internet speeds at the lowest end of the world scale for a very high cost.

Like allot of investors in the stockmarket, management at Telecom have been shortsighted in their business outlook.

Short term profits have been at the expense of the long term future of the company and billions of dollars must now be invested to turn that shortsightedness around.

Hard decisions have to be made and the company now finds itself in a bit of a watershed period.

It must focus on their customers first and provide them with the best in service and the "new" technology that must come with that service and eradicate the culture that seems to still have them in a battle with those that wish to do business with them.

There must be no shades of gray towards a new long term thinking Telecom, the change must be bold, brash and black and white. Reynolds words "...based on a focus on customers..." must be the core principle on which the company is based and it must be more than words, those words must be acted upon at every opportunity.

If they bite the bullet and do those things, the short term will clearly be difficult but longer term things will get better.

If management decide that the status quo is the way to go or fail to drive a new focused Telecom hard enough, then the long-term future for Telecom New Zealand looks bleak at best.


Telecom NZ @ Share Investor

Telecom Share Price Limbos but has it jumped the Shark?
Telecom NZ: Saint Gattung gets her Ya Ya's out
Telecom NZ: Bye Bye Paul Reynolds
Long Term View: Telecom NZ Ltd
Stock of the Week: Telecom Ltd
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

Download every available TEL Annual Report Free


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c Share Investor 2008, 2010

Court of Appeal delays Warehouse bid

Contrary to a comment made earlier last week when High Court Judge Jill Mallon had said an appeal could be made by the Commerce Commission to overrule her decision in November 2007, that Foodstuffs and Woolworths Australia [WOW.ASX] could make a bid for The Warehouse Group [WHS.NZ] and it should be under the condition that the case was heard urgently, the Court of Appeal has ruled that it would hear an appeal on April 29.

The latter court date will be after a court imposed ban on bidding for the Warehouse ends on February 29.

It is difficult to see a bid be made by either Foodstuffs or Woolworths after the bid deadline but it has been an unusual tussle so far and stranger things have happened in other takeover processes.

It would be presumptuous for any of the two possible bidders to show their hand early though and clearly wouldn't look good for their defence in the Court of Appeal case because the last thing the defence needs is a pissed off learned judge because his authority has been undermined in his court.

What is clear though, is that we are unlikely to get a result either way anytime soon.

If either side doesn't get their desired result in April they are likely to have another go at a case packed Supreme Court in Wellington.


Disclosure: I own WHS shares


The Warehouse Group @ Share Investor

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The case for The Warehouse without a buyer
Foodstuffs take their foot off the gas
Woolworths seek leave to appeal to Supreme Court
Warehouse appeal decision imminent
Warehouse decision a loser for all
Warehouse Court of appeal decision in Commerce Commission's favour
MARKETWATCH: The Warehouse
The Warehouse takeover saga continues
Why did you buy that stock? [The Warehouse]
History of Warehouse takeover players suggest a long winding road
Court of Appeal delays Warehouse bid
The Warehouse set for turbulent 2008
The Warehouse Court of Appeal case lay in "Extras" hands
WHS Court of Appeal case could be dismissed next week
Commerce Commission impacts on the Warehouse bottom line
The Warehouse in play
Outcomes of Commerce Commission decision
The fight for control begins soon

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c Share Investor 2008 & 2009

Michael Cullen's history on tax cuts comes back to haunt him

Michael Cullen's education as a Dr of History clearly lacked the basic tenant that as history is more often than not written down for posterity it can often come back to haunt the history maker:

"We just don't believe in tax cuts - it's against our fundamental philosophy - after all we are socialists and proud of it".A hardly stunning admission by Michael Cullen a while back but hard to fathom considering his announcement of personal tax cuts in an address to the Auckland Chamber of Commerce today.

Cullen trumpeted 4 billion dollars of tax cuts annually and gave examples as: " working for families, business tax cuts and Kiwisaver.

Of course Working for Families is not a tax cut but welfare, Kiwisaver isn't a tax cut either and business tax cuts were long ago gobbled up by Labour Government imposed business taxes like increased holidays, Kiwisaver contributions and administration, Government imposed energy hikes and a whole range of other taxes too long to list here.

If there are any tax cuts this year or in the following years by Labour, they will be linked to a Government agency and distributed that way not by the usual method of more cash directly in the hand.

Strangely enough, a 66c across the board tax cut was promised in the 2005 budget, coincidently another election year, but Labour broke their promise after reelection because they commented that economic conditions didn't allow such a cut.

Now 3 year latter, and with a crippled stagnant economy tax cuts are going to happen?

The truth is though Labour were and never will deliver proper tax cuts because they are philosophically opposed to them:

"Tax cuts are a path to inequality. They are the promises of a visionless and intellectually bankrupt people".

— Helen Clark, speech to 2000 labour Party Conference

On the contrary though, tax cuts show true vision and are not only "intellectually enriching" but in the long term they enhance every sector of society, socially and economically.

What is "intellectually bankrupt" though is promising personal tax cuts in election year.

The facts are that any time is a good time for tax cuts. They stimulate business and economies and have an upside long term, not a downside on the tax take by governments, and are especially relevant during the tough economic times we are now going through.

Tax cuts have been affordable since Labour came to office almost 9 long years ago and the excuses used to dodge such cuts have been coming as thick and as fast as Parekura Horomia on speed.

Cullen sites several: "we will have to cut Government services", "tax cuts lead to inflation and higher interest rates", "we will have to borrow money to fund tax cuts".

All clearly bollocks.

What has led to inflation and the highest interest rates in the Western world is reckless Labour Party spending, cut that and you can afford to return stolen taxpayer funds.

Ditto borrowing and government services, cut back Cullen, New Zealanders have, and have had to borrow because of your tax and spend mentality.

Finally, Cullen hinted today that any tax cuts must be "fair" and he clearly meant that those who earn't high salaries, probably wont be getting a tax cut.

Those earning higher salaries don't traditionally vote Labour anyway so they will be left out if there are personal tax cuts, but in an ironic twist, those receiving welfare through "working for families" benefits, mainly middleclass voters who could vote either National or Labour, maybe getting some of the taxes back that they have been paying to fund WFF in the first place!

Cruel but true.

I will leave you dear readers with a quote Robin Hood probably originally made:

"Tax cuts are a very sort of blunt weapon to redistribute income"

— Mike Williams, President of the Labour Party

To sum it up Labour's real attitude to tax cuts. Firstly Labour clearly don't believe in them and they truly believe that the high taxes they have imposed are there to "redistribute income".

You certainly can't vote for a party like Labour, The Green Party, The Maori Party, NZ First, Jim Anderton because they all fundamentally agree with Cullen, the Labour Party philosophy on tax cuts and cannot be trusted to deliver as part of a Labour-led Government in 2008.

Vote for either Act or National, they have promised real tax cuts and have done for years.

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c Political Animal 2008

Michael Hill Jeweller's profit sparkles

In what will probably be one of this reporting seasons pleasant surprises, Micheal Hill International(MHI), today announced profit guidance of around $NZ 20 million approx for the last half year. A stellar performance given the 2007 full year result was slightly over $ 20 million.

It will be a record profit for the company.

The full press release, courtesy of the NZX, from the company is as follows:


MHI
05/02/2008
HALFYR

REL: 0835 HRS Michael Hill International Limited

HALFYR: MHI: Michael Hill International - Half year profit guidance

Tuesday 5th February 2008

Michael Hill International Limited - Half Year Profit Guidance

Net profit after tax for the 6 months ended 31 December 2007 is now expected
to be in the range of $19.25m to $20.00m (last year's comparable period
result was $15.331m and the full year result for the 12 months ended 30 June
2007 was $21.017m).

The improvement in profitability was driven principally from "same store"
bottom line growth and from "new store" contributions (15 stores opened in
2006/07 traded for the full 6 months). The company also continued to reap the
benefits from our supply chain initiatives over the previous 2 years.

The company expects to release its full half year result on Friday 22
February 2008.

This announcement is made in accordance with the continuous disclosure
requirements of the NZX.

RM Hill
Chairman
5th February 2008

Clearly the cost savings have helped immeasurably and that can only be good when factored into new stores as they roll out.

The same store sales growth is a good sign but some of that can be explained by the move from the company to go upmarket, their shop floor prices are higher than before.

So this doesn't necessarily extrapolate to more customers but higher margin ones and this is just what management were aiming for.

It will be very interesting to see the detail come Feb 22 when half year results are poured over and direction for the coming year/s are mapped out.



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Michael Hill has defined growth strategy

Disclosure: I own MHI shares


C Share Investor 2008

Having a multiple Muslim

A news report today on Muslim men in Britain officially getting benefits for multiple wives has got me more than a little hot under the headdress.

Apart for the immorality of collecting money for doing nothing and the small fact that it is indeed illegal to be married to more than one person seems to have escaped the reasoning of the radical left in power in the mother country.

The muslimization of Europe continues apace.

While listening to this account on the Leighton Smith talkback show(Listen to Leighton Smith Live(Weekdays 8.30am-Midday NZ Time) ) today there was also a caller that recounted the case of a wonderful recently arrived Muslim individual who just happened to have two wives, in two state houses, side by side and receiving the largess of the taxpayer twice for two benefits for his small harem.

She didn't say where these individuals lived but it is more than likely going to be in a place like Mt Roskill, the centre of the universe when it comes to all the waifs and strays that nobody else in the world will have but us poor saps.

It is also more than likely that the fine taxpayer funded Harem discussed above is not the only example of this gross stupidity.

I myself am aware of such a "family" living in the state house area in the suburb of Northcote, on Auckland's North Shore.

Would another faith be given this sort of leeway to break our laws in the name of cultural diversity?

I think not, be best it not be critiqued should the Mullahs get angry. We are all well aware the lengths they will go to to show their disapproval of our intolerance to their cultural practices.

Couple this with statistics out today about the number of kiwi born people leaving for the more golden shores and you can see the obvious problems we are going to face.

I'm not anti immigration, we need lots more people with skills and jobs, and who fit in with the lifestyle, to come from nations all around the world but we also need to keep the good kiwis here.

You don't do that by importing riff raff to take their place.

John Key commented that Labour had clearly lost support because people were voting with their feet, while Helen Clark was quite nonchalant about the record losses of New Zealanders leaving because, "The population grew by about 3 per cent in the first five of six years of this century and that was done by net migration".

She should be concerned about those of us leaving, and thinking of leaving, if we all go mad at the end of the year and vote her back in, but the reason for her casual attitude is the simple fact that those, like the aforementioned multiple wive crews, that enter the country, are more likely to vote Labour and conversely those who are leaving would have voted for an opposition party.

Who needs Kiwis when you have "cultural diversity" though !

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c Political Animal 2008

New Zealand Stockmarket bull run: 2011

In a favourite movie of mine from 1987, Wall Street, staring Micheal Douglas as "Gordon Gekko" and Charlie Sheen as "Bud Fox", Gekko has a line in the film that goes something like, "money never sleeps", but you would have to add a rider to that, "except on the New Zealand stockmarket".

Gordon Gekko in Wall Street.

I am being a little bit mean because investors on the NZX have done well over recent years but while most overseas stockmarkets surpassed the giddy heights they reached in the 1980s and recovered after the 87 "crash" our market hasn't even got close to those halcyon days.

Well, apparently there is talk of resurrecting Gordo in a sequel to Wall Street and I believe while many foreign viewers may see the sequel with some sort of nostalgia most kiwis from around their mid 40s upwards will see will see the movie as some sort of horror flick, reminding them of past failure and lost fortunes.

I am constantly hearing from people in this age group when I broach the subject of investing, tell me that the stockmarket is "like a casino" "too risky" and full of criminals and charlatans. Well they maybe partly right on the last count but the sharemarket is a totally different story today.

Companies are largely valued on profit, prospects and management and those terms were mostly not applied to investing during the reign of the Gekkos in the 1980s.

I am 42 and wasn't invested in the sharemarket back then and my only real memory of it was talk around the Wall Street movie and the economy softening and that is where today's piece finally gets to its point.

Sorry about the verbal diarrhea!

While talking with my elders and, ask them what they do with their money(ironically those that lost money in '87 also seemed to have done their dough in finance company collapses, I see a pattern forming here) inevitably evokes the woes they faced with the sharemarket in 1987, I believe that this bogey is going to be laid to rest, given time.

People my own age are investing in companies listed on the NZX and those younger than I are doing similar. Those that were born the year Wall Street came out will only have knowledge of the market collapse from the same year in books or if they are interested specifically in the subject, so I believe the New Zealand stockmarket is in for an exceptionally good run when these younger investors come of age and start investing in the sharemarket as they hit their late 20s, early 30s.

The bull run could come even earlier should those of my own age stop listening to their parents advice and stop pouring dead money in home ownership.

Much of New Zealand's housing "boom" over the last 20 years has been fueled by those risk adverse baby boomers who got their wallets suctioned when they "invested" in companies back in the 1980s that didn't actually make any money, and we can still hear the collective moan from many of them today.

Like investing has always been, there is risk, but that risk is tempered by proper research into what you are buying and quite frankly those that invested in the "paper companies" around in the 1980s shouldn't blame the stockmarket. They should blame their own stupidity, greed, lack of research and understanding of what it is they were buying.

Those that remember Wall Street will also remember and maybe ponder its most famous monologue, when Gekko proclaims:

The point is, ladies and gentlemen, that: Greed, for lack of a better word, is good. Greed is right; greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms, greed for life, for money, for love, knowledge — has marked the upward surge of mankind and greed, you mark my words — will not only save Teldar Paper but that other malfunctioning corporation called the USA.

While there is nothing wrong with a little greed in our lives, those that harbour animosity to this day, to the Gordon Geckos that may have cost them a fortune, would do well to remember it was their own unbridled greed that led them along the path to financial disaster.

Just let it go and start investing in the stockmarket again and save us the lectures about '87.


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Research, research, research


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c Share Investor 2008

Reporting season a true indicator of company value

The New Zealand reporting season kicks off this month and regardless of the sub prime fallout and all its associated negative connotations, financial results and future indication of direction are still the main indication of company health and its possible day to day market value.


Mainfreight will face margin pressures in New Zealand
but is likely to get increased business from their global
divisions.


The subprime fallout was expected to vary widely on Kiwi companies. Of our top 30 stocks reporting, 10 were indicative of their respective fields: Auckland International Airport(AIA), Briscoes(BGR), Telecom(TEL), Freightways(FRE), Fletcher Building(FBU), Goodman Fielder(GFF), Contact Energy(CEN), Tourism Holdings(THL), PGG Wrightson(PGG) and The Warehouse(WHS).

Many of the above will be conservative in their indications for profit in the coming year.

Many companies have already indicated profit warnings, Hallensteins Glassons(HLG) and Postie Plus(PPG) have come to the table, while many companies have indicated flat earnings, The Warehouse, Telecom, Contact Energy, Sky City Entertainment(SKC), Pumpkin Patch(PPL) and Freightways have all indicated pressure on margins over the past year.

The pressure has come mainly from government intervention. Increased labour costs through a higher minimum wage, 1 week extra holiday and paid maternity leave have all pressured businesses and margins. Clearly those companies with very high staff numbers will be affected by this, retailers especially.

In addition to the above, more Government associated paperwork for administration staff has lead to lower productivity.

More Government pressure from reckless spending has led to higher interest rates, for consumers and lending for business, and the increases in energy costs, due to Government dictated taxes on petrol and electricity have made 2007 a bad year and are due to get considerably worse in 2008.

There maybe some surprises on the upside during the current reporting season.

Mainfrieght(MFT) looks like a good bet to increase profit and Restaurant Brands(RBD), the often talked about whipping boy here should show an increase from a very low comparison this time last year.

Fletcher Building’s half-year after-tax result was forecast by ABN to increase 13.5% from $NZ193m last year to $219m this year and their order book for future work is still going to be over NZ$ 1 billion.

This reporting season seems like a turning point for investors to me.

They must make up their minds whether they want to hold their investments during a coming hard year or run crying for the hills with their share proceeds in their hands.

Fortune will favour those who hang on to good companies and if you are buying shares for the first time or adding to your portfolio, look for good management first before anything else, for it is good managers with a track record that will be able to ride out the inevitable tough times.

I'm ready to face the coming months, good or bad, and reporting season is definitely an exciting time for this investor.


Related Share Investor Reading

Learn before you leap
A rare breed
Business gobbledegook

Disclosure: I own SKC, MFT, AIA, GFF,PLL,PPG,FRE,FBU and WHS shares

C Share Investor 2008

Commerce Commission makes a meal of Warehouse takeover

The latest dance by the participants in the Warehouse takeover waltz has one of the participants grandstanding, again.


Ian Morrice, CEO of The Warehouse, maybe smiling but
the Commerce Commission are losing their argument
to stop the retailer from a takeover because competition
from the company's Extra format stores, on which the
commissions argument is based, are failing to provide
an alternative in the supermarket sector.


The Commerce Commission was earlier this week cleared to appeal a High Court decision allowing Woolworths and Foodstuffs to make takeover bids for The Warehouse(WHS).

Justice Mallon heard the commission's application for leave to appeal in the High Court at Wellington. The application was opposed by both of the supermarket giants and the Warehouse itself.

The Commerce Commission have wanted to drag out the whole process since they got involved way back in mid 2007. The latest attention grabber by them is trying to drag out an appeal date.

The commission had pushed to have the Court of Appeal hear any case in late April and early May.

The commission had said:

"the potential dates for a hearing, starting on February 26, were not suitable as the legal counsel it has been using would not be available at that time".

It seems incongruous to me that legal counsel would "not be available" because one would expect that commission counsel would be working hard on the case given that an appeal was imminent and they were actually preparing a case for a decision to appeal this week.

After arguing that the commission's counsel would "not be available" commission chairwoman Paula Rebstock said:

"The commission agrees with the need for urgency and will be asking the Court of Appeal for the earliest achievable date".

So which one is it Paula!

In my opinion, counsel should have been ready to go as soon as the High Court gave their approval for an appeal.

Either the Commerce Commission don't have solid new evidence for an appeal and they are simply stalling for time in the hope that their argument can be backed up by something new they might uncover.

One of the commissions major arguments against allowing the takeover of the Warehouse by Foodstuffs and Woolworths is crumbling.

The Warehouse' "Extra Format" food/general merchandise stores, of which there are just 3, would allow new competition in the duopoly supermarket sector in New Zealand the commission argued, but since their initial ruling against a takeover in June 2007 sales figures for the stores have been below expectations and management is expected to make a decision in around a month regarding their future.

As I have said before, I don't have much faith that the commission have a good case. If they did they would have won it first time up and been ready to argue their appeal immediately.

A decent assemblage of briefs would have been ready to rock and roll ASAP and it will certainly inspire confidence in the defence given the slackness of the commission's counsel.

The Commission may be forced to fight its appeal as soon as next month, alot earlier than they expected, perhaps February 26-28.

Investors in The Warehouse have pushed up the share price from NZ$5.35 to $5.84 this week, so the sometimes savvy market doesn't believe the commission's argument either.


Essential related Share Investor reading


Commerce Commission impacts on the Warehouse bottom line
The Warehouse in play
Outcomes of Commerce Commission decision
The fight for control begins soon
Court of Appeal case could be dismissed

Disclosure: I own Warehouse shares


C Share Investor 2008

Warehouse Appeal: From stuff.co.nz

Warehouse sale delay costing shareholders and public

By NICK CHURCHOUSE - The Dominion Post | Wednesday, 30 January 2008

Woolworths says every month the Commerce Commission holds up a prospective purchase of The Warehouse is costing shareholders in the red sheds $5 million.

The High Court in Wellington heard the commission's argument for leave to appeal against a November High Court decision that overturned its ruling stopping Woolworths and Foodstuffs - New Zealand's two main supermarket companies - bidding.

Commission lawyer Stephen Kos QC told Justice Jillian Mallon the commission had a public responsibility to appeal if it thought a takeover would bring substantial lessening of competition in the supermarket industry.

The case relates to The Warehouse Group's foray into the supermarket game with its Warehouse Extra stores.

Mr Kos cited examples from Australia and Britain where competition regulators had questioned the competitive practices of supermarkets, saying the industry was a matter of concern worldwide - and in countries with more competition than New Zealand.

"The commission clearly has a responsibility to represent the public interest for the benefit of consumers," Mr Kos said.

But Woolworths lawyer David Goddard QC said the commission was doing the opposite. With every month a takeover bid did not eventuate, shareholders and the general public were out of pocket.

Mr Goddard estimated each Warehouse share would earn a $2 premium on face value from a hypothetical Woolworths buy-out, and with 300 million shares that meant they were missing out on $600 million.

Adding interest earnings to the guesswork numbers, he said every month without an offer on The Warehouse was $5 million lost.

Warehouse shares closed down 3 cents at $5.70 last night.

The delay, more than a year since the commission first blocked takeover moves, also left Warehouse employees in limbo and robbed consumers of benefiting from synergies and savings through adding The Warehouse to the Woolworths stable, Mr Goddard said.

Mr Kos, also seeking a stay on attempted acquisition by the supermarket companies till the matter could be heard in the Court of Appeal, said they could not expect the commission not to appeal because of commercial inconvenience.

"Unless [Woolworths and Foodstuffs] can show the commission is doomed to failure then there is an appeal to be heard."

He said the case was arguable and the stakes were significant so they should be allowed to appeal.

Foodstuffs and Warehouse lawyers also opposed the commission's applications.

Warehouse counsel Matthew Dunning said the "Damocles' sword" the commission had was creating uncertainty for The Warehouse.

Justice Mallon reserved her decision.

Disclosure: I own WHS shares

Essential related Share Investor reading

Commerce Commission impacts on the Warehouse bottom line
The Warehouse in play
Outcomes of Commerce Commission decision
The fight for control begins soon

Links c Share Investor 2007,2008

Goodman Fielder a hedge against an economic slump

Consumers still eat, even during economic downturns. Goodman Fielder is well
placed to weather the storm.



A stock likely to do well over an economic slump, a slump looking more likely than not, is the Australasian food giant Goodman Fielder (GFF).

With operations in Australia, New Zealand and throughout the Pacific Islands, Goodman has a business with food staples such as bread, milk, butter, flour, and highly branded packaged and processed foods for breakfast, lunch and dinner, and the snacks in between.



Wonder White, a strong
Australian brand.


Consumers are loyal to their brands and tend to stay true even when prices rise. Having said that there have been some large price increases of their products on the retail floor because of higher commodity prices, like wheat and sugar and increased labour, packaging and energy costs.

Unlike other companies, in less consumer essential businesses, Goodman Fielder has been able to pass on much of their increased business costs, so margins havent been affected on the downside too much.

Margins have been under pressure though and prospective buyers must be aware of this caveat.

Goodman does have competition, although Goodman does tend to dominate allot of food staples and brands: Vogels bread, Tararua, Kiwi, Edmonds, Meadowlea, Quality bakers, Irvines, anchor and a whole host of other recognised brands.

Goodman's share price has suffered of late, down to a low of NZ$ 1.78 last week from a high of $3.20 at the end of last year and finishing up 3c at $1.93 today.


Related Share Investor reading

Contact Energy looks bright during dark times
Goodman Fielder 2007 full year profit

Disclosure: I own GFF shares


C Share Investor 2008

Sign the anti smacking petition

The "anti smacking bill", or repeal of section 59 last year has lead to a petition for a referendum.
The referendum has 280,000 signatures and needs 20000 more for a referendum to be held at this years election at the end of 2008.

Give Sue Bradford, Helen Clark and her mates a slap in the face!!

Download and sign the petition here

C Political Animal 2008

Victim of Electoral Finance Act forced to shut down website

The first publicized internet victim of the Electoral Finance Act has finally come to light.

21 one year old Andrew Moore has had to take his website down at Don't Vote Labour because the Electoral Commission threatened him with legal action should he not do so.

Now those doubters who didn't believe this would happen and those that voted for the Act , should hang their heads in shame because an individual's freedom of speech has clearly been denied here.

Andrew is right. You shouldn't vote for Labour, The Greens, NZ First, Jim Anderton and the others who supported this piece of Stalinist filth and Andrew and people like myself should be allowed to freely say so.

Please support Andrew and others in the fight for freedom of speech. Go to his website here:

Andrew's Site

The message below replaces the previous content on Andrews site but he has a forum there.

Related Political Animal reading

Electoral Finance Bill Vote
NZ losses democratic freedom
Mike Moore turns the knife
List of MPs who voted for Act
Cartoon and comment
Auckland Protest against EFB
The purpose of the Bill is clear


C Political Animal 2008

Second stab at Burger Fuel denied

Trading in Burger Fuel shares has been spasmodic at best, since listing on the NZAX
on July 17 2007. They hit a low of 29c earlier this year.



The Burger Fuel(BFW) chart tells a horrible story.

Down 18% today to NZ 42 cents and testing its all time low of 29c.

No operating news yet but sales and profit figures will be coming up in the next month or so.

Some news just at the end of last year though that a Wellington Burger Fuel store was extensively damaged. That would take out a fair amount of revenue.

My efforts to get BF shares have again come to a greasy end.

I tried to put a bid in today at 25 c but was refused by ASB Securities because "it was too low"

The "5% rule" applies, where you cant bid below 5% of what the last sell price was.

That is, even though a bid of 29c was on a buy order a few weeks back and the last sell was above 60c the buy order was allowed to be placed.

The ASB broker told me "someone at the NZX put it through".

I still cant figure out how I'm supposed to get my bid in, for what I think the company is worth, in such an illiquid stock if I'm not allowed to put my bid in how I see fit.

Time may take care of the share price though.


Related reading on the Share Investor Blog

NZX share trades with strings attached
Don't buy Burger Fuel, yet
Burger Fuel: Inside info?
Burger Fool IPO: Burger Fool?
Exclusive Interview with Burger Fuel's Josef Roberts
Burger Fuel's Daytime drama
Burger Fuel share price out of gas
Beefing up store numbers
Director explains share price drop
Burger Fuel slims down in value
Burger Fuel and Coke
Marketing Burger Fuel's future
Pumpkin Patch VS Burger Fuel
Burger Fuel results and commentary


C Share Investor 2008

What happened to risk?

What happened to risk?

A question no doubt in some of my readers minds.

In relation to financial markets, investing and business it seems to be an archaic concept only seen as a entry in the Oxford dictionary.

The market turmoil that started with the Sub Prime fallout and associated credit crunch, several months ago, has highlighted what has been going on for many years, those that take risks in business and investing no longer seem to suffer consequences when the risk that they took doesn't quite give the expected payoff.

After global State bailouts of banks with "liquidity" problems and talk of sub prime borrowers being bailed out or their bad decisions to buy houses they could ill afford, the latest avoidance of risk involves the insurance companies that insured sub prime bonds against collapse.

For goodness sake you want to remove risk from insurance?

Let me borrow and modify a classic Tom Cruise flick, insurance is risky business!! Please don't sue me Tom.

The talk of a bailout last week led to US markets doing a Lazarus and finishing up by around 2.5%.

It ain't a positive investors, its a pure unadulterated negative.

The investing world isn't the only place risk and consequences has been removed from life, Governments worldwide have been trying to do this for years.

In New Zealand Helen Clark, and her merry bunch of Labour Party socialist risk aversionists have recently passed a law to allow citizens to easily declare bankruptcy and come out of it without paying back debtors. This is linked to student loans that don't attract interest and therefore students have no incentive to pay them back.

All risk taken and no consequences for that risk.

Over the last 9 years Aunty Helen has bubbled wrapped an entire nation so much so that the risk that she talked about when she gave a eulogy at Sir Edmund Hillary's Funeral has almost been completely removed.

When we remove consequences for risk though, we increase the risk that mistakes will continue to occur.

Those in the financial industry being bailed out, institutionally and individually are simply going to continue to do what they have done if there are no brakes on their behaviour.

The looming danger is ironically low interest rates, what led us into the whole sub prime fallout and reckless borrowing and lending in the first place.

Record low rates after 9-11 led to a frenzy of cheap credit and with similar low rates coming down the pipeline one doesn't have to be a Warren Buffett to figure out that this is not such a good thing at all.



Related Political Animal Blog Reading

Labour's Socialist Peril

Related Share Investor Blog Reading

Leaders must come clean over losses
Credit Crunch a blessing in disguise
Global Credit Squeeze: There is no free lunch


C Share Investor & Political Animal 2008

What happened to risk?

What happened to risk?

A question no doubt in some of my readers minds.

In relation to financial markets, investing and business it seems to be an archaic concept only seen as a entry in the Oxford dictionary.

The market turmoil that started with the Sub Prime fallout and associated credit crunch, several months ago, has highlighted what has been going on for many years, those that take risks in business and investing no longer seem to suffer consequences when the risk that they took doesn't quite give the expected payoff.

After global State bailouts of banks with "liquidity" problems and talk of sub prime borrowers being bailed out or their bad decisions to buy houses they could ill afford, the latest avoidance of risk involves the insurance companies that insured sub prime bonds against collapse.

For goodness sake you want to remove risk from insurance?

Let me borrow and modify a classic Tom Cruise flick, insurance is risky business!! Please don't sue me Tom.

The talk of a bailout last week led to US markets doing a Lazarus and finishing up by around 2.5%.

It ain't a positive investors, its a pure unadulterated negative.

The investing world isn't the only place risk and consequences has been removed from life, Governments worldwide have been trying to do this for years.

In New Zealand Helen Clark, and her merry bunch of Labour Party socialist risk aversionists have recently passed a law to allow citizens to easily declare bankruptcy and come out of it without paying back debtors. This is linked to student loans that don't attract interest and therefore students have no incentive to pay them back.

All risk taken and no consequences for that risk.

Over the last 9 years Aunty Helen has bubbled wrapped an entire nation so much so that the risk that she talked about when she gave a eulogy at Sir Edmund Hillary's Funeral has almost been completely removed.

When we remove consequences for risk though, we increase the risk that mistakes will continue to occur.

Those in the financial industry being bailed out, institutionally and individually are simply going to continue to do what they have done if there are no brakes on their behaviour.

The looming danger is ironically low interest rates, what led us into the whole sub prime fallout and reckless borrowing and lending in the first place.

Record low rates after 9-11 led to a frenzy of cheap credit and with similar low rates coming down the pipeline one doesn't have to be a Warren Buffett to figure out that this is not such a good thing at all.


Related Share Investor Blog Reading

Leaders must come clean over losses
Credit Crunch a blessing in disguise
Global Credit Squeeze: There is no free lunch


Related Political Animal Blog Reading

Labour's Socialist Peril


C Share Investor 2008

Warehouse Court of Appeal case could be dismissed next week

The Commerce Commission will need new evidence to
prove their claims of lessened competition in supermarkets
in the Court of Appeal.


Foodstuffs, the owner of the Pak 'n Save Supermarket chain, has just been given approval to open an outlet on Auckland's North Shore after 17 years of trying. Opposition to the company's plans were put up by Woolworths Australia [WOW.ASX] Foodstuffs opposition in New Zealand.

The battle by Foodstuffs to get this market up and running has been intense, sometimes underhanded and cruel. It has cost Foodstuffs and the North Shore millions of dollars in lost revenue and wages from the 300 hundred jobs that the supermarket will bring to the shore.

Woolworths as a foe has been a hard nut right to the end.

Foodstuffs and Woolworths are currently in a fight to win control of The Warehouse Group [WHS.NZ] and the High Court in November overturned a ruling by the Commerce Commission which prevented Woolworths and Foodstuffs bidding for The Warehouse.

The court will hold a hearing on Jan. 29 to decide whether the regulator is allowed to challenge the ruling in the Court of Appeal.

The obvious link to the two battles is clear.

None of these two retail chains are going to give up the fight for the Warehouse until all resources are exhausted.

The battle for control or to buy the Warehouse has been going for almost 2 years. There have been endless appeals by the two companies (as well as the Warehouse itself) and a denial by the Commerce Commission for a deal to go ahead. There will be more legal challenges if there is first a Court of Appeal case after the Jan 29 decision, and these will go as far as New Zealand's new Supreme Court, if the two appellants don't get their way and are not allowed to bid for The Warehouse.

In order for the Appeal Court to accept the Appeal by the Commerce Commission, they will have to furnish new information to the case to prove their point that if either of the two supermarket companies buy the Warehouse, competition or potential competition in the supermarket sector will be severely diminished.

This was the CC argument in the High Court and they lost on that point, so on that basis alone the Court of Appeal shouldn't hear the case.

If a case is to be heard with new evidence furnished, I cant figure out what that evidence could possibly be.

Given the preponderance of fact that seems to be on the side of the defendants, at this stage, I don't see the Court of Appeal giving approval for a hearing before their court on Jan 29.

Disclosure: I own WHS shares


The Warehouse Group @ Share Investor

Long vs Short: The Warehouse Group
Warehouse bidders ready to lay money down
The Warehouse set to cut lose "extra" impediment
The Warehouse sale could hinge on "Extra" decision
The case for The Warehouse without a buyer
Foodstuffs take their foot off the gas
Woolworths seek leave to appeal to Supreme Court
Warehouse appeal decision imminent
Warehouse decision a loser for all
Warehouse Court of appeal decision in Commerce Commission's favour
MARKETWATCH: The Warehouse
The Warehouse takeover saga continues
Why did you buy that stock? [The Warehouse]
History of Warehouse takeover players suggest a long winding road
Court of Appeal delays Warehouse bid
The Warehouse set for turbulent 2008
The Warehouse Court of Appeal case lay in "Extras" hands
WHS Court of Appeal case could be dismissed next week
Commerce Commission impacts on the Warehouse bottom line
The Warehouse in play
Outcomes of Commerce Commission decision
The fight for control begins soon

Share Investor Forum-Discuss this topic


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c Share Investor 2008 & 2009