The NZX continues to lose ground with retail investors

How can you tell if you are important to a business? that is, whether they want your business in the first place and what will they do to keep it.

Lets take a look at the New Zealand Stock Exchange [NZX.NZ] and see how they stack up for customer service.

Lets ask a number of important questions to give the NZX some sort of customer rating.

Do they look after all their customers?

The answer would have to be a clear no.

Why so?

Well the NZX in all its infinite wisdom gift their larger customers with preferential treatment simply because of the financial/old-schoolboy/business connections between those larger customers and with the NZX itself, that is, it is in the NZX' best interests for example give their mates in the same industry as them advantages over smaller shareholders in recent capital raising's; the likes of Kiwi Income Property Trust [KIP.NZ], Fletcher Building [FBU.NZ], Freightways Ltd [FRE.NZ], and Nuplex [NPX.NZ] because of the backscratching and arse licking that has to go on in the financial industry to make the wheels turn in New Zealand simply because of its small size.

One day the favour will be returned you see. Its wrong but it is true but it happens constantly.

Retail customers-small investors like you and me-are clearly shafted.

Are market rules broken to advantage the "big boys" ?

Well yes they are.

Back to the recent capital raising's, we had the NZX waiver several NZX rules to allow companies to buy preferential shares on preferential terms without consulting smaller shareholders who would have their shareholdings diluted through the issue of more shares.

To add insult to injury any offer made to smaller shareholders to buy shares was not on a pro-rata basis and capped at a set dollar rate, to be scaled down depending on demand.

The little guy gets it again.

But wait there is more.

Access to live market news data is unfairly distributed because unless you are lucky enough to have an NZX terminal you get the market news 20 minutes after the big boys get it.

Boy us retail investors are really on the back foot there.

Does the NZX take rule breaking seriously enough?

In my opinion the answer would have to be a big fat NO.

In my 11 years of market watching I have seen stock prices either dramatically rise or fall days before good or bad news about a company is finally revealed to the little guy. Its out there, an individual insider or some broker is trading on it and big money is made.

Surely it would be easy to find the culprit?

Well, yes it would but little detailed investigation is done into this by the NZX except the usual question to the company concerned about "whether you were aware of any company news that would have affected the company share prices, etc. etc.."

The NZX has access to trading records and irregularities in trading could be hauled up for question.

What does all this do Darren?

Well clearly it puts retail investors at a large disadvantage when it comes to investing in the New Zealand stockmarket.

Rules are broken and there are few consequences, favouritism to insiders is rife and ignored when it should be discouraged and in the vain hope that someone might be found guilty of any shenanigans there are usually very light consequences.

No wonder then retail investors or "Mum and Dad" if you like have deserted the NZX in droves for finance companies, term investments, residential housing and ultimately overseas stockmarkets, when you have different rules for different customers then those given the short end of the stick are simply going to go elsewhere.

Mark Weldon was charged with improving such things in our capital markets when he started as the boss of the NZX early this century but he has failed to halt the decline in New Zealanders investing in the NZX and ultimately Kiwi businesses and for that he should be soundly ashamed.

4 out of 10 from me.


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c Share Investor 2009

2008-2009 KFC sales figures mislead investors

Let me just elaborate on a short post I made at Shareinvestor.co.nz regarding Restaurant Brands [RBD.NZ] results to the year ended 28 February 2009.

It is something I have mentioned many times before but it must be stressed once again because Restaurant Brands shareholders and prospective investors in the company must be given the full picture when it comes to RBD managements disclosure over their KFC sales.

The "record" $211 million of sales reported in today's result for KFC is only a record in terms of 2009 dollars. KFC are actually serving up less chicken to fewer customers.

Their best listed year was in 1997 where they did $172.3 million in KFC sales. That is because of accumulated inflation at a very conservative 3% annually over the last 12 years amounts to 36%.

36% inflation means in 2009 dollars RBD would have to sell $62 million more chicken just to match the record made in 1997.

$211 million is a long way from the figure they need to make, of $234.32 million, just to match the 1997 record.

I am not an accountant and nor do I think I need to be but if such emphasis of "record sales" is placed on a figure by RBD management to gain market approval that the expenditure of 10s of millions of shareholder funds on KFC refurbishment in order to attain those sales then that figure should be clearly accurate and take inflation into account. That is simply not the case here.

Granted one can do the math oneself to come up with relative figures and compare year by year sales but having said that, to use current sales figures as a tool to push further shareholder expenditure must be justified to the nearest decimal point.

RBD's figures therefore do not pass this test and furthermore for analysts and business reporters to accept this without question is surely remiss to some extent.

Still my record with this company probably goes back longer than many on the RBD board or those professional stock analysts in their professional capacity.

Once again I am not an accountant but I would like to see inflation taken into account when businesses do their books, at lease an annotation in the audited reports of what the inflation rate was in the last year so a stockholder or a prospective stockholder can make a fully accurate comparison before they decide to buy, or not as the case may be.

Just to end on a positive note, the company is negotiating with YUM! over the Pizza Hut franchise and it is expected that this will allow RBD management to divest individual Pizza Hut stores to owner operators.

This is one thing I have argued for Pizza Hut for years that individual ownership makes for a better run business because owners have skin in the game. Pizza Hut's competitor Dominos have this arrangement and they are currently experiencing records sales.

This solution will be at once beneficial for RBD because Pizza Hut loses money and for the Pizza Hut brand in New Zealand which will be able to rejuvenate itself under an alternative ownership structure.

RBD shares were up 1c to 86c today on reasonable volume.

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Discuss RBD @ Share Investor Forum




c Share Investor 2009

Michael Cullen's legacy a sad indictment of Socialism

Michael Cullen is leaving, how sad for all of us.

Before we all get weepy beyond control lets remind ourselves how good he really was.

His Achievements:  

* Taking New Zealand to the brink of economic destruction at a time when the economy was at its best in generations.

* achieving amongst the highest taxes in the world.

*Using those taxes on handouts to those that didn't earn it in the first place.

*leaving middle income people with high debt as a result of those high taxes.

Failing to cut taxes even though faced with the biggest economic boom in generations.

*Leaving Kiwis with the aftermath, massive state debt and huge financial holes in all Government "services".

*growing Government spending by 50% in the last 5 years while the economy grew less than 26%-from about $42 billion to 62 billion!

*saddling kiwis with record numbers of useless bureaucrats.

*allowing the Auckland Airport shareholders to lose more than $1 billion in income.

*buying KiwiRail at 100% more than it was worth.

*Calling those who earn over $60,000 PA "rich pricks".

There is much more but this rich prick has to go to work.

How appropriate though that he gets a job as one of the head posties at the Post Office, where all the dead politicians go when incoming Governments don't know where else to put them.

Still, like the bulk of his life Cullen will continue to feed off the State tit because he is incapable of anything productive.

Hasn't he done well.

c Political Animal 2009

Flight of Fancy

It looks to be like the twitters in National are starting to get the sickness of overinflated egos from the mad lefties over at the opposition benches.

The arrogance and sheer rabid stupidity of the Minister of Education, Anne Tolley to take a trip in a helicopter just so she can "get an overview of distance" in  Auckland simply defies logic and commonsense, things sadly lacking from Labour and one of the reasons they were turfed out on their arses last November.

Sure compared to the billions wasted by Labour this is small potatoes but it is the message you are sending that is the important thing. It is clearly the wrong message!

The message from me is have a look in the mirror before you do something stupid.

c Political Animal 2009