Friday, September 28, 2007

Share Investor's Friday Free for all: Edition 5

Spin the Wheel

The start of the week saw a possible buyer named as the purchaser of Sky City Entertainment (SKC) after a “mystery buyer” was announced as a bidder last Friday.

Providence Equity Partners was named but then latter on in the week TPG Newbridge a private equity fund with ownership of multiple casinos around the world and a buyer of the Harrah’s Casino empire was fingered instead.

While TPG looks the most likely bidder, it looks like you could be more accurate if you used one of Sky City’s roulette wheels with just as much accuracy to find a suitor.

The final act this week in the saga came with a release from Sky City today that they were going to allow due diligence from the secret party and also actively seek other bidders. Shares closed up 17c today to NZ$5.22 on big volume of over 15 million shares.

The bonus laugh from last week though comes from brokers selling client’s shares before SKC shot up sharply in price on the Friday the announcement was made. Brokers only read the misleading headline of the announcement in which Sky City management “hid” the possible bid in an otherwise inconsequential company blurb.

Affected brokers and most probably their clients have been fuming all this week.

That will teach you to be lazy next time huh?

Slap on the wrist with a wet five dollar bill

Share brokers ABN AMRO Craigs were this week fined by the NZX for trading in shares in 2006 without gaining authorisation from the firm's compliance manager. In a statement to the NZX exchange, NZX Discipline, which rules on matters of market conduct, described the breach as "a serious matter."

ABN had been warned several times regarding the same breach.

In July the NZX Discipline panel's annual report showed that two broking firms and their advisers paid sums of money to the NZX this year for breaches of stock exchange rules.

The brokers and advisors were not named and were fined to the tune of $161,000 and $80,000.

The largest settlement was for Rakon (RAK) shares bought for advisors rather than allocated clients.

Another case named related to NZ Oil and Gas (NZO) shares that were purchased to “influence closing prices.” And brokers were fined a total of $80,000.

Makes me wonder what one has to do in this town to get an appropriate punishment for breaching “serious matters” when brokers go astray.

The old boys network keeps on keeping on and Mark Weldon and co have to take a harder look at breaches such as this to give the public confidence in a market lacking the bulls.

Perhaps the breaches happened late on Friday after lunchtime drinks. We could understand this couldn’t we?

Telecom Splits

News on Wednesday that Telecom New Zealand(TEL) was given concrete news that the New Zealand Government was going ahead with its original plan to split the company into three separate operational units.

The split will occur in March next year but take at least 4 years to fully realize. Where have we heard that one before, I thought Teresa had gone?

With internet speeds on average about 1GB per sec New Zealand languish near the bottom of developed countries for speed.

Ranked number one for speed consumption this writer speculates.

Countries like North Korea have entry level broadband speed at 24 MB per sec and more advanced nations are well over 100MB per sec.

Approaching Telecom reforms at dial-up speed isn’t going to get real broadband here anytime soon and it is one reason why this writer still uses snail-net.

Oldies not Goodies

ING’s Real Living retirement village float has joined AMP’s Somerset float that was cancelled last month.

Before the market turmoil of the last few months the AMP float looked like a promising investment.

ING had questions to ask about participants organizing the float anyway. Proponents within the deal were involved with dodgy dealings back in the roaring 80s.

A shame the AMP IPO went South, this correspondent was interested in buying a stake but I’m guessing that the other two oldie home retirement companies still listed on the NZX, Metlifecare (MET) and Ryman Healthcare (RYM) are going to do better considering the two oldie IPO’s are now dead.

Hopefully the AMP Somerset will go ahead in the future. Let’s hope for a resurrection.

Auckland Airport VS The Warehouse: Which one will fly?

Having taken a sizable stake in The Warehouse(WHS) last week, New Zealand’s largest listed general merchandise operator and also having a very small piece of Auckland Airport(AIA) I am left wondering when stacked next to each other , which stock is going to do the biz when and if buyers make offers that sellers cant refuse.

Both possible sales are not exactly straight forward ones, with AIA mired with local and central government impediments and the WHS weighed down with regulatory issues.

In October the case to allow Foodstuffs and Woolworths to buy the WHS will be heard by the Commerce Commission but the AIA transaction lacks any certain information with updates to the market few and far between.

In my opinion the Warehouse sale is likely to go ahead with conditions attached.

Buffett dines on Bear?

Finally speculation abounds that Warren Buffett, the world’s wealthiest investor, has been sniffing around Bear Sterns, the Wall Street investment bank.

Speculation of course sent Bear stock up strongly but stock for the company is trading at a considerable discount to its highs for the year.

Buffett of course is the master of the bargain, and companies like BS, who have recently been going through hard times during the market turmoil of failing sub prime loans might be a perfect candidate for some of the big man’s billions.

He has already got big stakes in Bank of America and Dow Jones so Bear Sterns would be a perfect fit in his portfolio.

The scenario described above has been refuted by contacts within Bear Sterns but who are we to believe?

NZX Market Wrap

The benchmark NZSX-50 index fell 6.91 points to 4268.90, on turnover totaling a high turnover of NZ$212.7 million.

Sky City (SKC) shares leaped today after the management announced it had agreed to due diligence by what it called a "credible" party interested in a potential takeover.

The company's shares hit a high of $5.41 before closing up 17c at $5.22, on turnover of 15.3 million shares. Other blue chips were mostly weaker, with Fletcher Building (FBU) down 17c at $12.69, Contact Energy (CEN) off 15c at $9.19, and Auckland Airport (AIA) down 3c at 313 .In the face of a continuing stronger New Zealand dollar, Fisher & Paykel Healthcare (FPH) fell 4c to $3.30 and F&P Appliances (FPA) lost 1 cent to $3.56, while Sky TV (SKT) fell 14c as it buys it product in $US.

Telecom (TEL) was up 3c at $4.47, as investors mulled over the Government recommitment this week to split the company into three units.

Air New Zealand (AIR) raised 5c to $2.47, following positive operating numbers for last month, and with shareholders approving its fleet purchase. The stock is running away from fair value with investors ignoring the market volatility of the airline industry.

Other stocks on the rise were Tourism Holdings (THL) up 10c to $2.40, PGG Wrightson (PGG) up 3c at 193, Nuplex (NPX) up 8c at $7.34, and Sanford (SAN) 5c higher at $4.35.

On the downside were Infratil(IFT) down 7c at $2.97, Steel & Tube(STU) down 19c at $4.30, Port of Tauranga(POT) down 5c at $6.70, and Mainfreight (MFT) continues its recent slide down 10c at $6.70.

Disclosure: I own SKC, WHS, RYM, AIA shares

C Share Investor 2007

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