Friday, October 12, 2007

Share Investor's Friday Free for all: Edition 7

The Dominoes keep Falling

The week kicked off with yet another finance company meltdown.

Geneva Finance, definitely not Geneva based, stopped lending money to clients.

A few weeks ago there were warnings about this company and latter on this week its credit rating was dropped by Standard and Poor's from B+ to B-

Standard & Poor's defines a B- rated company as one able to meet its financial commitments but vulnerable to adverse business, financial or economic conditions, doesn't look good.

Meanwhile, Nelson finance company LDC and its 700 odd investors could get up to 90% of their funds returned, company liquidators have announced.

This is one of the better returns from the 10 finance companies that have collapsed over the last 18 months or so.

Bridgecorp investors, who between them risk losing up to half a billion kiwi dollars have decided to discuss the merits or otherwise of taking legal action against Bridgecorp and financial advisers who gave clients the thumbs up to plunge their bucks into this rotting corpse.

Finally, Hanover Group, one of New Zealand's biggest finance companies, seems in a huge hurry to quit an apartment building that it helped finance and that has got into difficulty.

Instead of flicking off the 92 units individually and getting more money back, they are forcing a mortgagee sale and risk getting roughly half the proceeds that they could.

The problem with the most recent finance company collapses has been liquidity and cash flow issues.

A Slap on the Back

The New Zealand franchisee of KFC, Pizza Hut and Starbucks, Restaurant Brands(RBD) this week announced a net profit of NZ $4.5 Million.

This is up nearly 100% on last year, as the company barely managed a positive result in 2006.

Revenue increased marginally on last year

Much has been made by management of the KFC "transformation" through store refurbishments but the head chickens at RBD still have a long way to go to get close to sales figures from its listed heyday.

Starbucks continues to plod on without contributing to the bottom line but Pizza Hut has slowed the downwards flow in sales for its round dough making stores.

I was expecting better and it doesn't look good for next years announcement in May.

The Power to Succeed

Another nail in the coffin for New Zealand's economy was rammed home this week when the climate change disciples from the Labour Party and Green Party announced that this country would no longer be able to build fossil fuel power stations for the next 10 years.

We are currently short of reliable power sources for a much needed expansion of our economy and today's announcement means that we now risk current industry and put the price of power to consumers and business up simply because worshipers at the climate change altar want to collect more taxes.

Business especially needs the surety of a sustained supply of electricity to allow expansion of their business and the confidence to invest.

Look for more manufacturers to head across foreign waters because of this decision.

Nuclear energy would be the answer to this problem if it actually existed but the n word will not be discussed by the Gore-ites in the Labour party.

NZX Market Wrap

The NZSX-50 index, down earlier in the day, rose 9 points to 4305.62. Turnover totalled $NZ95.9 million, with falls outnumbering rises 54 to 59.

Telecom (TEL) fell 6c to $4.44, while Fletcher Building(FBU) jumped 23c to $12.78, and Contact Energy (CEN) rose 22c to $9.57 in the wake of the Labour Government's new energy strategy released yesterday.

Fisher & Paykel Healthcare(FPH) was up a cent at $3.30 and its sister company Fisher & Paykel Appliances(FPA) up 5c at $3.70.

Sky TV (SKT) lost 5c to 570.

Among companies under M and A speculation, The Warehouse(WHS) was up 5c at $.548, casino company Sky City Entertainment(SKC) was even at $5.28, and Auckland Airport(AIA) climbed 3c to $3.10.

On the downside were Michael Hill(MHI),down another 14c to $11.26 following disappointing quarterly sales figures yesterday, and tech company Rakon (RAK) 12c lower at $4.80 in reaction to the higher currency.

Freightways (FRE) (POT) rose 5c to $7.10, Pumpkin Patch(PPL)was up 8c at $3.91, 

Mainfreight(MFT) rose 5c to $7.05, Port of Tauranga(POT) gained 2c to $3.13, and Tourism

Holdings(THL) was up 4c at $2.31. The influential Fund Manager, Fisher Funds, from Auckland's 

North Shore, sold down Freightways and purchased more Pumpkin Patch.

Infratil(IFT) fell 4c to $3.05, fish exporter Sanford(SAN) fell 3c to $4.27, Steel & 

Tube(STU)lost 3c to $4.41, and Hallenstein Glasson(HLG) the clothing retailer was down 2c at $4.53.

NZ Dollar Wrap

Reuters currency rates (12.07.07) NZ Time
(5pm today 5pm yesterday)

NZ dlr/US dlr US77.02c US76.42c
NZ dlr/Aust dlr A85.52c A85.05c
NZ dlr/euro 0.5427 0.5398
NZ dlr/yen 90.41 89.62
NZ dlr/stg 37.89p 37.43p
NZ TWI 72.31 71.79
Australian dollar US90.07c US89.86c
Euro/US dollar 1.4192 1.4158
US dollar/yen 117.36 117.19

c Share Investor 2007

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