Monday, November 30, 2009

Stock of the Week - Reprise: Contact Energy Ltd

Contact Energy Ltd [CEN.NZ] was a Stock of the Week pick back in June and I picked it then because the share price was heading below 6 bucks and there seems to be some resistance to the stock price falling too far past the $5.50 mark and that is why I have included it again.

The stock has retrenched below $6 4 times this year and has always retraced back above that mark. As high as just over $6.50 on one occasion.

A good stock for you short termers out there and a good opportunity for those of you looking for a good company on the cheap for a long-term proposition.

I must repeat though that management of this company is poor but even a monkey running this company can make money.

Could go lower than its current $5.84, with a low this year of $5.47.

Buy on further weakness if this stock has been on your watchlist.

Contact @ Share Investor Blog

Not so fast Davy Boy
Still Watching Contact Energy
Beam me up Davy
Stock of the Week: Contact Energy
MarketWatch: Contact Energy - June 2009
MarketWatch: Contact Energy - Jan 2009
Contact Energy looks bright during dark times
Share Investor's 2009 Stock Picks
Follow the Monopoly Board

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Stock of the Week Series

Restaurant Brands

NZ Refining
Ryman Healthcare
Mainfreight Ltd
Fisher & Paykel Healthcare
Xero Ltd
Auckland International Airport
Sky City Entertainment Group
Burger Fuel Worldwide
Michael Hill International
Contact Energy Ltd
The Warehouse Group
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c Share Investor 2009

Friday, November 27, 2009

Kiwi Income Property debt levels should be a worry to investors

I only have 1000 Kiwi Income Property [KIP.NZ] shares so the outcome of decisions made by management has little material effect on me but it is well worth noting their recent plethora of capital raising attempts over the last few months.

Back in April they raised $50 million in an institutional and shareholder offer for additional shares and just recently I received a very glossy (and no doubt expensive) prospectus asking for an additional $125 million from shareholders.

Now I am not against companies raising capital from time to time, it is part of being a shareholder, but the dilution for shareholders if they don't take up the offer is something that cannot be ignored.

The high debt levels are a worry too in an economy that is yet to bottom.

The company has massive debt levels of almost NZ$1 billion which is just slightly half of the value of the assets on its books - assets that are worth $200 million less than last year and are likely to be worth even less next year as the commercial property sector comes under more pressure due to a business slowdown and less rental activity.

Management of various assets has also been a little lax to say the least with a building in Wellington, BP House, only being offered for sale to one interested party when there were others sniffing around - very strange.

The over-reliance on one property for income - Sylvia Park Shopping Centre - and the spending of shareholder capital to continually expand it could also be a concern if the retail sector continues to slide as it has over the last 18 months.

I am starting to backslide on my reasons for buying in the first place and regret my purchase - be it ever so small - I don't like losing money and fear I will with this one if their debt levels overwhelm their asset values, shareholders run out of money to prop it up and institutions lose interest.

KIP Shareholders please keep an eye out for your investment over the coming year.

As a footnote, and it really needs to be said even though it is probably obvious, I did not participate in the April capital raising and will not involve myself in the latest money grab.

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Letters to Aston: Lessons Learned from a Lifetime of Investing

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Share Investor 2009

Tuesday, November 24, 2009

Sky City to Focus on Gaming

I was going to write about something completely different today but that can wait.

Something I have been writing about for years 1 2 3 has finally happened at Sky City Entertainment Group [SKC.NZ]. They have ditched their money losing Sky City Cinema Division.

CEO Nigel Morrison hinted at it in an interview I did with him back in September:

SI - The SkyCity Cinema division has always been a challenge, to put it mildly. How do you see its fit within your gaming assets given its poor operating history and low to negative returns over a long period?

NM - As I’ve always said since my arrival at SKYCITY, I don’t believe that SKYCITY Cinemas is a core division of our Group. Our Cinemas team, led by Jane Hastings, has done a good job turning around this division in 2009 and we are looking for better performance again in 2010.

He was a little more revealing off the record at the time but either way this Sky City shareholder is very happy about the news.

With the dropping of the cinema division the company will now be able to focus on the casino assets that made the company a shareholder favourite in the 1990s until early 2000s when this asset started to suck money out of the company and the attention of directors and the former CEO Evan Davies.

They are getting NZ$59 million (subject to due diligence and regulatory approval) from Australia based cinema operator Amalgamated Holdings Ltd [AHD.AU] and the good news is that this excludes land and leases held by the company. Presumably this means that if sold in a February deadline Amalgamated will be paying rentals to Sky City - such a lovely thought!

The cinema division was bought for a total of just north of NZ$100 million years ago and was completely written off on the balance sheet 2 years back, so the realisation of nearly $60 million, plus hanging onto assets in the company actually worth something (the cinemas as such made no money) is a great outcome for the company and its long suffering shareholders.

The only decision to be made now is whether the proceeds of the sale will be used to pay down additional debt or distributed to shareholders as a special dividend - I would support the former.

Sky City shares rose 3c in a down market on larger than average volume on the news, indicating that the market has been looking forward to this result.

Disclosure: I own SKC shares in the Share Investor Portfolio

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Sky City Entertainment Group @ Share Investor

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c Share Investor 2009

Monday, November 23, 2009

Long Term Play: The Warehouse Group

Chart forWarehouse Group Ltd (The) (WHS.NZ)

I grabbed another 7000 shares of The Warehouse Group [WHS.NZ] back in July when the price came down below 4 bucks. That was for my long term portfolio.

I gave my readers the heads up back in September that there was short term money to be made by buying WHS stock at just over 4 bucks those that took up the offer would have been able to make a good 10% on their money in a few weeks if they timed things right.

The Warehouse share price hit $4.08 at close of business on the NZX last Friday (see chart above) after ditching its dividend the previous week and this investor is watching closely again for the share price to drift back below his buying price barrier so he can add more stock to his portfolio.

First quarter sales have stabilized and a slight rise is apparent for whatever reason.

The stock is a good yield play with over 6% gross PA return on current shares prices and dividend payouts, so it beats term deposits hands down which currently languish at just over 5%.

My interest is clearly going to be piqued at closer to the $3.72 I paid for additional stock in July and I am going to have to use borrowed money this time to secure any possible purchase.

The revolving credit line I have sits at 5.5% floating so when imputation credits are added I am still up on any possible deal.

I am looking at adding 5000 more to take my long term holding to 20000.

The Warehous
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Friday, November 20, 2009

Are we there yet?

Has the stockmarket and wider economy in New Zealand and abroad made a recovery as many commentators have pitched or are we in the middle of something that we don't really have any idea about what will happen?

Well, it depends on who you read, watch or listen to.

I am of the strong opinion that in New Zealand we are in a middle of a downturn that could go either way depending on the reactions to economic conditions.

So far that has included pumping large amounts of borrowed moola into financial institutions and other quasi Government diaspora in order to smooth out the financial bumps and "rescue" us from the worst parts of the recession - the opposite of what we should have done and what got us into the economic toilet in the first place.

This has kinda worked if one doesn't go deeper than a politician looking in the mirror but of course it really is a false economy because in order for a sustained crawl back into the black these "stimulus" packages need to continue and in order for that to happen we have the have the Chinese saver ready and willing to continue to have their savings plundered in order for our emperors keep their clothes.

Is that going to happen? clearly not and when we stop gorging off the hard work of the Asian region we have to eventually pay them back and that is when the hard part comes.

All our money going into paying back what we owe not on stimulating the economy, boy its a circular thing aint it?

Many will know that I am of the opinion that those that took the big risks (individuals and institutions) and made the big money should have been left to fail, for that is the natural order of things and of course teaches good life lessons along the way. If we had left things to collapse we would be on a sure upwards trend in terms of the economy and not the present shaky, socialist type unsureness that we currently find ourselves wallowing in.

Our bailouts, stimulus packages and taxpayer funded car and house purchasing is simply delaying the inevitable downturn. When that happens I do not know but it will and will make the current financial melee look like a walk in the park by comparison.

We will get to our destination in the end though, wherever that is.

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Share Investor 2009

Friday, November 13, 2009

What Infratil sale of Auckland Airport stake means

The sale of Infratil Ltd [IFT.NZ] 3.87% stake in Auckland International Airport to institutions [AIA.NZ] 3 days ago at first look might not seem good news for existing shareholders.

All is not lost however!

Infratil management state that their reason for selling was "consistent with recent capital management initiatives and provided additional flexibility to fund current and future opportunities".

That means they pretty much took a bath on their short term punt on the airport being sold 2 years ago and when the brakes were put on it by the outgoing Labour Government they held on for too long.

Of course another port sale could be way off in the distance but an investigation into the relaxing of the rules of "sensitive strategic" assets by the National Government earlier this year means that this would be more likely given another bid for the airport.

What is more important to Auckland International Airport shareholders is that the company is doing OK during the current downturn -stagnant profits are all the rage - and is likely to do significantly better in the long term.

The Canadians and Arabs were willing to pay 100% more than the current share price (oh that seems so long ago) so there is still value left in the near monopoly company that is the Auckland Airport.

And that fellow shareholders is the way you should be looking at the Ifratil sale.

Disclosure: I own AIA shares

Auckland International Airport @ Share Investor

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Tuesday, November 10, 2009

Stock of the Week: Ryman Healthcare Ltd

Ryman Healthcare [RYM.NZ] is a stock up there with Fisher & Paykel Healthcare [FPH.NZ] in terms of possible long term gains.

In my opinion it will grow revenue and profit for many years to come.

The reasons I have included it in this week's Stock of the Week are its long term prospects and the fact that I still think it is cheap stock at current prices.

The elder care sector that Ryman competes in has been growing for the company at a rate of 20% per annum for the last 10 years and shows little sign of abating. In fact current growth rates could look quite modest in comparison to future growth.

Demographics show that in the future the elder population that will need such care that companies like Ryman provide will increase by around 150% over the next 20 years or so.

The stock has been cheaper over the year at a 52 week low of NZ$1.14 but at a $1.97 close yesterday and an all-time high of Over $2.70 at its peak, considering its potential growth this still makes Ryman a good long term stock.

Buy on any weakness if this stock is for you.

Good luck!

Disclosure: I own RYM and FPH shares

Stock of the Week Series

Restaurant Brands Ltd
New Zealand Refining Ltd
Hallenstein Glasson
Mainfreight Ltd
Fisher & Paykel Healthcare
Xero Ltd
Auckland International Airport
Sky City Entertainment Group
Burger Fuel Worldwide
Michael Hill International
Contact Energy Ltd
The Warehouse Group
Fisher & Paykel Appliances

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c Share Investor 2009

Monday, November 9, 2009

Kathmandu IPO: Shares set for discount

According to a Bloomberg story the Kathmandu Holdings [KMD.NZ]IPO looks set to be oversubscribed, indicating that either this is the best IPO since IPOs were invented or that investors have failed to look close enough into the prospectus for the numerous omissions and sleights of hand made by current owners Milford fund shareholders and their associates and decided there is money to be made.

If the Myer float last week is anything to go by Kathmandu is going to begin trading at a deep discount when the shares begin trading on the NZX and ASX in late November.

Myer Holdings Ltd [MYR.ASX] shares were dumped as institutions holding stock soon realised they couldn't stag the issue and began to sell off.

Those patient investors wanting to get Kathmandu shares may get them for closer to their worth if they are willing to wait a while and let Mr Market decide what the company is worth.


Prospectus date Friday, 23 October 2009

Retail Offer opens Tuesday, 27 October 2009

Retail Offer closes 5:00pm AEDT/NZDT, Friday, 6 November 2009

Institutional Offer and Institutional Bookbuild opens Tuesday, 10 November

Institutional Offer and Institutional Bookbuild closes Wednesday, 11 November 2009

Pricing and allocation announced Thursday, 12 November 2009

Expected commencement of trading on ASX (conditional and deferred settlement basis)
and on NZX (conditional settlement basis) Friday, 13 November 2009

Institutional Offer settlement and last day of conditional trading Tuesday, 17 November 2009

Shares expected to begin trading on a normal basis on NZX Wednesday, 18 November 2009

Expected despatch of holding statements and any refund payments if required Thursday, 19 November 2009

Shares expected to begin trading on a normal settlement basis on ASX Friday, 20 November 2009

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c Share Investor 2009