Monday, May 31, 2010

Ecoya 2010 Full Year Profit: More of the same to come?

Ecoya Ltd [ECO.NZ] had its IPO listing on May 3 2010 and its 2010 full year profit snuck out to the market late last Friday isn't going to blow out all the candles on your celebratory cake.

For starters the loss indicated by management in its prospectus, at $2.35 million, is almost $100,000.00 more than forecast on revenue of $3.9 million.

The loss is around 250% more than the previous year.

These forecasts were stated in the Ecoya Prospectus just 2 months ago.

The differences in forecasts and actual results were explained variously as unexpected stocktaking and variances in customer receipts.

There is also some more expense for shareholders down the line with up to $675,000 to be lent to "employees" (see directors) to buy ECO shares. This sum is 6.5% of the $10.1 million raised.

To be fair the company is in its listed infancy but it has been operated by the current management for a number of years as a private business so they should have an accurate handle of the way the business operates by now and quite clearly they don't.

I would rather have seen the company under promise and therefore over deliver but the current result would put a sout taste in the mouth of shareholders, especially considering ECO shares are down more than 10% thus far.

Having been a negative bugger, their first profit report as a listed company shouldn't rule out any sort of recovery in company fortunes sometime in the future but to kick off business in this manner isn't a good look.


Ecoya main shares are trading at 89c on extremely low volumes, its low for the year.

Ecoya Ltd @ Share Investor

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Every Bastard Says No: The 42 Below Story

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c Share Investor 2010

Sunday, May 30, 2010

Patience Will Pay off

I am getting a wee bit excited again because of the global market turmoil and downwards stockmarket prices - it is dull and dangerous when share prices rocket beyond their real intrinsic value - because good stocks are starting to look attractive again.

I started buying stocks in the Share Investor Portfolio again when they approached my ball park for buying back in April 2009 and didn't stop until shelling out $35,000.00 for Mainfreight Ltd [MFT.NZ] and The Warehouse Group Ltd [WHS.NZ] in July of that year. I got what I thought were comparative bargains and was happy with my purchase then and still am now.

The thing is, and this was inevitable given the fragile nature of the worlds economy, markets have stepped back into the fear cycle due to the bleak outlook and have started moving in a southwards trajectory.

Bad if you bought at the peak of the buying frenzy over the last year but good if you are the patient little tortoise just peeking out from under your shell again.

It is clear to me though that this is just the beginning of a market slide and better opportunities await for those will to marketwatch and twiddle their thumbs for a while.

Over the last year or so we have seen markets like the DOW recover from their lows to be up by more than 60% at its peak earlier this year, a rise bigger than the one after the great Wall Street crash of 1929. We have to expect, given that, that our markets are going to correct themselves from these peaks and find a level more suited to the uncertainty and bleak outlook for the global economy and as markets always overreact to bad and good news we will probably see some relative bargains to be had.

The DOW trading at levels close to its pre Sept 2008 slide high, is not an index that mirrors what is happening now, let alone what could happen in the future with all this State debt sloshing around.

The New Zealand Stockmarket has lost around 10% off its mid April 2010 peak to finish at 3047 on the Top 50 Gross Index last Friday and as night follows day it always follows the fortunes and misfortunes of its much bigger brother across the Pacific and then a few thousand miles more.

Be ready then to buy as the market falls. Buy good quality and the best buys are often stocks you are already holding in your portfolio that have perhaps dropped below your initial buy price. Hell you bought at that price, if they are on sale and the long term company prospects are good why not stock up?

The key is patience though. I think markets are going to fall a significant way from current levels and some stocks are going to come off worse than the average. It is very hard to pick market lows (I would say impossible) so buy at levels you are comfortable with but don't buy yet - unless you know something I don't.

A slow race to the finish line will make you a winner.

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Every Bastard Says No
From - Every Bastard Says No: The 42 Below Story

c Share Investor 2010

Friday, May 28, 2010

Fisher & Paykel Appliances 2010 Full Year Profit Analysis

The 2010 Full Year result for Fisher & Paykel Appliances [FPA.NZ] out this morning should leave shareholders feeling a little green around the wallet.

In relation to the 2009 Full Year result of $33 million the 2010 $83 million loss on revenue down 15%, while possibly better than most thought it would be, is nonetheless a testament to management failure.

Both the 2009 and 2010 full years were marked by one off "restructuring costs" and there are probably more of those to come but normalised profit (which FPA like to point out) has almost halved from 2009.

Revenue in Australia has improved significantly and New Zealand revenue has stopped falling.

Notably though North American sales have collapsed over the last half, while European revenue has more than halved in the 2010 6 months.

These markets were trumpeted by management as high growth and while other appliance makers sales have improved in these markets as the economy is stimulated by taxpayer handouts the more expensive and unreliable FPA product has been languishing on the shelves.

A plant built in Mexico to meet this demand has been underutilized and value of it written down this year.

Net debt, while reduced significantly because of a capital raising and bailout by Haier in 2009, at $179 million is still way too high and likely to increase and need further attention in the medium term, especially if sales don't improve.

The outlook for 2011 remains bleak in my opinion and further losses look to be on the cards even if sales improve.

Fisher & Paykel Appliances @ Share Investor

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c Shareinvestor 2010

TSB Bank VS Kiwibank

The fuss made from the left over a possible part sale of Kiwibank would be easy to understand if the bank was a roaring success but the bank that was set up in the early 2000s to buy votes for Labour and Jim Anderton has been a drain on taxpayer funds since then.

You will read the exact opposite in the mainstream left media but this particular Government Department just doesn't cut it.

A $NZ 125 million set up cost and continued subsidization from New Zealand post means Kiwibank has been a big failure.

Some forget what happened last time politicians got involved in banking in New Zealand, with the BNZ having to be bailed out by the taxpayer in the late 1980s after it went belly up. Why do some insist we keep something because it makes Kiwibank customers feel all warm and fuzzy while the rest of us subsidise them with our taxes?

A possible float of Kiwibank would ameliorate the demands of Kiwibank management for more taxpayer dosh for expansion of the bank.

I am of the view that the bank be sold outright and the money returned to taxpayers but any float, partial or full would benefit the bank and the company in one fell swoop.

We have a smaller bank, TSB Savings Bank, that is community owned and it has powered ahead the likes of Kiwibank without taxpayer handouts, growing business a real and sustainable way by using largely customer deposits to lend to other customers (you know, how a real bank operates)

By subsidising the likes of Kiwibank we stifle real private business like TSB. When their competitors have the advantage of taxpayer funding it really isn't a level playing field. The only winners are the bureaucrats working at the bank.

So, lets float or sell Kiwibank. In the long-term it is going to save us alot of money.

TSB have just announced their 23rd consecutive annual record profit of $51.2 million, up 19% on last year. This compares with a $23.4 million half year 2009 profit (bolstered by NZ Post & taxpayer funding) by Kiwibank, down 9% on last year. TSB have acheived their results on less than half the assets that Kiwibank has on its balance sheet.

Figures don't lie.


TSB Savings Bank - Services
Contact TSB - Support your local bank

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c Share Investor 2010

Mainfreight Ltd: Full Year 2010 Profit Analysis

Mainfreight Ltd [MFT.NZ] has had a very good 2010 full year profit result considering the state of the world economy and the subsequent slow down in world trade. The result is up 2.5% on the 2009 full year announcement.

Key Points

1. Total revenue (sales) decreased by 10.5% to $1.13 billion, from $1.26 billion last year

2. A net surplus after taxation and abnormals of $36.37 million for the twelve months of the 2010 financial year; an increase of 2.5% on the previous year’s result of $35.48 million.

3. Second half of year up more than 11% in revenue indicating a possible return to growth.

4. A big focus on cutting operating costs over the period of downturn in the business/economy, with more than $32 million cut.

5. A huge decline in North American revenues of nearly 25% in the first half but importantly showing signs of a recovery in the second half.

6. Australian operations steady.

7. New Zealand operations down in first half but improving in second.

8. Asian business under intense competitive pressure.

9. Cashflow down.

10. Debt decreased significantly from $115.28 million to $80 million.

Management have done well to come in with a higher full year profit. They did this by cutting back fat in the business and delaying capital expenditure and that is a testament to how responsive management are to trading conditions for them and the economic situation. Other listed NZX companies have continued to operate without these sort of economy measures and shareholders are paying the price.

Mainfreight have indicated to the market that while business for them is improving, any improvement could be tentative at best given the continuation of global economic problems and problems in Europe and elsewhere with high state debt levels.

I have to concur with these sentiments and I see any - if there is to be growth - short to medium term growth for Mainfreight that it comes for reasons of market share protection and that will impact on margins and therefore profit.

Hopefully that means there will be more expenditure cuts until the economic slowdown is a real one (the current "rebound" could be fueled by more State funded debt through stimulus packages) and sustainable growth and increased margins will once again be the order of the day for Mainfreight.

9 out of 10.

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c Share Investor 2010

Tuesday, May 25, 2010

Telecom maybe oversold

Every market watcher is talking about it, just how low is the Telecom NZ [TEL.NZ] share price going to go.

Well at time of market close today the TEL share price is down 11c to a new all time low of $1.85 (see 2 month chart above) on lowish volume.

I don't want to discuss this today though.

I think the market has oversold the stock at this point and seems to be discounting the value that could be added to shareholders if the company decides to split up its various divisions so it can bid for 1.5 billion in taxpayer dosh to build a new fibre network for faster broadband in New Zealand.

The decision to split the company is by no means a definite one but beleaguered CEO Paul Reynolds indicated yesterday that this could be on the cards and the company is investigating the possibility of breaking Telecom into two parts - Chorus and Telecoms other divisions.

Depending on how a possible separation is executed, this could be a good move for existing shareholders as a split could realise them full value of the companies two parts by opening the Chorus lines/infrastructure business to the posibility of nabbing a slice of that taxpayer moola.

While there might be one-off and ongoing costs for the two separate businesses I think investors at these price levels will benefit from a separation, at least in the short term.

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Monday, May 24, 2010

Sky City Convention Centre Expansion a Money Loser: Part Two

With news out over the weekend that Sky City Entertainment Group Ltd [SKC.NZ] intends to extend its expansion of its present centre to include a bid for a much larger and far more expensive stand alone "National Convention Centre", should leave SKC shareholders in fear of future profits and indeed the viability of the company in the medium to long-term.

I have fears about the $40 million expansion of the present convention centre and the dubious reasons for spending money on something with little or negative returns.

A new National Convention Centre, if built by Sky City, would be located as a standalone development on Hobson Street by the TVNZ centre.

Estimates of a price tag range from NZ$300-$550 million would clearly need SKC to either draw down on their $1 billion credit-line or go to the market for additional funds from shareholders and/or institutions and would be the biggest single capital expenditure for the company since its flagship Auckland Casino was developed in the mid nineties.

If Sky City borrowed say $400 million at their current rates of financing at around 7.5% per annum the convention centre would have to return a net profit from it of $30 million per annum just to cover financing costs. It simply doesn't stack up if you look at the figures.

In the absense of evidence of any good return on capital expense and ongoing running costs being a massive being a permanent drain, a convention centre built by Sky City just looks like monument building and justification of this sort of cost to shareholders should be put to the vote before anything goes ahead.

Let the local politicians build such a convention centre, if it is needed at all, at least then the ongoing losses would be spread around ratepayers rather than just long suffering SKC shareholders like my good self.

Disclosure I own SKC shares in the Share Investor Portfolio

Share Investor Interview

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c Share Investor 2010

Saturday, May 22, 2010

2010 Budget a Good Start

Thurday's 2010 New Zealand Budget was probably one of the best I have seen in my 44 years but it lacked the will to live within a budget.

Lets gripe first.

There were no cut-backs in Government spending, in fact spending was increased by $1.8 billion, so borrowing is the name of the game for sometime yet.

Little incentive for investors to save.

Welfare needed to be cut and the Emissions Trading Scam tax dumped along with some superfluous Government departments like Wimins affairs and the Ministry for "climate change" but I guess there is time for that at a latter stage.

The tax cuts, while good, were not sharp enough or bold enough to change the direction of the economy quick enough.

What I like.

The tax cuts gave a good incentive for all to work harder and were especially generous to low income earners with good cuts in the lower income brackets. A flat overall tax of 20% would have given the economy a good kick-start , with a tax free threshold of $10,000 for all earners.

The cut in company tax from 30 to 28%, while not bold enough (a cut to 25% reducing to 20% in 2011 would have been wiser) will be good for private and listed companies and will be a small incentive to those buying listed stocks.

A good budget tax wise but not enough restraint.


Budget 2010 -
Budget 2010 -

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Friday, May 21, 2010

Telecom NZ Share Price has "Jumped the Shark"

I wrote about Telecom NZ [TEL.NZ] share price back in March and at that stage, March 17, the share price had reached $2.15 at close of trading after touching $2.13. At that time an all-time low for the company since it listed back in 1992.

Well, today, thanks to more global economic uncertainty because of free spending debt laden Greeks and other PIIIGS the TEL share price has dipped below the magical 2 buck mark for the first time and it is all on for young and old. It has now "jumped the shark".

Like most other NZX traded stocks the Telecom NZ share price has traded down (see TEL comparison with the overall NZX on chart above) on very large volume today but the company still has other negative factors going against it like more money to be spent on capital infrastructure, more competition and more problems delivering adequate service in all its areas of business; Telecom landlines, Mobile, Internet and infrastructure delivery.

Below 2 bucks is an important psychological level for the share price and it is anyones guess where that level will reach but I am picking it is all downhill from here, even if global markets"recover" from the slippery Greeks.

Beware the shark.


Telecom NZ is currently trading at $2 even on nearly $25 million traded.

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