Share Investor: October 2010

Friday, October 29, 2010

Allan Hubbard Saga: Fourth Thorton Report

Well, the Allan Hubbard saga rolls on with the forth Grant Thorton Report released today.

What it reveals is a deeper look at Mr Hubbard's financial processes in regards to several of his now defunct investment vehicles.

Once again it looks bad for Mr Hubbard.

More detail of related loans made and lack of security provided from borrowers seems to be par for the course.

Details include major shortfalls in loan payments made to Aorangi Securities:

"We will also be working with farmers who have been unable to meet their interest obligations to Aorangi and who may, in fact, never be able to do so."

There is also one property owed by the Te Tua Trust that has not received any rent for 12 years! That trust has also been identified as having "very poor" record keeping:

"Of a total of 104 Te Tua loans, 25 are not being serviced, they have no address or contact details for nine further borrowers and 11 loans are likely to be written off."

There are also grave issues over Hubbard's transfer of assets to his various "Charitable Trusts"-
charitable to him not others so it seems:

"We have investigated this arrangement and have concluded that these transfers are of doubtful validity. A number of shareholders in these companies have taken action to reverse these transfers, as they required the consent of all shareholders. A formal annulment process is under way and all shareholders of each company will be contacted with regard to the annulment."

"There are a number of associated tax issues that need to be addressed because of these unauthorised transfers."

So it appears that contrary to submissions to media by Mr Hubbard that others in his various companies had taken control and were "doing their own thing", Hubbard was the one with the finger on the button.

To boot he now appears to have an issue with the Inland Revenue, perhaps the scariest revelation thus far over the last year or so.

There is also further evidence that various Hubbard entities now under statutory management were in trouble for two years or more - again contrary to Mr Hubbard and his supporters assertions that his businesses only suffered financially because of recent Government intervention.

Many loans to various business have been made without sufficient collateral and in some cases to individuals and business who would not ordinarily be able to borrow money in the third tier lending sector, let alone the first tier. Highly risky lending was par for the course in a significant part of Hubbard's business.

A significant sum of $27 million in assets comprising cash, shares and investments was also "missing"but included in Hubbard Management Funds books as at 31 March 2010. A serious omission that can only become clearer with some more intensive investigation on Thornton's part.

The Hubbard saga is an interesting issue. It comes at a time where fraudsters who were involved with the failure of Blue Chip have walked without taking responsibility for the mess they left behind and a Serious Fraud Office crackdown on Hubbard and his shenanigans at South Canterbury Finance.

Thornton Report 5 comes at the end of November.

Footnote: From Grant Thornton Report 4

A group of six investors is being established to meet with us to discuss issues facing investors. It
has become apparent many investors are having difficulty understanding the many complex issues in Aorangi and HMF and how these impact on their investments. The liaison group will disseminate information to other investors from our meetings. The liaison group can be contacted via Jan and Noel Macpherson. Their email address is janandnoelmac@hotmail.com and contact phone number is 03 685 8095.

Hobbit tax cut needs an overall business sequel

The saving of the Hobbit movie and its production in New Zealand rather than taking off overseas by pumping taxpayer dosh into it puts me in a quandary.

Like most Kiwis I wanted the Hobbit to be made here and after New Zealand and foreign unions put that prospect at risk by black banning the movie back in August (read the ban documents here) I, like the majority of us was hobbit mad.

Rightly so, at risk was $670 million of badly needed foreign moola pumped into the Hobbit and the local economy and billions of dollars of future earnings at risk from other movie projects because of bone headed unions and brain dead actors.

Those future projects are still at risk due to the Hobbit fracas.

John Key has saved the day and boy did he do well to stitch up a last minute deal. US$ 20 million of taxpayer dosh was used to sweeten the deal by providing bigger "tax incentives".

This is what I am in a quandary about however.

I am clearly for the Hobbit being filmed here but I am against corporate welfare, which giving $20 million of taxpayer cash to Warner Brothers to make the movie is.

The movie will be a net earner for the country, $NZ670 million in direct revenue, plus possible billions in intangibles like more tourists, less just under NZ$100 million in taxpayer incentives, so it is moola well spent but what makes the movie industry so special?

Frankly it aint.

While it supposedly provides around NZ$3 billion in annual foreign revenue it is nowhere near our biggest industry or earner of foreign exchange.

That precious prize goes to tourism as a whole and the Dairy Industry comes in as the second sequel in the foreign earnings blockbuster stakes.

Of course these two industries are currently being hammered by increased government imposed cost through harebrained carbon taxes and other environmental extremism and a penchant for the Nats to roll over private property rights, so land owners cannot sell their properties to the highest bidder.

So you can see why I am in two minds cant you?

If the National Government thinks lowering taxes (effectively that is what tax incentives are) to make movies here is a good idea - and I think it is - then why not lower taxes for other industries as well.

We know lower taxes stimulate the economy from a personal tax cut point of view and the same is true of lower taxes for business.

They are a good thing!

Why not have lower taxes for all business instead of Governments trying to pick their favourite business of the moment.

With the Hobbit they have chosen a clear winner but when have you seen Governments of any hue pick business winners?

The answer lies in a long record of wasted billions in failed businesses.

So John, you did well this time but if you are listening I know you know that lower taxes are great for our economy, it shows in your policies. Why not spread the tax love around and let business choose what they do with that extra dosh rather than you.

It will make the forthcoming blockbuster Hobbit movies look like an art film by comparison.

Recent Share Investor Reading

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A Perfect Gentleman: The Sir Wilson Whineray Story

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Thursday, October 28, 2010

Make me an offer I cant refuse: Auckland International Airport Ltd

I know my entry price for shares in the Share Investor Portfolio but what price do I sell that share for if I was made an offer today?

I have been thinking about this over the last week or so, so in the first of a series of 17 installments - the number of companies in the portfolio - I am going to discuss what my sell price might be and why.

Please keep in mind that most of the portfolio I don't intend to sell anytime soon, if at all, but if I was offered a predetermined price right now I would sell if that price met my future expectations of financial performance for the company. The offer would have to take into account the prospects for the company in the long term and the possibility I may not be able to do better return wise were I to use the proceeds of a sale to purchase another investment. My investment outlook is 10 years plus.

Many of you are going to be completely blown away by the price I put on my investments but this is only my opinion so don't shoot me without thinking your response through first.

The first stock I wish to cover off is Auckland International Airport Ltd [AIA.NZX]. This stock has performed well for me and has returned around 50% thus far when dividends, capital increase and tax credits are factored in. 1000 AIA shares were first purchased in 2006 and then 4000 in 2009. 304 shares were bought in 2009 at $1.65 as part of a capital raising.

A great little earner so far!

The main reason I bought this company is its status as a near monopoly in a fast growing sector that is protected by the capital outlay and political problems that another port competitor would face, so it has a great little competitive moat around it.

Just to show my readers what value I put on it, I did not sell the stock when the Canadian Pension Plan came calling a few years back and offered around $4.64 for a stake in the company.

My long term view of this particular company puts a far higher value on it.

Profit has been stagnant for the last few years but if historical growth continues long term investors in AIA will be rewarded.

For these reasons $10 plus per share would get me to part with my beloved AIA shares today.

Queenstown Airport Buyout @ Share Investor

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AIA @ Share Investor

Long Term View: Auckland International Airport
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Download AIA Company Reports
Download Queenstown Airport Company Reports

c Share Investor 2010

Tuesday, October 26, 2010

Share Investor Portfolio: Value @ 25 October 2010

The Share Investor Portfolio has done well over the last week. Up 2.1% or $5865.47. This was due to an overall rise in every stock in the portfolio except PPG, ASBPB, RYM, and STU.

This is from a background of the NZX similarly up over the past week.

There is $15660.03 in unspent net dividends in the bank from the 2010 earnings year and approx $50000.00 in tax credits earned from the portfolio since it began in late 2002.

Share Investor Portfolio as at 17:30:00, Monday 25 October, 2010 (NZDT)

Stock

Quantity

Cost price

Total cost

Market price

Market value

Change

AIA

2,000

$1.700

$3,400.00

$2.110

$4,220.00

$820.00

24.12%

AIA

2,000

$1.510

$3,020.00

$2.110

$4,220.00

$1,200.00

39.74%

AIA

803

$2.150

$1,726.45

$2.110

$1,694.33

$32.12

1.86%

AIA

445

$0.000

$0.00

$2.110

$938.95

AIA

$1.650

$105.60

$2.110

$135.04

$29.44

27.88%

ASBPB

2,864

$0.000

$0.00

$0.725

$2,076.40

ASBPB

7,146

$1.000

$7,146.00

$0.725

$5,180.85

$1,965.15

27.50%

BGR

438

$0.000

$0.00

$1.380

$604.44

BGR

2,562

$0.990

$2,536.38

$1.380

$3,535.56

$999.18

39.39%

FBU

266

$0.000

$0.00

$8.200

$2,181.20

FBU

848

$9.750

$8,268.00

$8.200

$6,953.60

$1,314.40

15.90%

FPH

3,000

$2.350

$7,050.00

$3.330

$9,990.00

$2,940.00

41.70%

FPH

469

$0.000

$0.00

$3.330

$1,561.77

FPH

1,531

$3.720

$5,695.32

$3.330

$5,098.23

$597.09

10.48%

FRE

1,882

$0.000

$0.00

$3.010

$5,664.82

FRE

6,749

$3.630

$24,498.87

$3.010

$20,314.49

$4,184.38

17.08%

GFF

541

$0.000

$0.00

$1.900

$1,027.90

GFF

1,459

$2.330

$3,399.47

$1.900

$2,772.10

$627.37

18.45%

HLG

244

$0.000

$0.00

$4.450

$1,085.80

HLG

756

$2.530

$1,912.68

$4.450

$3,364.20

$1,451.52

75.89%

KIP

190

$0.000

$0.00

$1.040

$197.60

KIP

810

$1.480

$1,198.80

$1.040

$842.40

$356.40

29.73%

MFT

1,000

$7.960

$7,960.00

$7.060

$7,060.00

$900.00

11.31%

MFT

1,838

$8.000

$14,704.00

$7.060

$12,976.28

$1,727.72

11.75%

MFT

550

$0.000

$0.00

$7.060

$3,883.00

MFT

1,612

$4.200

$6,770.40

$7.060

$11,380.72

$4,610.32

68.10%

MHI

1,646

$0.860

$1,415.56

$0.750

$1,234.50

$181.06

12.79%

MHI

7,000

$0.630

$4,410.00

$0.750

$5,250.00

$840.00

19.05%

MHI

718

$0.000

$0.00

$0.750

$538.50

MHI

636

$1.050

$667.80

$0.750

$477.00

$190.80

28.57%

PPG

$0.000

$0.00

$0.290

$8.99

PPG

1,500

$0.440

$660.00

$0.290

$435.00

$225.00

34.09%

PPG

1,004

$0.800

$803.20

$0.290

$291.16

$512.04

63.75%

PPL

1,000

$3.090

$3,090.00

$2.000

$2,000.00

$1,090.00

35.28%

PPL

1,000

$2.870

$2,870.00

$2.000

$2,000.00

$870.00

30.31%

PPL

939

$4.200

$3,943.80

$2.000

$1,878.00

$2,065.80

52.38%

PPL

877

$0.000

$0.00

$2.000

$1,754.00

PPL

1,184

$1.530

$1,811.52

$2.000

$2,368.00

$556.48

30.72%

RYM

373

$0.000

$0.00

$2.160

$805.68

RYM

4,627

$1.970

$9,115.19

$2.160

$9,994.32

$879.13

9.64%

SKC

5,750

$7.430

$42,722.50

$2.910

$16,732.50

$25,990.00

60.83%

SKC

1,000

$7.600

$7,600.00

$2.910

$2,910.00

$4,690.00

61.71%

SKC

2,750

$7.700

$21,175.00

$2.910

$8,002.50

$13,172.50

62.21%

SKC

1,431

$8.750

$12,521.25

$2.910

$4,164.21

$8,357.04

66.74%

SKC

25,085

$0.000

$0.00

$2.910

$72,997.35

SKC

899

$4.720

$4,243.28

$2.910

$2,616.09

$1,627.19

38.35%

STU

$0.000

$0.00

$2.490

$194.22

STU

322

$4.740

$1,526.28

$2.490

$801.78

$724.50

47.47%

WHS

4,500

$3.730

$16,785.00

$4.000

$18,000.00

$1,215.00

7.24%

WHS

6,979

$6.000

$41,874.00

$4.000

$27,916.00

$13,958.00

33.33%

WHS

2,880

$0.000

$0.00

$4.000

$11,520.00

WHS

641

$3.710

$2,378.11

$4.000

$2,564.00

$185.89

7.82%

13.41%

	Total cost	Market value	Change
	$279,004.46	$316,413.48	$37,409.02

Share Investor Portfolio @ Share Investor

Share Investor Portfolio: Value @ 18 October 2010
Share Investor Portfolio: Value @ 11 October 2010
Share Investor Dividends

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A Perfect Gentleman: The Sir Wilson Whineray Story

c Share Investor 2010