Share Investor Friday Free for all: Edition 11

Fonterra front footing it

The announcement yesterday of a possible listing on the NZX by New Zealand's biggest company, Fonterra, is the best news the New Zealand economy has had in generations.

Fonterra, a global milk products producer, manufacturer and exporter is a huge contributor to NZ Inc and the company has become a dominant force in the Global Dairy products boom.

It has now got to the point though, that it needs some serious capital to allow it to grow larger and compete with the likes of Nestle, Danone and Kraft. Fonterra's cooperative structure doesn't allow the company to raise the capital needed to foot it with the other big boys as the dairy industry players grow in size, through acquisitions and mergers.

There has been much bleating by Unions and the NZ First Political Party that the proposal isn't a good idea but frankly as Unionists and pollies what the hell would they know about business.

This is great news for Fonterra and its long term future and excellent news for New Zealand investors as they will be able to participate in an industry that dominates our export revenues and economy and contribute to the investment of a great business.

The NZX is going to be more indicative of our economy by having Fonterra listed, possibly sometime in 2010, and the index will get the much needed boost that it has lacked all these years simply because of the impact the company has in our economy.

A cash cow indeed.

Sky City twiddling thumbs in the back row


Sky Tower, Auckland, NZ

News this week that Sky City Entertainment(SKC) is not likely to be able to tell the market anything about the 3 companies currently looking over SKC's books and what their intentions will be until "after Christmas" leaves this writer wondering how far management can stall shareholders any longer.

The timetable initially stood at an announcement at the end of October, then mid November and now after xmas. It makes me wonder how serious prospective bidders might be and doesn't inspire confidence in a good price for the company or a sale at all.

In other company news, contenders for SkyCity Cinemas - which could be worth as much as $116 million - are understood to include Australian firm Greater Union, US-based Reading Cinemas and Hoyts, previously a partnership between PBL and West Australian Newspapers, which was purchased by Australia's Pacific Equity Partners.

The vagaries of management speak are truly alive and well at Sky City, this from the company November 14:

SkyCity said yesterday it did not expect to progress with the cinema sale before the end of November.

What the hell does that mean, will they give a bloody deadline?

Sky City Management surely must be nominees for the worst board for 2007.


Morrison speaketh with forked tongue

I'm having trouble taking Lloyd Morrison seriously.

Morrison, the chief executive of Infratil, a director of Wellington Airport and a backer of a second airport for Auckland at Whenuapai has $300 million invested in Auckland Airport(AIA) on behalf of Infratil and the NZ Super Fund.

The trouble with this though is that Morrison's directorship of Wellington Airport and backing of a second port in Auckland put him in direct conflict with his large ownership of AIA shares and his ambition to get a seat on the AIA board.

Morrison says there is no conflict but it doesn't take a genius to figure out that he is staining credibility paper thin if he thinks that.

He was caught out today on National Radio Business today and last week when he said that the Canadian Pension bid was too low at $NZ3.65 and mentioned a price north of 4 bucks per share as being fair value for the company.

Interesting take when you consider than Infratil was involved in a bid, earlier this year, that was rejected by the board as too low, probably below the Canadian bid.

Morrison is a savvy investor and he is using subterfuge, doublespeak and attacking competitors in his bid to get some sort of control in the Auckland Airport deal/s.

While the AIA board hasn't been straightforward with shareholders over the last 8 months of this protracted bid for control of the port, Morrison's intentions are not clear and he cannot be trusted and shouldn't be elected to the AIA board on November 20.

In takeover news, Canadian Pension Plan Investment Board (CPPIB) has made a formal bid for AIA today.

The key terms of the offer are as follows:

Offer Price: The consideration offered for each Outstanding AIAL Shares taken
up under the offer is $3.6555 in cash.

Partial Offer: The Offer is for 39.53% of the AIAL Shares not already held or
controlled by the Offeror

Closing time: The Offer closes at 5.00pm on 13 March 2008
Partial Offer: The Offer is for 39.53% of the AIAL Shares not already held or
controlled by the Offeror

Closing time: The Offer closes at 5.00pm on 13 March 2008



Hollow words, hollow competition

The owner of Share Trader and many other financial based sites in New Zealand threatened to "take legal action" over this revelation published in the Share Investor Blog a month ago and insisted it be removed and an apology made but as yet has failed to serve me with a writ.

This individual also made a threat of "legal action" over my use of "Good Returns Bookstore" banners on my site back in July even though I was legitimately using them as a genuine affiliate.

Now I don't take kindly to threats and I am justly annoyed by this pest, but I guess threats ring pretty hollow when you use them as your modus operandi when doing business and don't follow through.

Good Returns Bookstore, owned by Tarawera Publishing, continues to spam me with emails to buy their books, even though I canceled my affiliate membership and Tarawera's Sharetrader continues to host my contributions on their site, even though I didn't sign up to their new draconian membership terms and conditions (see the fee for spamming!!) as part of Tarawera taking over the site.

*Incidently you can buy all types of finance books from my Share Investor Bookstore, the range is many hundreds of times larger and at least 30% cheaper than Good Returns Books.

Sort yourself out Phil!



Learning to love China



World markets have been nervous again over the last few weeks. The Dow has slipped from over the 13600 mark to just above 130000, oil has reached almost 100 bucks, gold is over US$800 and the US dollar is doing an impression of a tiger moth with one wing.

Shakiness over future sub prime losses for banks and financial institutions have been blamed and to be sure there is more to come once sweetheart mortgage deals end but like any market jitters the market tends to overreact.

I think what could be happening now and we wont really know it for sure until we look back, is that we are partially seeing the start of the transition of dominance from the US as the financial and economic powerhouse to China. To be fair it ain't there yet but early signs seem to be showing the genesis of something akin to an economic transition.

The low value of the Yuan and the Chinese economy powering ahead means their economy will only power ahead in the future, while the US, a massive importer of foreign made goods is struggling as their dollar sinks and imports cost more.

Also the US as a safe haven for foreign investment is being eroded as their interest rates plummet and the cost of repaying debt to China gets ever more expensive.

The transition of America from a manufacturer to their home market and huge importer to a bigger exporter must come and will be easier to do as their dollar drops against their main trading partners.

It is then China will be seen as an opportunity to US manufacturers instead of a threat and the whole cycle of economic change will start again.

Let us remember that China was an economic powerhouse once before.


NZX Market Wrap

The NZSX-50 index, closed up 1.1 points at 4114.2, on turnover valued at $138.5 million.

Auckland Airport fell 3c to 301, after Canada Pension Plan Investment Board (CPP) submitted its formal cash bid for 39.53 per cent at $3.6555 per share. The airport company has also asked its advisers to seek other offers.

AIA shares had earlier risen to 308 before profit takers moved in. Turnover was a heavy $46.8m.

Fisher & Paykel Appliances rose 4c to 364, having gained about 30c since its first half result last week. The company is also considering selling its finance company to focus on its whiteware manufacture and retailing businesses.

Market heavyweight Telecom gained 4c to 425, Fletcher Building was up 8c at 1166 after being caned for most of the last week or so, and Contact Energy lost 5c to 885.

F&P Healthcare was up 3c at 328, Sky City gained 5c to 537 after getting knocked about yesterday after a broker downgrade. Sky TV lost 8c to 562, and Vector recovered some of yesterday's 6c loss to close up 3c at 233.

Air NZ, which has had a rough ride recently due to rising fuel prices, rose 1c to 202.

Among other stocks to gain, NZX was up 5c at 961, Freightways rose 2c to 380, Infratil was up 2c at 293, Nuplex gained 5c to 725, and carpetmaker Cavalier was up 3c at 315.

Hellaby Holdings lost 2c to 271, despite news it was trading ahead of last year, when it posted its first loss since re listing in 1994.

Rakon fell 5c to 515, Tower was down 4c at 204, Hallenstein Glasson lost 3c to 445, Mainfreight was 5c lower at 710, and The Warehouse was down 2c at 522, marking time while waiting for a decision by the Commerce Commission as to whether Woolworths or Foodstuffs can make a bid to takeover the company.

On the NZAX , Burger Fuel International was down 2c to 60c.

NZ Dollar Wrap

Reuters currency rates
(5pm today - 5pm yesterday, NZ time)

NZ dlr/US dlr US75.43c - US76.47

NZ dlr/Aust dlr A85.28c - A84.97c

NZ dlr/euro 0.5162 - 0.5210

NZ dlr/yen 82.96 - 85.14

NZ dlr/stg 36.93p - 36.17p

NZ TWI 69.72 - 70.48

Australian dollar US88.46c - US89.99c

Euro/US dollar 1.4613 1.4679

US dollar/yen 110.00 111.29

Disclosure: I own Sky City and Auckland Airport shares

C Share Investor 2007

Share Investor Friday Free for all: Edition 10

Ian gets a Bargain



The Warehouse in Hamilton


Ian Morrice , the head of The Warehouse(WHS) has received good news recently. It was reported in mainstream media today that he is to receive a total remuneration of $3.908 million for the 2007 financial year to June 29.

Nothing wrong with that, Morrice has done well to turn around company fortunes by selling the losing Australian arm and reinvigorating the shop floor by selling more consumer friendly brands in his stores.

Speculation by media in the case of The Warehouse is that one of those targets was an increased share price. Like Auckland Airport(AIA) a few months back managers were given incentives if certain performance targets were met and the link to share price performance was cited by that company.

Both AIA and WHS were/are under takeover speculation so the increase in share price is totally unrelated to the performance by management or the CEO and the incentives paid to those at AIA and Morrice at WHS are clearly undeserved.

If share price increases can be pinpointed to management's achievements then and only then incentives should be paid.

In a closely covered case by business media, the appeal by Foodstuffs, Woolworths and The Warehouse has finished today but a decision is not expected for several weeks.


Playing the game of Monopoly



A Waste Management Trash Unit

Proving that the Commerce Commission can make a ruling in favour of a virtual monopoly business in New Zealand they have cleared Transpacific Industries to buy some businesses off Envirowaste Services.

The company have been trying to buy parts of Envirowaste for some years after being turned down by the CC to buy the whole company a few years ago. That decision followed the purchase of Waste Management by the Australian trash giant and the approval of that purchase by the commission.

Transpacific was yesterday cleared to buy EnviroWaste's solid waste collection businesses in four centres and solid waste businesses in two others.

That decision could shed some light on a decision pending before the commission on whether The Warehouse could be purchased by two dominant retail industry players.

Oils Well?

The recent climb in the price of oil from the low of $US70 per Bbl to over $96 today and the worry over the price is a complex tale of inflation and increases in productivity and technology.

While the price is clearly just below the inflation adjusted April 1980 record price of US$101.70 there are reasons why we shouldn't worry too much, yet.

Since those heady days individuals and companies have increased productivity manifold times and the technology that we now use, for industry and personal use, allows the consumption of far less of the black stuff.

Our cars get more millage to the gallon/litre for a start and vehicles are one of the biggest users of oil, especially you Americans!!

As a footnote to this story, no the world isn't running out of oil. The "Peak Oil" theory is as mythical as global warming and the tooth fairy The left are mining P.O. to advantage their nonsense and collect more taxes.


Acres of Shopping


The new 210 million dollar Westfield at Albany, New Zealand


The expansion of retailing in New Zealand looks set to continue for the foreseeable future if the plans of the mall giant Westfield (WDC) are anything to go by.

Westfield has just opened a giant mall, a former apple orchard from where the "Albany Beauty" apple gets its name, in Albany, just a stones throw from where I live.

That new mall has 5.2ha of indoor floor space and although it was opened yesterday, the 1800-seat Sky City(SKC) Cinemas, will not open until next year.

The company have 12 malls in New Zealand and look set to continue expansion of not only Albany, where there are acres of land to do so, but malls in Newmarket, Auckland and Christchurch as well.

Construction of other shopping precincts unrelated to Westfield, in the Albany area, are going ahead stridently as the population in the area expands rapidly.

Westfield look to have a great future in this country as its covered mall shopping areas don't have the same dominance as they do in such regions as its home market, Australia and the home of the mall, the USA.



NZX Market Wrap

New Zealand shares dropped more than 1 per cent today following significant declines on Wall Street, but the local market's fall was smaller than for those around the region.

The benchmark NZSX-50 index closed down 53.8 points at a one-and-a-half month low of 4154.13. Turnover totalled $113.4 million, with 24 rises and 80 falls.

Telecom shed 2.6 per cent, or 11c, to a more than two-month low of 417 after its quarterly result today. The company said net profit for the three months to the end of September were $225 million, unchanged from a year earlier. But profits from continuing operations were up 29 per cent.

The mobile outlook wasn't good, some of the ways they got some profit seemed to be from lower tax and one-off things like the Southern Cross dividend. Obviously the combination of a bad day and a poor result.

Air New Zealand was one of few leaders to post a rise, up 3c at 215 despite ongoing oil price rises.

Fletcher Building fell 32c to 1168 and continued its dramatic fall over the last week, Contact Energy was down 4c at 900, Fisher & Paykel Appliances lost 8c to 348, F&P Healthcare was 6c lower at 317, and Auckland Airport lost a cent to 287.

Sky City was down 6c at 539, while Sky TV rose a cent to 570.

Smaller stocks to rise were Methven, up 6c at 246, NZX, up 8c at 948, Nuplex, up a cent at 756, and carpet maker Cavalier, 2c higher at 310.

Pumpkin Patch was down 6c at 293 after I bought some earlier this week at 309, Michael Hill lost 20c to 1025, Ebos fell 8c to 537, Freightways was down 7c at 383, and Mainfreight fell 3c to 732.

C Share Investor & NZPA 2007

NZ Dollar Wrap


Reuters currency rates

4.45 today 5pm yesterday

NZ dlr/US dlr US76.25c US77.11c
NZ dlr/Aust dlr A82.99c A82.91c
NZ dlr/euro 0.5277 0.5335
NZ dlr/yen 87.60 88.99
NZ dlr/stg 36.65p 37.13p
NZ TWI 70.61 71.32
Australian dollar US91.90c US93.08c
Euro/US dollar 1.4444 1.4462
US dollar/yen 114.90 115.37

Disclosure: I own WHS Shares

C Share Investor 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