Sky City share volumes sets tongues wagging

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Reuters story on SKC - NZ's Sky City CEO sees year of consolidation, then expansion (March 25, 2008)


With volume of Sky City Entertainment[SKC.NZ] shares traded on the NZX at over 8 million today and around 5 million yesterday one would have to ask why the large volumes changing hands? The average trading volume is just over 1.2 million shares.

Answer, I don't know for sure, but I'm going to speculate again.

Clearly the number one stab in the dark would be a share price so low it would have to be about 6 years ago that it traded at the present level of NZ$3.48 and it has got out the bargain hunters and institutions.

Number two punt is a mystery buyer getting a controlling stake-although talk of anyone kicking the tyres of the company is long gone, for now.

Three, Unitab as it was around 3 years ago, now Tattersalls[TTX.AX], from Australia topping up their 0.5% shareholding that they already have in the company.

Fourthly, and probably most likely, Commonwealth Bank[CBA.AX], who dumped Tattersalls stock on March 7 (PDF disclosure) and who is also a biggish player in SKC.

Just to hedge my bets, a combo of all four is also part of my playbook!

The coming year is going to be a tough one for Sky City, But new CEO Nigel Morrison has restructured and redefined a number of casinos in this part of the world. The giant Crown Casino in Melbourne but one of them.


Disclosure: I own SKC shares


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c Share Investor 2008

Hallenstein Glasson Australian expansion needs expert execution

Hallenstein Glasson [HLG.NZ] net profit for the 2008 half-year after tax fell 6.6 per cent from $9.9 million to $9.2 million, in line with the company's January market guidance.

The results are mirrored in an overall decline in sales of 2 per cent, with group sales for the six months ending February 1 falling from $100.7 million to $98.5 million.

The company has done spectacularly well for so long but in the last few years sales and profit have been stagnant.

It seemed reasonably clear that profit wouldn't continue to climb as rapidly as it has done in the past, because much of it came from focusing on cost reductions in the business and the company now runs a lean mean retailing machine, fixed costs like rising labour expenses and leases aside.

The expansion of women's clothing chain Glassons across Australia is a priority for new Hallenstein Glasson chief executive Shayne Quanchi, who is based in Melbourne herself.

The focus on expansion across the Tasman before stalled growth in New Zealand is seriously looked at, could be of some concern to shareholders.

Even though Quanchi is a 20 year veteran of retailing in Australia, doesn't mean she can make the Kiwi style Glassons chain a rocking and rolling OZ success.

Its competitors there are way more savvy, generally part of the big conglomerates like Coles/Wesfarmers, David Jones, and the like and the differences between similar targeted customers that Glassons has here and its competitors in Australia are vast in their sophistication, choice options and pricing.

Don't get me wrong, Hallensteins is a great company and has done well in New Zealand for generations but the road to Australia for many New Zealand companies and their expansion plans, is littered with the corpses of battered balance sheets and zombie like shareholders who have had their wallets picked.

Clearly Australia is an opportunity for the company in which they can continue to expand but the story so far there has been disappointing when compared with the operations of the New Zealand unit.

One good and important aspect of the result is that gross margins have been maintained and that is no mean feat in the present retailing environment.

Like other retailers, such as Briscoe [BRG.NZ] and The Warehouse Group[WHS.NZ], they are going to struggle this year, as consumers, especially in New Zealand, slow their spending because of increased taxes, petrol and mortgage costs.

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c Share Investor 2008

NOW Couriers look likely to deliver for Freightways

New acquisition NOW Couriers should help Freightways
continue to dominate the growing Auckland delivery market.


News yesterday that the New Zealand courier and document information management company Freightways [FRE] is to buy the small Auckland courier company Now Couriers for around NZ$11 million should be welcome news for shareholders.

Not only that, the faith Freightway's management have in the long-term future of their business with this purchase, during the current economic downturn and associated credit crunch is a positive move, when every other business in New Zealand seems to be talking gloom and doom.

Freightways as a whole, has managed to ride out the economic slowdown and increased business costs very well. It has still managed to grow revenue and profit slightly over the last year.

Their core courier business seems to be one of the most resilient divisions and Auckland especially seems reasonably bullish.

NOW has 40 contracted owner drivers servicing greater Auckland, and is at the budget end of the market, so it compliments Freightways other brands: Sub 60, Castle Parcels, New Zealand Couriers, Post Haste and several other brands.

Management want to keep the latest acquisition separate from the others as it wants to differentiate it from its other nationally focused brands.

I like the way management have had a partnership with NOW for several years, got to know the company well and then bought control. Too many companies rush into these sorts of acquisitions and that is where things can go horribly wrong. Freightway's management clearly have a good understanding of this business and that way the price they paid for it is more likely to be relevant to its earnings, prospects , and its long term future.

Their track record on "bolt-on" acquisitions is extremely good.

CEO Dean Bracewell has been a diligent head and the tough outlook for the New Zealand economy looks to be something he looks forward to with relish.

The future outlook by Bracewell is tempered by comments of influences from the local economy and that they are well positioned to grow when economic conditions are rosier.

He expects the core package delivery businesses to perform "soundly" and its fast growing documents division to be strong over the coming year.


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Disclosure: I own FRE shares


c Share Investor 2008

Marketing vs Content

During the last 7 months or so since contributing in a serious way to this blog, I have learnt a number of things.

1. Its bloody hard work
2. Don't ever underestimate how intense competition can get
3. Loyal readers are why I continue
4. Marketing can be more important than content (even though I hope I have
improved my content over the last 7 months)



Marketing such as this, helps push products that
have little real benefit for the consumer but sell
more because of the appeal of its advertised image.


While the first point maybe obvious to those seasoned writers who have been doing this for years, and business leaders should know instinctively the second point. Point number three is more of a personal nature but it is the importance of marketing that I wish to principally discuss here.

When one thinks of the triumph of marketing over content, ones interest naturally leans to the granddaddy of all when it comes to marketing, Coca Cola.

The advertising of the sugar, water, caffeine and CO2 concoction has been filled with much mystique and hype since the product began and hasn't ceased in this way in the product's 100 plus years of existence.

The origins of Coke's marketing success comes from those traveling charlatans who used to go from town to town in the USA, boasting of the properties of the latest elixir that would "cure all".

In the case of Coke it started as one of these types of elixirs but it at least had a bit of a pick me up quality to it, from the sugar and caffeine, and other substances in its earlier guise.

The early backers seized on this traveling salesman mystique and it has been used and refined over the years to the point where Coke is the most recognised brand in the world, and has been for many years.

A huge amount of marketing dollars were used to push the fizzy water over the last 100 years and the ploys used to keep the drinks mystery and image have been many and varied.

During the company's boom years of the 1940s, American soldiers were supplied with the sweet brown stuff by Coca Cola wherever the war took them and the image that Coke was the epitome of fighting for the "American dream" was then cemented in the minds of not just Americans, but many other countries that fought side by side them.

Clever marketing on Coke's part.

The fact that this product, if consumed in large quantities, can, make you tubby, rot your teeth and has no benefit to the body in a nutritional way is largely forgotten because the consumer is constantly bombarded with images of attractive, athletic, young people enjoying the "Coke lifestyle".

A whole host of dangerous and worthless products from Cigarettes to most home cleaning products, are successful because of great and or constant marketing.

It is a masterstroke of marketing an image for a product that has no real benefit to its consumers.

I know, they say consumers these days can see past the hype and can tell quality but the coke test proves that millions just cant or chose to ignore the realities.



The world's most successful brand, Coca Cola, achieved
its longevity not through its magnificent product but
from expert marketing and branding.


While I'm clearly not comparing my writing to Coke's success, I do wonder sometimes about lesser quality product succeeding over the hyped up marketing of the likes of my mate from the Tarawera empire, Phillip MacCallister, who's marketing budget must surely be bigger than my mortgage payments, which are quite considerable!

The Share Investor Blog isn't being advertised on Google, but I probably should. I don't spend any money on marketing but I do spend time trying to get it out there for free so people can read it.

I think it is relatively interesting, and its content of a sufficiently good quality. It is getting a steady increase in readership as the months go by, but I still think it deserves better numbers when I compare it to other websites of a similar nature with larger audiences.

My ignorance of the importance of marketing before I started the Share Investor Blog is clearly apparent to me now. Here was I thinking, in my best Kevin Costner impression, "if I write it they will come".

How hopelessly wrong I was.

The importance of marketing cannot be underestimated, especially when it comes to a new business venture. While it is fine to have a wonderful product, that is not always enough. People actually have to know you have a great product.

Those people at Sony had a superior product in the Betamax Video player in the 1980s but the competition had more marketing muscle but an inferior product.

We all know what happened to Betamax.

My lesson learned!


**Footnote: Look for an exciting new permanent addition to the blog over the next 2 months. Legal reasons prevent me from telling you more.


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c Share Investor 2008