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

Discuss this stock at Share Investor Forum - Register free


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
Fisher & Paykel Appliances

Related Amazon Reading


Small Investor Goes to Market: A Beginner's Guide to Picking Stocks by Jim Gard
Buy new: $14.95 / Used from: $0.01
Usually ships in 24 hours

c Share Investor 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.

Recent Share Investor Reading

• Sky City to focus on Gaming
• Long Term Play: The Warehouse Group
• Are we there yet?
• What Infratil sale of Auckland Airport stake means
• Stock of the Week: Ryman Healthcare Ltd
• Kathmandu IPO: Shares set for discount

Discuss this topic @ Share Investor Forum - Register free

Download the KIP MCN prospectus


From Fishpond.co.nz



NEW! "Letters to Aston: Lessons Learned from a Lifetime of Investing" by Martin Hawes


c Share Investor 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


Share Investor Interviews

Share Investor Interview: Sky City CEO, Nigel Morrison

Sky City Entertainment Group @ Share Investor

• Sky City Entertainment 2009 FY Profit Preamble
• Sky City debts levels now more manageable
• Insider Trading on Sky City shares
• Sky City Profit Upgrade: Always on the Cards
• Sky City's Current Cinema "Boom" a Horror Story in Disguise
• Stock of the Week: Sky City Entertainment Group
• Sky City share offer confusing and unfair for smaller shareholders
• Sky City CEO doubles down
• Sky City Entertainment 2009 Interim Profit Review
• Sky City Entertainment 2009 Interim Result Preamble
• 2008 Sky City profit analysis
• Sky City Entertainment 2008 Full Year profit results , NZX release, 2008 full year presentation, result briefing webcast, financial statements
• Sky City 2008 profit preamble
• Sky City outlines a clear future plan
• As recession bites Sky City bites back
• Sky City Assets: Buy, sell and hold
• Why did you buy that stock? [Sky City Entertainment]
• Sky City Share Volumes set tongues wagging
• Sky City half year exceptional on cost cutting
• NZX Press release: Sky City profit to HY end Dec 2007
• Sky City Cinemas no Blockbuster
• Sky City Entertainment share price drop
• New Broom set to sweep
• Sky City Management: Blind, deaf and numb
• Sky City sale could be off
• Opposition to takeover
• Premium for control
• Sky City receives takeover bid
• Sky City Casino Full Year Profit to June 30 2007
• Setting the record straight
• Sky City CEO resigns
• Sky City Casino: Under performing
• Sky City Casino 2007 HY Profit(analysis)
• Sky City Casino 2007 HY Profit

Discuss this topic @ Share Investor Forum - Register free







c Share Investor 2009

Long Term Play: The Warehouse Group

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 Warehouse Group @ Share Investor

Share Investor Short: Warehouse Group yield worth a look
Woolworths supermarket consolidation an indicator of a move on the Warehouse?
Stock of the Week: The Warehouse Group
Warehouse 2009 interim profit a key economic indicator
When will The Warehouse bidders make their move?
Long vs Short: The Warehouse Group
Warehouse bidders ready to lay money down
The Warehouse set to cut lose "extra" impediment
The Warehouse sale could hinge on "Extra" decision
The case for The Warehouse without a buyer
Foodstuffs take their foot off the gas
Woolworths seek leave to appeal to Supreme Court
Warehouse appeal decision imminent
Warehouse decision a loser for all
Warehouse Court of appeal decision in Commerce Commission's favour
MARKETWATCH: The Warehouse
The Warehouse takeover saga continues
Why did you buy that stock? [The Warehouse]
History of Warehouse takeover players suggest a long winding road
Court of Appeal delays Warehouse bid
The Warehouse set for turbulent 2008
The Warehouse Court of Appeal case lay in "Extras" hands
WHS Court of Appeal case could be dismissed next week
Commerce Commission impacts on the Warehouse bottom line
The Warehouse in play
Outcomes of Commerce Commission decision
The fight for control begins soon

Discuss this topic @ Share Investor Forum - Register free





Security Analysis: Sixth Edition, Foreword by Warren Buffett (Security Analysis Prior Editions) by Benjamin Graham
Buy new: $41.77 / Used from: $32.40
Usually ships in 24 hours




c Share Investor 2009