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.


Telecom NZ @ Share Investor

Telecom NZ Share Price has "Jumped the Shark"
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Telecom NZ: TV3 60 Minutes Segment more like Corporate PR
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Telecom NZ: Saint Gattung gets her Ya Ya's out
Telecom NZ: Bye Bye Paul Reynolds
Long Term View: Telecom NZ Ltd
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Revisiting Telecom
Getting cute and fluffy with Teresa Gattung
Telecom NZ Hangs up
Business Gobbledygook puts up barriers to communication
A Rare Breed
Telecom NZ facing a watershed period
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Telecom rewards Gattung for mediocrity

Download every available TEL Annual Report Free


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c Share Investor 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

Share Investor Interview: Sky City CEO, Nigel Morrison - November 2009
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Sky City @ Share Investor

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NZX Press release: Sky City profit to HY end Dec 2007
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Discuss SKC @ Share Investor Forum





c Share Investor 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.

Related

Budget 2010 - stuff.co.nz
Budget 2010 - nzherald.co.nz

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From Fishpond.co.nz



Buy Bird on a Wire: The Inside Story from a Straight Talking CEO & more @ Fishpond.co.nz




c Share Investor 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.


Telecom NZ @ Share Investor

I was Wrong... sort of
Telecom NZ: TV3 60 Minutes Segment more like Corporate PR
Telecom Share Price Limbos but has it jumped the Shark?
Telecom NZ: Saint Gattung gets her Ya Ya's out
Telecom NZ: Bye Bye Paul Reynolds
Long Term View: Telecom NZ Ltd
Stock of the Week: Telecom Ltd
Revisiting Telecom
Getting cute and fluffy with Teresa Gattung
Telecom NZ Hangs up
Business Gobbledygook puts up barriers to communication
A Rare Breed
Telecom NZ facing a watershed period
Biology a major key in "glass ceiling" for women
Telecom rewards Gattung for mediocrity

Download every available TEL Annual Report Free


Discuss TEL at Share Investor Forum - Register free


From Fishpond.co.nz



Buy Bird on a Wire: The Inside Story from a Straight Talking CEO & more @ Fishpond.co.nz




c Share Investor 2010