Schroder Investment Management takes big Fisher & Paykel Healthcare Stake

Back in August last year I wondered whether Schroder Investment Management, a large multinational investment company, had added to their large Fisher & Paykel Healthcare [FPH.NZ] shareholding (they didn't) but they have been making large share movements in that area this year.



After ditching about 25% of their holding on March 19 (PDF) to take their position to 4.7% of total FPH shares issued, today in an NZX disclosure (PDF) it was revealed that Schroders have taken their holding to just under the magic 10% mark, their biggest shareholding in the company to date.

I make no bones about it, I see this company as one of the NZXs stars and pick it as one of the best long-term performers for the next ten years if the last ten are anything to go by. Having Schroders take such a large stake certainly gives pause for thought that I actually might have known what I was doing when I bought shares in the company but as I pointed out in that August article Schroders share the same investment style that I do so it is no surprise that both of us would make the same pick:

We are long-term investors: establishing the fair value of a security takes the discipline to avoid being caught up in market fashions and the confidence to be contrarian when necessary. We focus on the ability of a business to generate sustainable value and earnings growth. We look at the quality, as well as quantity, of earnings and we meet company managers and ensure that we fully understand their marketplace and business strategy. We believe that, over time, the mis-pricing of stocks versus fair value will be recognised by the market, and that our long-term approach to research will lead to long-term outperformance.

Having said that, Schroders did sell a small portion of their holding in March and I have no idea as to why (one can only assume for a short-term profit) but increasing their holding to just below 10% is certainly an interesting move.

As their statement above suggests they have been buying FPH at relative bargain prices compared to historical values and to be sure any serious "mis-pricing" of this stock in comparison to its concrete revenue and profit results will see this small shareholder take advantage of that situation.

Fisher & Paykel Healthcare will be reporting its Full Year 2009 profit results Tuesday May 26, 10.00am (NZ Time) - A conference call will be held at 1.00pm to discuss the results and you can listen to it here.

Fisher & Paykel Healthcare @ Share Investor

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Schroder Investment Management Home

Fisher & Paykel Healthcare financial data

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• Price History
• Related Securities

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c Share Investor 2009

Good Morningstar

News out in New Zealand's Business media today about Morningstar's (incidentally a Berkshire Hathaway, Warren Buffett owned vehicle) ranking of our mutual funds sector and I would argue as a spin-off the NZ financial sector as a whole, should be of surprise to those who only read the sports pages and gossip and perhaps the hapless Mark Weldon, CEO of the NZX.

New Zealand ranked a D minus rating.

As far as my major sphere of interest goes, the stockmarket, I have been banging on about how "wild west" our stockmarket regulation and oversight have been in this respect for 10 years.

The guts from Morningstar for me:

Morningstar researchers evaluated and scored countries in six categories—investor protection, prospectuses and shareholders’ reports, transparency in sales practices and the media, fees and expenses, taxation, and distribution practices. Read full article PDF format

"Investor protection" and "transparency" are two major planks of my rantings and Morningstars.

Recent capital raisings on the NZX have been the latest outrage to be foisted on New Zealand stockmarket investors, with protection for large shareholders managed by the NZX and Securities Commission laws at the centre of capital issues but at the same time leaving smaller investors like my good self drowning in a pool of bile filled anger over being shafted once again.

Mark and his directors down in windy Wellington in that flash building on the waterfront and those not far from him at the Securities Commission should take note.

This time, these are your contemporaries saying this about you, not the investors that keep getting the blunt end of your regulatory axe and perhaps you might listen now that it is your buddies saying this?

One can only hope.

Until then the swirling bile will keep me critical.

The Rankings by Morningstar

United States: A
China: B+

Italy: B
Japan: B
Netherlands: B

Taiwan: B
Canada: B-
France: C+
Switzerland: C+
United Kingdom: C+
Australia: C

Singapore: C
Germany: C-
Hong Kong: C-
Spain: D
New Zealand: D-

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c Share Investor 2009

Like a Kid in a Candy Store

I still have Auckland International Airport [AIA.NZ] on my mind from a month or so ago when I bought a few thousand more to add to my original 1000.

This has certainly been the case for me today with my new purchase but lets not get carried away. I have bought at a good price for me, my original foray into AIA being at $2.15 in November 2006. With dividends and tax credits included in that initial AIA purchase my cost price comes in at $1.88 per share. Today's purchase then is 18c per share lower than it was more than 2 years ago.

The main reason the stock is on my mind is that the share price on market closing today is below the $1.70 share price I paid back in April and I'm kinda getting excited again - as Warren Buffett famously likes to puts it, like a kind in a candy store - because it looks like the share price might fall even further!

At $1.66 closing and a $1.65 low today on $1.5 million of turnover it looks like the share price could go lower on a negative day on the DOW overnight.

The 52 week low for this stock is $1.56 and I will be paying close attention to the share price if market sentiment if negative this week for an opportunity to buy more.

How many?

Well, I'm looking for another 7000 shares to add to the Share Investor Portfolio to take it up to an even 10000.

I will stop there, because I do have a self imposed limit when it comes to buying anything.

Now I must add that I am average to useless at picking the market but I was happy to buy my initial 1000 shares at $2.15 and more than happy to buy at any price below that.

You can see why I am so exited huh?

Bring on those Mars Bars and M & Ms.



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c Share Investor 2009

Labour racks up a $7500 per minute outrage

I remember John Banks on talkback radio in the 1990s discussing this and that and one thing he continually stressed and I cant remember why, was the cost of running Parliament.

He actually had it down to the cost per minute which for some reason has stuck firmly in my mind.

The price per minute was NZ$7500.00 and at the time I remember thinking that is *$%&%* expensive!

Funny that but my elephant like memory has come in useful for this piece.

Some of you may know that Parliament is debating changes to Auckland local body council legislation (even as I write this on a Saturday they are - listen here) and in those debates the discussion is often passionate, reasoned and related to the legislation at hand.

Opposition is allowed to what is called filibuster, basically waste time trying to add amendments to the legislation under debate.

What is different this time though is that the time wasting has reached historically lengthy proportions.

Labour have filibustered to the point where thousands of joke amendments have been put to the vote and to slow those joke votes down even further they have been cast in Maori by Labour Party members. These votes then have to be translated.

The New Zealand public are used to Labour wasting money, over the last 9 years billions of our dollars have evaporated into thin air.

This is different though, it is the working of parliament, the very centre of our democracy and it is being abused and slowed down by individuals who have no countenance to its cost to you and me.

The total waste by Labour just yesterday at $7500 a minute was $6.7 million and this is just one day of cost!

It would be nice to see this sort of detail in mainstream media lest the hoards are misled by braindead headlines but there you go, you are welcome.

Footnote: Labour's 4 day delay cost taxpayers a minimum of $26 million.

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Bruce Sheppard: Explanation Received

Capital raising, company creditworthiness and business viability during these highly unsure and volatile economic times is very important for investors with NZX listed companies in their portfolios and that is why I am following the stoush between Bruce Sheppard and Mark Weldon at the NZX with much interest.


In a post I made this morning I pointed out that I thought Bruce was being irresponsible in blanket accusations over NZX companies defaulting on bank credit terms and the NZX wanted him to explain himself and name names.

I thought he should too.

He has in a general way this morning with a letter addressed to Mark Weldon, NZX CEO:

Mark,

I have thought about this long and hard, read all my blogs. They explain the background to the issue, and they explain the simple matrixes that I have applied and they have explained how I have analyzed the financial statements with this in mind. Either analysts are blind stupid or inefficient, the simple numbers that you need to check reasonable compliance are these and they don't require a detailed breakout of financial statements:

They are these:

1) How much interest are they paying, a bit hard to find sometimes but not hours of work.

2) Continuing EBITDA (earnings before interest, tax, depreciation and amortisation), not hard to find either but you do have to make some assumptions about what is recurring and what is not, this is explained in my blog.

3) Interest bearing debt, and where it is parked, parent subsidiary, its composition between capital notes, and those notes' terms, bank debt and so on. Currency risk is an exposure, and hedging polices come into play. I have not analyzed hedging as disclosure on this is such a tangled web of crap that it is almost impossible to work out how they have hedged their interest and debt exposures and the issues that go with that. Many have foreign currency debts with no natural hedge.

4) Book Equity... that is easy.

5) Net tangible assets is a bit harder but not to hard.

Read the full article

Bruce gives his reasons and goes into some detail as to why he made his sweeping accusation without further elucidation and it seems generally correct, to the point, accurate and honest and we need to know that detail.

Having said that, I still maintain all the research and detail that he says is coming on particular companies should have been released coinciding with his general release.

Us investors need to know but need to know in full before he slanders the good NZX listed companies among the obvious bad.

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Bruce Sheppard: Please Explain

I am a big fan of Bruce Sheppard and agree with his usual well considered and fully explained point of view most of the time. He is more often than not right, expert at financial matters and blunt to the point appearing rude.

This blog yesterday received many hits with Bruce's name as a search and I didn't have the time to explore why.

The reason for the controversy is in Bruce's blog post published on May 8.

It is explained in this piece in Stuff.co.nz that basically he has put his line in the sand and alluded to various NZX listed companies having problems with debt levels:

According to Mr Sheppard, around half of 47 major listed companies he analysed during a three week investigation are at risk of defaulting on their bank terms. However, he said he will not reveal names until companies have had a chance to respond to letters he has written to them.

He selected companies based on published 2007/2008 debt levels and applied assumed bank terms to their financial metrics. Mr Sheppard added that his research raises questions about exchange operator NZX continuous disclosure regime and its role as regulator.

What Bruce has failed to do, and this is unusual for him, is provide corroborating evidence that backs his May 8 accusations.

Frankly if he does have evidence, he needed to come out with it at the same time he made his claim, and not scare the horses so to speak.

It is highly unprofessional to do otherwise because it taints every NZX listed stock with the same debt brush.

He has received a "please explain" from the NZX and unusually again I agree with the NZX and that doesn't happen often:

14 May 2009 - Shareholders' Association chair Bruce Sheppard has contributed meaningfully to capital markets debate over the years. The broader interests of the market, and market confidence, would be best served at this time if he released his analysis at a very detailed level. Investors can then draw their own conclusions as to the health of the companies in which they are investing.

NZX shares Mr Sheppard's goal of healthy, open and transparent capital markets in which investors can have confidence. Providing detailed and transparent information to support his conclusions will further that goal.

Time to put up or shut up Bruce.

Read the answer to the NZX request

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Long VS Short: Michael Hill International

In this seventh installment of the Long vs Short series I am once again going to take look at the chart comparisons for a stock from the Share Investor Portfolio and compare the 10 year return (above chart) to the turmoil of the last year with a 1 year return chart (large chart at bottom of post).

In this series I want to show the merits of investing, using charts, for the long-term vs short term gains or losses. I will use the longest available data to me for the long-term view (10 years )and will make a comparison against the NZX50.

In this segment of Long vs Short I will take a look at Michael Hill International Ltd [MHI.NZ] .

I currently hold 3000 Michael Hill shares after buying them in November 2007 (see small chart below for detail) I added a further 7000 in July 2009.

The company has been a spectacular performer over its 25 year plus history, growing from just one store to more than 200. Its returns to shareholders have been similarly spectacular but have tapered off over the last year due to the world-wide recession.

Symbol	Price	Value	Earned
MHI.NZ	$0.620	$1860	$-807
You own 3000 [MHI.NZ] shares purchased at $.889 [$2667]

In my 18 months of owning this share my return has been a loss of $807 or around 30% (see small chart above)This includes dividends and tax credits.

If I had bought this share just a year ago (see large chart at bottom) my return would have been exactly the same as my 18 month return of a 30% loss.

Now for the real point of this comparison lets look at the return for Michael Hill shareholders who have held the stock for 10 years. (see large chart above)

From a high of a 450% return in 2007 the 10 year return as of writing is still around 240%.

That beats my holding return and the one year return by 270%!

Yet another point made that when it comes to long VS short term investing, long beats short like it has its hands tied behind its back.




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c Share Investor 2009

Road Worriers

The fuss made over the proposed motorway tunnels going through the suburb Mt Albert and through to Waterview reminds all of us of the elitism that rules the Labour Party and some of those that vote for them.

It is OK to put open motorways throughout Auckland through a number of different suburbs, some of them wealthy and some of them less so but not through Mt Albert, where the former Prime Minister lived?

Aparently yes, if you are a Labour Party member.

We are all well aware of driving along the Southern Motorway, through suburb after suburb along an above ground piece of tarmac, sometimes ten lanes in width.

True, motorways can now be built better above ground, with noise walls and noise dampening surfaces but they are a necessary evil.

The last link in Auckland's motorway system, the Waterview connection is the most crucial part of the system because it completes a road system designed in the 1950s to move future traffic.

The proposal by Labour was for a $3 billion plus unfunded tunnel of approximately 4km that was never going to go ahead under Helen Clark's reign of terror because it would have cost her votes and possibly her power. So it was a political decision to stall the motorway rather than a practical one to go forward and progress-hardly surprising given Labour's track record.

Labour took 9 years to get something done and failed. This left Mt Albert residents affected by the new road in limbo and it left Auckland as a whole losing 10s of millions of dollars a year because of lost time due to extra travel around the Mt Albert area.

What makes Mt Albert residents and surrounds such special people, nothing really, they aren't.

It was simply Labours elitist political approach that made it seem normal to them that spending more than $3 billion of taxpayer money on Mt Albert tunnels instead of half a billion on an open highway to keep political power and expecting people in South Auckland (ironically where Labour has BIG support), where that 10 lane highway I mentioned above cuts through, to pay for it.

We now have a decision and the road (PDF)is going to be built.  

About bloody time.

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Rankin's appointment stirs the Lazy Left

To have the Labour Party, Sue Bradford, that guy from the United Future Party (isn't that name an oxymoron with just one member?) and the navel gazing left media disagree with something means you surely must be on the road to something momentously truthful.

Having appointed Christine Rankin a commissioner in the Families Commission (not sure what they do, does anyone?) the left gets frothy at the mouth over an attractive well dressed woman with a strong opinion that they disagree with and the balls to make it known to everyone, simply because they feel threatened by her common sense and drive.

The fact that she comes from a practical background from the "wrong side of the tracks", instead of the Labour Party breeding ground of university political studies classes and unions brings their hackles up even more.

They feel threatened, challenged and understandably nervous with a capable person in their midst.

I cant wait for the shake up because these academics, theorists, leftist brain dead bureaucrats need a good kicking.

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Dead Cats & Vicious Bears 2: The Cat Bounces Higher

Back on March 24 I wrote about the dead cat bounce that had been the "stockmarket recovery" up to that time:

Stocks like Fletcher Building [FBU.NZ] are up more than 20% on recent lows, Mainfreight [MFT.NZ] up by nearly 20%, Sky City Entertainment [SKC.NZ], Goodman Fielder [GFF.NZ], Briscoe Group [BGR.NZ], Hallenstein Glasson [HLG.NZ] and Ryman Healthcare [RYM.NZ] all up over 10%. The NZX is up nearly 200 points, 43 of them today. Markets around the world are up dizzying amounts over the last week and a half, the DOW alone leaping around 1000 points off 13 year lows. It gained nearly 500 points today in the third highest ever percentage gain in the indexes history.

Since then the NZX has added another 250 points plus, the DOW is up a further 1000 points to close at over 8500 last Friday and there have been incredible gains on a wide range of stocks listed on the New Zealand bourse, I mean really incredible gains of more than 50% in some cases, all in the space of a mere two months! 

Gee whiz it is like a bull market! (can you feel the sarcasm?)

Retail stocks seem to be among the biggest gainers, as they were the biggest losers when the economy started to fall apart last year

Pumpkin Patch [RYM.NZ] up from 80c to 1.38, Ryman Healthcare [RYM.NZ] up from less than $1.20 to $1.72, Briscoe Group [BGR.NZ] 55c to 94c and Restaurant Brands[RBD.NZ], that serial loser that runs the KFC franchise, up from the high 50s to nearly a buck!

The stocks I mentioned in March have gained considerably, with Ryman Healthcare[RYM.NZ] alone putting on an additional 30% in share price.

What has fundamentally changed though?

A B-I-G fat nothing.

Market sentiment has surely done a 180, but sentiment should be set aside for old Meg Ryan movies, not buying stocks as they go up in price.

Who was buying when they were going South?

Nobody, but market fundamentals were the same then as they are now, terrible!

Makes no sense to me and I think sentiment might come back into the market when investors getting in on rising stocks start blubbing when they realize that sentiment can quite easily change in markets.

A dead cat bouncing even higher means there is further for it to fall and it is going to hurt.


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c Share Investor 2009

David Shearer: A Wolf in Sheeps Clothing?

I haven't watched "Q & A" on TV One on Sunday because I cant stand Paul Holmes, especially when he sweats like a fat German with a sausage up his arse in a sauna, but I took a look quickly last Sunday and it gave me a belly laugh.

Holmes asked John Tamahere what he thought of David Shearers prospects in the Mt Albert Bye Election and Johnny Boy answered thus:

"Lets tick the boxes,

He's straight, he's married, he has a family"

I would have added that he is a male and white but of course that would be sexist and racist so I wont.

Funny how Shearer appears to be everything that the typical Labour MP isn't?

c Political Animal 2009

Private Eyes

In the wake of a police whitewash over emails stolen from Don Brash's computer a few years back, probably by Labour insiders, we see the latest stoop in dirty politics by Labour happen in the Onehunga Electorate office of National MP Peseta Sam Lotu-Iiga.

Former Labour MP Richard Northey has been seen by several witnesses "riffling through" Mr Lotu-Iiga's office.

Like the incident from a few years ago Northey has denied the accusations but similar to the incident a few years ago the finger can only be pointed in one direction.

Labour and its leader were unable to compete on level footing on policy last year before the general election and were left to wade in the filth and muck that they tried to scrape up on their opposition using taxpayer dosh but were left with the blowback on their own faces.

It seems they haven't learnt from that lesson and are repeating the same gutter politics this year in the Mt Albert Bye Election

Melissa Leigh, National's prospect for the Mt Albert Bye Election needs to keep her private papers private, least they fall into Labours hands, again.

c Political Animal 2009

Are you experienced?

Further to yesterday's rant about how confusing and unfair I thought the Share Purchase Plan (SPP) and top up offer for Sky City Entertainment [SKC.NZ] I can add a bit more meat to the bones after having spoken to my broker at ASB Securities, Bruce MacDonald, in charge of investor relations at Sky City and the hacks at Computershare, the company acting on behalf of Sky City for the small shareholder capital raising.

ASB Securities

This broker had received many inquiries over this top up offer as to qualifications that made investors eligible to apply under that offer, specifically what "experienced investor" and "wealthy" meant in terms of eligibility.

From Securities Amendment Act 2004

• “(2CC) For the purposes of subsection (2CB), a person is an eligible person if the person is 1 or more of the following:

  • “(a) wealthy (as defined in subsection (2CD)):

  • “(b) experienced in investing money (as defined in subsection (2CE)):

  • “(c) experienced in the industry or business to which the security relates (as defined in subsection (2CE)).

• “(2CD) For the purposes of subsection (2CC)(a), a person is wealthy if an independent chartered accountant certifies, no more than 6 months before the offer is made, that the chartered accountant is satisfied on reasonable grounds that the person—

  • “(a) has net assets of at least $2,000,000; or

  • “(b) had an annual gross income of at least $200,000 for each of the last 2 financial years.

“(2CE) For the purposes of subsection (2CC)(b) and (c), a person is experienced in investing money or in the industry or business to which the security relates (as the case may be) if—

“(a) an independent financial service provider is satisfied on reasonable grounds that the person to whom the offer is made, as a result of having experience of that kind, is able to assess—

• “(i) the merits of the offer; and

• “(ii) the value of the security; and

• “(iii) the risks involved in accepting the offer; and

• “(iv) that person's own information needs; and

“(v) the adequacy of the information given by the person making the offer...


I found out when I rang my broker that I don't qualify as an "experienced investor" (even though I thought I was!) as alluded to in the top up offer documents. I would have to have "traded more frequently. and derived an income from those activities and/or have a larger portfolio than my current one.

It seems that these requirements are inserted to protect the "smaller less sophisticated investor", a category which I apparently don't meet either in terms of my Sky City holding and confirmed by both Computershare and Bruce Mac Donald.

Bruce MacDonbald (Sky City Entertainment Investor Relations)

Bruce reiterated much of the above, especially the looking after smaller shareholders part and that the company was restrained by securities law by being unable to offer shareholders like me a large enough parcel of shares as to fully protect from dilution of my shareholding.

This is in reference to the SPP where I can only apply for a maximum of $12500 worth of shares, already short of stopping dilution, and then I may not get the maximum because over subscriptions will mean a scaling down.

So if you own a smaller amount of shares your dilution effect will either be nil or infinitesimal.

Bruce pointed out that the applicable securities law, the Securities Amendment Act 2004 and as far as I can tell the Securities Act 1978 and subsequent amendments(of which there are many)means in effect that the issuer of the shares "must look after the largest number of smaller shareholders possible" and because people like me are somewhere in the middle we sit in some kind of financial black hole (my words) between the small shareholders and larger institutions who participated in the April $230 million placement.

When I pointed out that I was getting shafted Bruce told me SKC simply could have done an institutional placement and forgotten about everyone else but stressed again that "they wanted to be fair to the largest number of shareholders that they could". My counter to that would have been why didn't Sky simply have a rights issue if it had came into my head at the time.

In effect I am getting it from the front and the rear.

Computershare

Computershare pointed out in their usual unfriendly and grudging manner most of the above and added that the way the Sky City offer was structured was the same as Fletcher Building in terms of definitions of eligible investors.

Conclusion

Although paying down sky City debt with he proceeds of the capital raising will lead to higher profits due to less interest paid, the amount I shares I receive under the SPP is unlikely to get me back to pre-capital raising dilution and I have no choice in that at all.

What is a positive though is that I have learnt something over the last few days and every little extra tool in the financial toolbox helps.

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Sky City share offer confusing and unfair for smaller shareholders

I was going to discuss the merits of owning Contact Energy Ltd [CEN.NZ] shares in the light of takeover signs surfacing recently over that company but I will leave it to another day.

I will instead focus on something today that has left me scratching my head.

Many of those that follow my media machinations closely will know that I own a reasonable number of Sky City Entertainment [SKC.NZ] shares.

There has been a recent capital raising to institutions and large shareholders and now we smaller unimportant shareholders are about to have their opportunity to buy an additional stake to avoid dilution of our shareholdings.

Today I received "top-up" offer documents that allow me to buy 1269 shares in the $5 million offer but I have to be either an "experienced" or "wealthy" investor to participate and I must get a "certificate" from my chartered accountant or my "financial service provider" to prove I am either so I can get my new shares.

The only problem is that I don't have either of the above but then I read on that I will probably not be eligible anyway because the top up offer is conditional on the $35 million Share Purchase Plan (SPP) not being fully subscribed, which is highly unlikely to happen given major oversubscriptions in popular capital raisings thus far completed by listed New Zealand companies.

The other wee problem is that I haven't received the SPP documents or booklet that the covering letter says I should read to determine whether I should consider the offer.

The top up offer seems superfluous to requirements because it gets canned if there is an oversub of the SSP but even if there was going to be a top up many wouldn't bother because they have to be "wealthy" (have net assets of $2 million or gross income of more than 200k for each of the last two years) or be an "experienced investor" and be able to prove both using your accountant or financial advisor.

I really cant be bother with the top up because I cannot bloody fully understand it! and it seems to run counter to commonsense because it probably wont occur anyway.

All I am entitled to then is to apply for a maximum of NZ$12500 of shares and it seems given the large interest in the $230 million SKC corporate capital raising carried out in April and an over subscription in the Fletcher Building offer concluded this week, I am unlikely to get anything close to that figure.

I would need to get my hands on around 5000 shares at the offer price of $2.61 per share in order to stop dilution of my position but unlike the corporates and large shareholders my shareholding in Sky City Entertainment of 7 years is going to be seriously diluted.

I will be applying for the maximum under the SSP.

Contact Energy will follow soon.

Sky City @ Share Investor

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