Stock takes: Short measure

It's bound to sound a bit churlish - maybe it's just the hangovers kicking in - but there are a few 42 Below shareholders who don't think Geoff Ross has struck such an amazing deal with Bacardi.

Ross does deserve to be applauded for the wealth he has created, but his figure of a 68 per cent return for those who bought into the IPO isn't as exciting as it appears at first glance.

Over three years (on a compounding basis) 42 Below delivered average returns of about 15.5 per cent - before tax. Not terrible but a little light compared with the returns one would expect for such a high-risk investment.

The NZX 50 has delivered annual returns of 16.3 per cent over the same period.

Somewhere between a 17 and 20 per cent return per annum would have been closer to the mark, said one professional investor. There's room to disagree but one thing is for sure - anyone who bought shares in February 2005 is unlikely to be too chuffed with the 77c-a-share deal. 42 Below traded between 76c and 85c in that month.

Air NZ shares lift

An easing of international oil prices would seem to be the most obvious reason for a solid rise in Air New Zealand shares over the past month. The shares have soared (or lifted off ... or some other aeronautical cliche) since hitting a low of $1.08 in July. They closed up 3c at $1.35 yesterday.

Fuel has been the big ugly albatross around the neck of every airline this year. Air New Zealand claimed that fuel price rises cost an extra $275 million in the last financial year. So any respite is likely to directly impact on the company's bottom line.

Peter Sigley at Goldman Sachs JBWere has put out a positive report on Air NZ, noting that the airline reported a 14.1 per cent increase in yields for July and August compared with the same period last year. But Sigley is sticking with his recommendations - short term: market perform, long term: hold. The catalyst for any upgrade would be Goldman Sachs lowering its oil track price, he says. That isn't happening yet.

His valuation on Air NZ remains $1.64.

Tourism talk

More fuel emerged this week to feed the speculative fires sizzling around Tourism Holdings.

On Wednesday, US private equity group Drake & Associates filed its sixth substantial security holder notice since May - showing its stake in the company is up to 13 per cent.

Also last week THL director David Cushing (son and business partner of Sir Selwyn Cushing) upped his stake. In a disclosure notice to the NZX he revealed he has been buying on market and has lifted his holding by nearly 500,000 shares to 9.83 million - or just over 10 per cent of the company. There is speculation that any takeover deal is likely to involves a hook-up between Drake and the Cushings. With the share register wide open the theory makes some sense.

France's AXA (and AXA Asia Pacific) has also increased its stake to 12.43 per cent.

THL has been tipped for some time as an attractive prospect for privatisation. Its assets - although all in the tourism sector - are an eclectic mix of transport operators and sight-seeing attractions. It may well be the value of THL's parts may be greater than its value on market. THL shares closed at $1.91 yesterday.

Telecom believers

One of Telecom's biggest shareholders delivered the beleaguered telco a vote of confidence this week by upping its stake in the company. Sydney-based institutional investor Lazard Asset Management lifted its stake by about 1 per cent from 5.18 per cent. No one at Lazard was prepared to explain the move.

It's possible they see the regulatory risk abating and believe Telecom will still come out on top once the unbundling bunfight is over.

Given the mess that Telstra is in across the Tasman maybe Telecom doesn't look like such a bad bet at its current prices. Telecom shares closed down 5c at $4.39 yesterday.

Vector next

On the regulatory front, the resolution of the Commerce Commission's dispute with Hawkes Bay lines company Unison has done good things for Vector's share price.

Unison agreed to reduce its average prices but successfully avoided having the commission take control of its pricing regime.

That bodes well for Vector, which is involved in similar discussions with the commission. Vector shares closed up 8c yesterday at $2.43.

Chinese checkers

There are some things even Graeme Hart can't turn a profit on. Carter Holt Harvey's great Chinese adventure came to an abrupt end this week as Hart sold Plantation Timber Products, a Shanghai-based board maker, for about $150 million (US$100m).

Carter Holt bought it in 2004 for $216 million. The Plantation business was never profitable but to be fair to the previous Carter Holt management it was a work in progress - one that needed a lot more investment.

Mooring a deal

Another column in another paper recently pitched the idea that a keen speculator with $4.8 million to burn might be able to block the takeover of Mooring Systems by Dutch giant Cavotec - potentially "greenmailing' the two companies to offer shareholders a better deal.

The idea - originally suggested by a shareholder at the Mooring AGM earlier this month - is that $4.8 million would buy a 10 per cent stake, which might not be too difficult to acquire given the wide spread of shareholders on the Mooring register.

Nice theory. Trouble is that the Mooring deal is a merger not a takeover. It will go to shareholder vote next month and will require 75 per cent approval. MSL shares remained moored at $3.72 yesterday - 3c below the merger value of $3.75 per share.

Chilly outlook

UBS head of research David Lane has downgraded his earnings forecasts for F&P Appliances for the 2007, 2008 and 2009 years. His revision is driven in part by guidance the company provided at the AGM last month.

It warned of rising costs for raw materials such as copper and indicated its 2007 earnings would be at the bottom of the range - effectively down by 3- 5 per cent.

That prompted Lane to revisit longer-range forecasts downgrading 2007, 2008 and 2009 by 6 per cent, 23 per cent and 25 per cent respectively. That equates to net profits of $88.14m in 2007 out to $117.71m in 2009.

Earnings per share are still on track to grow thanks to the acquisition of Italian cookware company Elba. A lower currency will also help although the fluctuation of the New Zealand dollar this year has added to the woes.

The roller-coaster ride of FPA's shares tracks the volatility of the kiwi versus the aussie almost exactly, Lane notes. If the current kiwi strength were to continue, there could be further downside to the 2007 estimates.

The shares fell 6c to close at $3.55.

Top of the world

The Lion Nathan 2005 Annual Report is such a fine document that next month it will go on show in Hamburg's Museum fur Kunst und Gewerbe (Art and Commerce). Yes, it's that good. Or has at least been judged so in the annual report world champs.

The Lion report didn't take the supreme "best on show" award (that went to Swiss giant Novartis) but it did win the "international" category at the 20th annual ARC Awards. With categories ranging from "best chairman's letter" and best "off-calendar accounting (traditional and non-traditional)" the competition doesn't sound like it will ever rival the soccer World Cup for excitement.

Congratulations, though, to Lion Nathan and Ponsonby-based design team Insight Creative, which put the report together. It's not quite a holiday read but it is a nice-looking publication. Those with German travel plans should rearrange their schedule to include Hamburg now.