KEY POINTS:
Shares in Australasian brewer Lion Nathan have been on an upward trajectory since late June.
They have crept from $10.39 on June 23 to close at $11.12 yesterday - a rise of 7c in just under three weeks, albeit on light volumes.
The rise is puzzling, given the dearth of company announcements over that period. Perhaps retail investors are seeing it as an attractive defensive stock - people tend to continue drinking in good and bad times. Or are they counting on more drowning of sorrows as the sharemarket continues to falter?
ACC OPPORTUNITY
Media reports of National's plan to open ACC up to competition have prompted Rodney Deacon at Goldman Sachs JBWere to take a look at the implications for the New Zealand insurance sector - and listed company Tower NZ in particular.
Partial privatisation of ACC could provide an extra $81 to $135 million of profit for the general insurance industry, he says.
Tower currently has a 5 per cent share of the New Zealand insurance market with a focus on home and contents and vehicle insurance.
Deacon argues that if the ACC market was opened up then Tower would most likely look at competing in the motor vehicle segment but the Treatment Injury account could have some cross over with its health insurance business.
"Combined, these would present considerably less opportunity than that afforded to the total insurance market," Deacon says.
"But assuming that Tower would at least hold its market share, they would still be material." Potentially 5 per cent of Tower's 2007 net profit.
Deacon already has a buy rating and a target price of $2.80 on Tower. It is trading on a 2009 year PE multiple of about 9 times in the wake of the GPG partial takeover.
"We think this represents good value relative to both the market and Tower's Australian peers," he says.
Any move to partially privatise ACC would further enhance that valuation. On the downside the two possible risks would be that with a greater premium pool on offer new competitors could be attracted into the market from offshore and that National opts not to privatise the Motor Vehicle account.
Tower NZ shares closed yesterday at $1.94.
STILL VOLATILE
After a promising couple of days, that were starting to look something like a rally, the NZX-50 hit the wall hard yesterday.
The combo of negative Wall St trading and a nasty 30 per cent downgrade by Hallenstein Glasson were too much to overcome and the index resumed its now familiar pattern of falling quickly on pretty thin volume.
On Wall St another 2 per cent fall across the board on Wednesday sent the S&P-500 index into bear territory. The Dow Jones Index is already there.
Locally some brokers are now talking up the idea that the market is oversold and there are bargains to be had.
They are right, sort of.
There is no doubt that stocks like Fletcher Building and F&P Healthcare are worth more than the $6.43 and $2.35 they are respectively trading at.
The problem is the volatility in the market and in world markets generally makes it look a bit optimistic to say that the market has bottomed out. Particularly with a potentially rough earnings season about to begin shortly.
Still it is always darkest just before the dawn, or so the saying goes.
RETAIL ROUT
With the industry in the doldrums, retail stocks have taken a bigger hiding than most in the sharemarket's slump.
Hallenstein Glasson - which yesterday advised an earnings fall of around 30 per cent - Michael Hill International and Pumpkin Patch are just hovering above their 52-week lows, but the continual downward slide of takeover target The Warehouse Group is most surprising.
Its shares ended yesterday at $3.96, not far from the $3.91 closing price on June 6, 2006.
That was the day before Foodstuffs kicked off market speculation by taking a substantial stake in the Red Sheds.
It's a far cry from the heady days in April last year of a share commanding around $7.30.
Admittedly its decline has come on light volumes - a situation one broker described as "death by a thousand cuts-type scenario" that is affecting pretty much every stock as institutions hang tight, leaving retail investors to cash up or cut their losses.
But there is considerable angst too over whether the Court of Appeal might actually side with the Commerce Commission's case, essentially putting up another hurdle in front of suitors Woolworths or Foodstuffs.
With a decision still pending after nearly nine weeks, some have clearly cut and run.
Not helping The Warehouse, of course, is its recent profit downgrade as a result of deteriorating consumer confidence and retail spending.
But the longer it takes for a decision to be reached on whether a takeover can go ahead, the more likely the share price will live up to its well known slogan, "where everyone gets a bargain".
GLOBAL TOP
40 Globally the seismic economic shift the world has been through this year is still forcing firms to reassess their market outlook.
UBS has adjusted its Global Top 40 stocks list.
Out goes American telco giant AT&T, in goes an oil hunter - deep-water driller Transocean.
While the shift towards energy stocks might seem inevitable the UBS Top 40 list still retains buy recommendations on plenty of stocks with exposure to consumer spending - from McDonald's, Pepsi and Microsoft to News Corp, General Electric and Johnson & Johnson.
The Top 40 also remains heavily weighted towards US stocks despite the economic downturn there.
UNCERTAINTY ABOUT TAKEOVER ADDS TO CONTACT ENERGY'S WOES
Contact Energy is suffering from the general market-wide malaise and other factors - low hydro generation and uncertainty over the takeover of its Australian parent - are also bearing on the stock.
While it has outperformed the NZX-50 since the start of the year, Contact has not done as well as such a normally reliable defensive stock might have been expected to in the past month.
Forsyth Barr analyst Andrew Harvey-Green says that as well as falling victim to the general selloff, it has been suffering from the low water levels in its Clyde hydro power system.
While this in turn has been partly mitigated by reopening part of its asbestos-affected New Plymouth power station, the company is being affected in the short term.
BG Group's hostile A$13.7 billion takeover for Origin Energy - 51 per cent owner of Contact Energy - was last week formally rejected. Contact's share price spiked to $9.70 in May on early speculation of where it would fit in to any deal, but Grant Williamson of Hamilton Hindin Greene says there remains uncertainty whether the bid will succeed.
Contact shares fell 11c to $7.51 yesterday.
