KEY POINTS:
Stock Takes and all of the Business Herald team wish Infratil founder and managing director Lloyd Morrison a speedy recovery after it was revealed this week that he is suffering from leukaemia.
It's a tribute to Morrison's abilities as a leader that he has assembled such a well-regarded team around him that the news he will step down for a while has not bothered investors unduly.
On the day of the announcement, Infratil's shares closed down just 2c at $1.63. By the close of trade yesterday, they had recovered all of that and some, closing at $1.67.
Contrast that with international computing giant Apple, whose shares lost as much as 10 per cent last week after founder and chief executive Steve Jobs said he was taking leave of absence for several months to cope with a complex hormone-related illness.
GAME ON?
Is Origin Energy readying another takeover tilt at Contact Energy?
Contact's profit downgrade this week, which prompted a 9 per cent one-day fall in its share price, has one or two cynics, suggesting another attempt may be in the offing.
They point out Origin's last try in early 2006 was preceded by a profit downgrade in October 2005. Origin's failed bid that time sparked an outpouring of minority shareholder antipathy toward Contact's supposedly independent directors, particularly Phil Pryke and Tim Saunders who once again recommended the majority shareholder's offer as they did in 2001 when Edison Mission tried to assume full control.
The antipathy towards Pryke, Saunders and Origin has yet to fade - witness last year's annual meeting when Origin was forced to at least give some semblance of backing down from its proposal to increase remuneration for them and other directors.
The Australian business media has recently reported on the potential for Origin to "tidy up its structure" given its healthy cash balance at present. Origin may also be looking at some of Babcock & Brown's power assets.
The loss of Contact would be a massive blow for the struggling New Zealand sharemarket. Earlier this month, NZX boss Mark Weldon told the Business Herald that current exchange rate volatility probably made cross border acquisitions less likely at present. However the kiwi dollar has recently been losing ground against the Aussie. The stars appear to be in alignment for Origin. Contact shares closed up 16c at $6.76 yesterday.
DEBT CAN BE FATAL
Fears last year of a credit squeeze on New Zealand businesses appear to be well founded with the issue continuing to attract more attention.
It will be interesting to see how Contact goes with its upcoming bond issue. Other major corporates issuing debt in coming weeks include Fonterra.
The task of raising funds on the debt market has not been made any easier by the Government's retail deposit guarantee scheme which, among other unintended consequences, has distorted the risk/return equation.
The likes of Contact and Fonterra will be competing for funds with companies including Mascot Finance. Fonterra, which just had its AA- long-term credit rating affirmed by Fitch, is, according to Kapiti Coast financial adviser Chris Lee, expected to offer its bonds at between 7.5 and 8 per cent. Meanwhile government guaranteed Mascot Finance is expected to offer 9 per cent.
BANKING ON CANBERRA
In fact there was some talk this week from Prime Minister John Key that his Government might extend funding directly to a small group of key corporates if necessary. His Finance Minister Bill English has subsequently explained that these are times for considering worst-case scenarios and while nothing could be ruled out, the Government is unaware of any corporates that need such assistance at present.
The Australians, however, are not so coy and have announced a multibillion-dollar "crisis fund" which would see the Federal Government become a lender of last resort to allow some of Australia's biggest companies to roll over existing credit facilities and avert a new wave of layoffs and a further plunge in business and consumer confidence.
Thinking of the Australian Government's A$2 billion rescue package for the automotive industry, its wholesale funding guarantee for banks which is more affordable than New Zealand's and other big buck responses to the credit crisis, it strikes Stock Takes that Rudd's Government is continuing a grand Aussie tradition of corporate welfare and protectionism which contrasts with New Zealand's more laissez fair "tough love" approach. Ha! - just look where it's got them.
WHO'S SQUEEZED?
Meanwhile Key's talk of supporting key corporates if they require it has sparked a fair amount of speculation, in the Business Herald's offices at least, about which companies may find themselves in such an unenviable situation.
We can safely rule out Fletcher Building. It yesterday said it had met its initial $100 million target in its current capital note issue. The offer closes on February 5 and the company can accept oversubscriptions up to a further $100 million. Fletcher Building shares closed up 11c at $5.75 yesterday.
TROUGH ENOUGH
Much of last year's volatility has been noticeably absent from sharemarket trading so far this year with just five sessions out of 14 seeing movements of more than 1 per cent. Still, the NZX-50 has given up a fair chunk of the gains it made in late November and December.
With the benchmark index closing at the end of December 33 per cent down on the previous year, 2008 was a bust.
The NZX-50 is about 150 points above the low it hit in November, hopefully this will mark the bottom of this bear market.
The bottom of the last bear market was, arguably, back in March 2002 when the NZX-50 was at 2009 points. It peaked in October 2007 at 4332 representing a gain of 116 per cent over the five-year period. Closing at 2734 yesterday it was ahead of the March 2002 level by 36 per cent. Of course the NZX-50 is a gross index and includes dividend payouts as well as share price movements.
But nevertheless, paltry as a 36 per cent gain over seven years is, it's better than the Dow Jones which is down around 20 per cent over the same period, the FTSE which is down 22 per cent and even the S&P ASX200 which is virtually flat.
SHORT GETS LONGER
For further evidence of the Australian Government's willingness to be accommodating to key corporates look no further than the Australian Securities and Investment Commission's ban on short
selling of financial stocks which has now been extended for a further six weeks.
The ban, put in place last year, was supposed to expire next week but Asic cited the growing crisis among British and American banks and the ban will now run until March 6.
In the UK after a short selling ban on financial stocks expired, Royal Bank of Scotland, which owns ABN AMRO and half of ABN Amro Craigs here in New Zealand, has seen its shares sink by more than 70 per cent this week, while those of Lloyds TSB dived 55 per cent.
Among those Australian companies heaving a sigh of relief at the extension of the ban will be Macquarie Group, which was widely expected to be one of the stocks affected when the ban was lifted.
