KEY POINTS:
The Shareholders Association has surprised Guinness Peat Group's Tony Gibbs (and possibly even itself) by awarding him their annual Beacon award - for providing a shining example of excellent corporate leadership.
Gibbs is a colourful and eminently likeable character but he is equally well known as a corporate
raider and right hand man to Sir Ron Brierley.
In presenting the award yesterday Shareholders chairman Bruce Sheppard acknowledged the two haven't always seen eye-to-eye on issues of corporate governance. But he highlighted three reasons for the decision.
The first was GPG's strong record in creating wealth for shareholders. Gibbs also won kudos for the way he exited the Vector board last year. It was a rare thing to see a director take a stand on an issue, step down and let the market know the reasons for that move, Sheppard said. Thirdly, Gibbs successfully took on the Government over tax changes.
Dream, dream, dream
From Contact Energy's "What-If" department comes news that shares could have been around the $10 mark if the Origin merger had gone ahead.
Contact chairman Grant King told the company's annual meeting last week shares had risen 43 per cent since the merger was announced last year but would have been 60 per cent higher if the two companies had merged, based on current market capitalisations.
Origin pulled the plug on the proposal because local institutional investors would not support it. But King's calculations didn't appear to take into account any drag the Contact component would have had on a fully merged business.
One analyst has pointed out that while not disagreeing with King's view, Origin would have been a "slightly different beast" if Contact had merged into it.
While King's figures had a back-of-an-envelope feel to them, deputy chairman Phil Pryke said he had analysis which showed about $500 million in extra wealth for shareholders was "left on the table".
Regardless, Contact has since done well - its share price peaking at $9.70 after the deal was ditched.
But forecasts of flat wholesale electricity prices, high gas prices, higher depreciation and interest costs all add up to put the squeeze on profits next year. The market was aware of this but shares still took a a 19c or 2 per cent dip on the day of the meeting a week ago. Meanwhile Contact has assured the Business Herald there was no attempt to avoid shareholder flak in the timing and placement of their annual general meeting.
The suggestion - which came from the Shareholders Association - was that the genteel environs of Christchurch and the timing clash with SkyCity's meeting may have been a handy way to avoid the glare of shareholder attention.
Contact shares closed down 2c at $9.04 yesterday.
Re-genesis
Genesis Research and Development has returned to its roots after flicking on its interest in BioJoule - a company with the potential to make green plastic out of shrubby willow.
BioJoule was sold to Singapore, Hong Kong and Sao Paulo-based Pure Power Global for $6 million and 1.2 million shares.
Genesis' share of the deal is $3.9 million in cash - half now and half next August - plus nearly one million shares in Pure Power.
Samples of the natural lignin produced from shrubby willow have been converted into a polyurethane foam showing potential for green plastic.
However, Genesis chief executive Stephen Hall said up to $5 million would have been needed during the next 18 months to two years to build a pilot-scale digester and fund laboratory work.
"It has been difficult to raise capital or grant funding in New Zealand so international involvement is required," he said. "However it is possible that a biorefinery to produce ethanol, unsulphonated lignin and xylose from shrubby willow could still be built in New Zealand when the technology has been further developed."
Genesis had been a little different from most other biotechnology companies by focusing on both human therapeutics and ag-bio, Hall said.
"That's always been a little confusing to overseas analysts at least," he said. "So with this transaction we're really back to our roots where we started and that's focusing on human therapeutics."
The cash from the sale of BioJoule will fund work on an oncology and a Zyrogen antibody programme, which were moving towards clinical development.
Genesis shares closed at 28c yesterday, down 2c.
Managing fine
Fund managers will be hoping for the benefits of the tax changes on collective investment vehicles to kick in after seeing a large outflow of money in the lead-up to the October 1 changeover date.
Figures from NZX-owned fund research firm FundSource show $633.9 million poured out of managed funds during the September quarter resulting in a net decline of funds under management of3.5 per cent.
The out-flow is the biggest recorded in the 17 years that FundSource has been tracking managed fund performance.
FundSource analyst Gabrielle Donnell said the decline could be attributed to several factors including the closure of some funds, volatility in global markets and difficulties in the New Zealand finance company sector.
Donnell said investments like Rabobank's bond issue had proven popular with investors and the attractiveness of New Zealand's high cash rate was also likely to have drawn investors towards bank deposits.
However Donnell expected fund flows to improve over the next quarter as money entered KiwiSaver funds and investors moved to take advantage of more tax- efficient portfolio investment entities.
"These are arguably the most significant changes the New Zealand managed funds industry has yet experienced. While we are currently in a transition period, we would expect to start to see the benefits for managed funds down the track."
Meanwhile a survey by Mercer of superannuation funds reveals median returns for the September quarter were three per cent with AMP Capital Investors' unit trust and Arcus Investment Management the top performers.
SkyCity offer
The SkyCity sale process is looking increasingly like a three-horse race and all of them are private equity players.
US firms TPG and ProvidenceEquity Partners have already been widely tipped and now it looks like CVC Asia Pacific will also kick the tyres on the troubled gaming company.
While you can never rule out James Packer's PBL they don't seem to be lining up to do due diligence.
ABN Amro's Carolyn Holmes urges SkyCity shareholders not to sell out to a low-ball offer in her note on the stock.
Holmes has a discounted cashflow valuation of $6.10 on the shares but says there is another 54c to 93c per share upside to be derived from restructuring scenarios including the sale of assets such as the Grand Hotel, cinemas, Convention Centre and the Adelaide casino.
Factors which could effect the long-term valuation also include improved gaming revenue growth rates at SkyCity Auckland under new management and the risk of increased gaming levies.
Running a series of calculations to work out what a private equity player might be prepared to pay (assuming debt levels, interest costs and required rates of return) she estimates there is a theoretical possibility that $6.50 a share couldbe viable.
More realistically though the price is likely to range from $5.75 to $6.10. But at $5.75 the buyer would be getting too good a bargain.
Holmes has also lifted her target price on the stock to $5.94 to reflect the likelihood of a takeover - but notes there is still a risk of no bid eventuating.
SkyCity shares closed up 8c yesterdayat $5.45.
