Stock takes: New ally for Hanover?

With gold hitting a string of fresh all time highs in US dollar terms, Oceana Gold shares have been making impressive gains of late.

But shares in the company, which operates the Macraes mine in Otago, have also benefited in other ways too this week.

On Monday, broker McDouall Stuart's Market Weekly reiterated its "buy" recommendation on the stock, partly on the "expectation that results from the current exploration campaign will become known during the fourth quarter".

"We expect those results to confirm a significant extension of reserves and, therefore, mine lives," McDouall Stuart said.

The next day, Oceana announced a 42 per cent increase in its "mineral resources at Macraes Goldfield".

New chief executive Paul Bibby, comments: "This updated resource estimate has materially inceased the resource base at Macraes and is an important step towards our objective of extending the mine life of the operations." Uncanny.

Oceana Gold yesterday rose 5c to $1.85.

ALLY FOR HANOVER?

The bad news out of Hanover Finance this week has stoked speculation some kind of debt for equity swap deal with Allied Farmers Finance is in the offing.

The prospect was first aired by the Sunday Star Times and Allied Farmers managing director Rob Alloway wasn't going out of his way yesterday to dispel the speculation.

He acknowledged debt for equity swaps involving stressed finance companies was something his firm was looking at.

"Clearly if you convert debt to equity you haven't got the oversight, monitoring or management of a trustee so you can make faster decisions to match the market and it provides liquidity for investors.

"There's clearly some opportunity for someone to come up with another way out for some of these investors because clearly these moratoriums are not going to work."

"We're looking around," he told Stock Takes.

"Some of the news that's come out over the last week we're looking pretty carefully at."

Hanover then?

"We keep pretty close to the whole finance industry and Hanover's just one of many that's under stress at the moment.

"We're not really in a position to talk about any deals that we're considering at the moment but clearly Hanover's an opportunity for someone, I would say."

Allied Farmers shares, which have been looking fairly perky lately, closed steady yesterday at 32c.

TOUGH SELL

Such a deal might make sense for Allied and may even help Mark Hotchin and Eric Watson to put some distance between themselves and the mess they have made, but would it really be of much benefit to investors?

Alloway's comment that such a deal would provide liquidity for investors is probably true as far as that goes. But look at Geneva investors who had a portion of their debentures converted into equity. They're now free to "liquidate" that equity at 9c a share, less than a quarter of their "theoretical value" when the conversion took place.

Stock Takes assumes that before any debt for equity swap of the type Alloway is talking about could take place, investors would have to approve it. That could prove to be a tough sell.

LIMP TICKET

The New Zealand Markets Disciplinary Tribunal announcement this week that it had reached a settlement with an unnamed participant - or broker as you or I might call them - has left other market watchers somewhat underwhelmed.

The settlement, in relation to a couple of incidents where the broker chose not to report off-market trades until well after they occurred, "had the potential to undermine both investor confidence and market integrity", the tribunal said.

Based on what we understand about the incidents, it did undermine the integrity of the market. By publicly disclosing the offending took place but declining to name the culprit, NZX Regulation is itself ensuring that investor confidence will be damaged.

Why moisten the bus ticket like this before administering the punishment? NZX Regulation acknowledged "the co-operation of the participant during the investigation, its acknowledgment of the breaches and its undertaking that it had taken immediate action to ensure that such breaches did not recur".

"You got me bang to rights. I'll never do it again, honest," appears to be enough to ensure your own good name is protected at the expense of the wider market.

NOTHING TO SEE HERE

Tourism Holdings is the latest company to attempt to exert control over the news it generates by placing restrictions on the way media can report on its annual meeting.

Unlike a recent Pyne Gould Corp shareholder meeting in Christchurch regarding its recapitalisation plans, media were allowed to attend Tourism Holdings' annual meeting in Auckland this week, but they were not allowed to record the proceedings.

Tourism Holdings' view is that audio and video recordings represent a much bigger risk that what is said by directors or executives will be presented out of context and in a misleading way than if a journalist simply took notes with pad and pencil.

Curiously, PGG Wrightson which, like Tourism Holdings, is chaired by Keith Smith, also had a ban on recording its meeting.

Stock Takes understands that it's entirely up to the company who and what they allow into their shareholder meetings but it's hard to escape the feeling that restrictions on media reporting are put in place when someone has something to hide.

REDDY TO ROLL

Will the Kathmandu IPO pave the way for a bunch of other private equity outfits to get shot of assets they bought a few years back on cheap debt that are now proving to be somewhat burdensome?

REDgroup is reputedly looking at a sharemarket float and holders of the company's NZDX listed bonds are reacting to those reports, or someone knows something a little more definite, or the market is simply heartened by the company's recent results, because the yield has come in considerably in recent days.

Pacific Equity Partners purchased Whitcoulls from British bookseller WH Smith in 2004. It paid $135 million to buy Whitcoulls and Australian chain Angus & Robertson.

It subsequently added Australian newsagency chain Supanews for an undisclosed sum and then last year acquired 30 Borders stores in New Zealand, Australia and Singapore in a deal worth as much as A$110 million.

Formerly known as AR Whitcoulls, the company rebranded itself as REDgroup last year.

But by the middle of this year, the company's $36 million in December 15, 2010 bonds issued with a coupon of 9.5 per cent were changing hands at a yield of 27.9 per cent.

Yesterday they were at 17.5 per cent, hardly indicative of fantastic prospects, but a big improvement nonetheless.

Last month the company reported full year earnings of $42.4 million, a 301 per cent increase on the previous year, with revenues up 52 per cent.