KEY POINTS:
What NZX chief executive Mark Weldon describes as the most important corporate reporting season for some time is almost upon us.
Given this year's market turmoil, investors are hoping for a round of results that confirms the perception that US ills aside, New Zealand's corporates are in good
shape and earnings will hold up.
ABN Amro analyst Carolyn Holmes is expecting a strong result from Sky TV at least.
She forecasts a 34 per cent increase in first half net profit to $49.1 million from $36.5 million a year ago.
While Holmes expects Sky to report "soggy" subscriber growth, thanks to the equally damp squib that was the Rugby World Cup 2007 screening on free-to-air TV, she says that will be offset by tight cost control.
She forecasts revenue growth of 8.9 per cent but costs growing at just 3.4 per cent thanks to a decline in depreciation expense.
Assuming a dividend payout ration of around 50 per cent of npat, Holmes is picking a 6c fully imputed dividend.
ABN has a discounted cash flow valuation of $7.05 on Sky. Yesterday its shares closed 6c lower at $5.30.
Holmes rates Sky as a "buy" and attributes the discount to DCF to an unclear regulatory outlook which is "likely to remain that way at least until the next election".
But there are clouds
After three days of gains last week, the sharemarket's decline has resumed again, albeit at a more measured pace than over the first four weeks of the year.
While welcoming the respite and talking up the bargains on offer now, the general view among market watchers is that there may well be more heartache to come.
Still, the woeful performance of equities has boosted interest in fixed interest investments, so long as it's not debenture stock issued by smaller thinly capitalised finance companies.
"It is not all doom and gloom," says David Speight of online brokerage Direct Broking, talking about a "flight of cash to the bond market".
"The New Zealand fixed income market is offering yields that reflect a far higher reward for risk than they have in the past," said Speight, citing a widening of credit spreads on a number of new issues due to the credit issues overseas.
While the fallout from the US sub-prime and credit crunch issues bit equity markets really hard only at the beginning of the year, Direct Broking says retail investors were showing increased interest in securities offers on NZX's NZDX debt market at the end of last year.
While the firm says fixed interest trading usually picks up by a few percentage points during the second half of the year, last year it rose by 20 per cent.
"It's definitely an investment vehicle moving back in favour," says Direct Broking's Julian Granger.
"This month the bongo drums in the market place are that we've got a few new debt issues around the corner," said Speight.
NZX data shows NZAX turnover was up a fairly mild 6 per cent in December on a year ago, but January data due within a couple of weeks should show whether the sharemarket trouble is indeed encouraging retail investors into what is a less glamorous but safer market.
Silver lining
A real estate company hailing signs of a slowdown in the housing market? Well, they are "reinventing" the industry at flat-fee realtors The Joneses.
"With the market slowing in both price and volume, The Joneses are finding that vendors are becoming ever more discerning over the price they pay to sell a home and the level of service they receive," The Joneses' partner Chris Taylor said in a market announcement this week.
"We've experienced strong business growth as the market has slowed."
If that's so, then the timing of the property market slowdown has been perfect for The Joneses, which plans a reverse listing on the NZAX shortly via RLV No.3, one of the shell companies former Direct Broking broker Brett Wilkinson keeps on hand for such use.
In the statement released under RLV No.3's name, Taylor said he expected the real estate market to remain relatively flat throughout this year and predicted that demand for The Joneses' fixed fee model would grow rapidly.
If the housing market tanks, as some fear, does that mean The Joneses will make a killing?
Burger that
Shares in Burger Fuel, which sought to tap the first-time equity investor with wacky adverts for its IPO last year, continue to provide those who bought them with a rude introduction to the sharemarket.
Already trading at 40 per cent discount to their $1 issue price by the end of last week, on Tuesday they fell a further 30 per cent or 18c to 42c.
Ouch! By the end of trade yesterday they were back up to 50c.
More bargain hunting
As if further proof was needed that the local market is undervaluing Fisher & Paykel Appliances, a substantial shareholder notice to the NZX yesterday showed Brook Asset management has been buying up the stock as it plummets to new depths on the back of the global market meltdown.
Brook has now moved to a 6.13 per cent holding in the company, up from 5.24 per cent.
There are some good reasons why the stock is cheap. The ongoing curse of the high New Zealand dollar has dampened its profits for a couple of years now. It all has high exposure to the US market. The slow-down in US house building will affect the amount of new whiteware being purchased and a broader slowdown in US consumer spending will hurt sales of its high-end luxury fridges and cookers.
But these are relatively short-term issues which investors like Brook are happy to look through.
Brook's Simon Botherway says he has faith in the quality of Appliances' management to handle a downturn. He also notes the company is still to reap the benefits of moving production offshore and that there is scope for them to move more manufacturing out of New Zealand if costs remain high here.
The sale of the group's finance division remains a real possibility and if the price stays low for too long a full takeover bid by one of the big US or Chinese whiteware manufacturers isn't out of the question.
That might be a tragedy for the local market but would deliver a healthy premium to those that have bought in at a good price. F&P Appliances closed yesterday at $2.80 - down from $3.50 on December 24.
As the investing experts keep pointing out - when markets fall the smart money starts buying, not selling.
Uncle Bill could only do so much for Vestar group
Last week Stock Takes ruminated on what MFS' problems in Australia meant for clients of its financial advisory group, Vestar, here in New Zealand.
MFS has given Vestar clients, whose money was sunk into failed finance Capital + Merchant, a commitment to ensure they "do not suffer any capital loss" in relation to the failure, although it has yet to detail what that commitment amounts to.
Vestar also put its clients in to Bridgecorp and Property Finance Securities - both also in receivership.
Who picked these dogs?
The chair of Vestar's "investment selection committee" is Commerce Commission member and former BNZ chief economist Donal Curtin. Also on the committee, Vestar's founder Kelvin Syms, a man according to the Vestar website, "with over 30 years experience in researching and identifying the right investments for clients".
Vestar was run (according to Syms in a Northern Advocate article published in December 2006) to rules set out by a plumber, his Uncle Bill.
"Know your product inside out, give fantastic customer service, look after your money."
Demonstrating superb timing and adherence to one of Uncle Bill's maxims at least, Syms sold Vestar to MFS in late 2006, for $52 million, a few months before Bridgecorp failed. With those shares now on a trading halt after falling 70 per cent in one day last month, they won't quite be worth what they were when Syms sold out.
