Stock takes: Turkey shoot begins as shares fall

Hanover investors are already down 21 per cent after the first day of their new deal. Photo / AP

Stock Takes apologises for inflicting Hanover fatigue on readers over the past couple of weeks.

We planned to avoid writing anything about it this week but just can't help ourselves.

We'll keep it short and note merely how Allied Farmers shares dived 4c to 15c yesterday in the first trading since the deal was approved by bond holders. Day one, and Hanover investors are down 21 per cent already.

That is on what is an extremely limited supply compared with what will be on offer when Hanover investors finally get their two billion new shares.

We'd be surprised if Allied's share price didn't get further trampled into the carpet in the stampede for the exit when that happens.

It's going to be horrible.

IN THE PIPELINE

Fisher Funds' Australian Barramundi fund may be poised to exit its largest holding, fibre network operator Pipe Networks with a very respectable profit.

Larger rival TPG has offered A$6.30 a share for the company in a scheme of arrangement. Given Barramundi's average entry price for its 7 per cent stake, according to Fisher's Frank Jasper, was around A$3 the fund is well in the money.

At the offer price, Barramundi's stake is worth around A$30 million, "we've already doubled our money on it", but it is holding out for more.

Pipe is the third largest metropolitan fibre network in Australia, and is strategically important because of the cost and difficulty in replicating its infrastructure, and it has been growing quickly.

Barramundi's view is that TPG's offer is lower than that for similar transactions for a company that is growing faster than the wider industry. It also offers almost no consideration for the value of Pipe's recently completed undersea link to Guam.

"For the new cable we're effectively just being given back our money," says Jasper.

He also notes that TPG's own share price, unusually, has put on an enormous amount of value since the offer was tabled.

"It's telling you the market's ascribing enormous synergy value to this transaction or that the market thinks the price offered for Pipe is low and it will pick up the company cheaply.

"We say we should share those benefits even just 50:50 which to me would be enormously generous to TPG shareholders. That justifies a takeover price in excess of A$8.00 as does our valuation work. Our belief is we're not alone in our views on this."

As is frequently observed, in takeover offers in the Australian market, the first offer is often not the last.

Pipe's shares closed up 5c at A$6.05 yesterday. Barramundi units are currently trading at 68c.

NO HOME DELIVERY

Given the focus in the Capital Markets Development Taskforce's report this week on New Zealand's potential to become a hub for trading in agriculture based financial products, NZX's new dairy futures market's fortunes will be closely watched.

NZX's head of traded products Fiona MacKenzie says it may take some time for the market to build volume and scale.

"It's not as if you flick a switch and suddenly you have a functioning market, you have to avoid rushing when you launch new products. Our expectation is that volumes will be modest at the start, but liquidity begets more liquidity."

MacKenzie expects the initial whole milk powder future will be followed by anhydrous milk fat and skim milk powder futures contracts.

She notes that other exchanges around the world including the big daddy of futures markets, the Chicago Mercantile Exchange, are looking to launch similar products - "they heard about us". NZX's products will differ however in that they are cash-settled contracts.

"The big advantage is you don't have to get tied up in the logistics of physical delivering at expiration and you have a much bigger potential market."'

This means that the ambitious speculator working from home in the suburbs doesn't run the risk of having several container loads of milk powder turn up on their doorstep.

MacKenzie told us the market should go live some time in the second quarter of next year.

THE ROCKETS

As the year ends and the holiday season beckons, we thought it worth looking across the sharemarket to see who had the best and the worst of years.

Among the NZX-50 the standout was Restaurant Brands which gained 147 per cent since January 1.

The company resolved problems around its Pizza Hut franchise by inking a new agreement with franchisor Yum Restaurants International and has proved to be a truly counter cyclical operation as consumers turned to takeaways.

Chief executive Russel Creedy told the Business Herald earlier this month the company was in growth mode before the recession, particularly KFC.

"I think all that's happened is that it has continued."

The growth had been accelerated by smarter marketing and operational improvements. he added.

Restaurant Brands overtook Pumpkin Patch, which was the year's top performer back in September and has now risen 103 per cent for the year.

The two companies were in a league of their own.

The third best performer, ignoring dual listed but primarily Australian Pan Pacific Petroleum, was NZX itself which has risen 60 per cent.

DAMP SQUIBS

The booby prize is a little more problematic, the three contenders were Nuplex, down 42.2 per cent, PGG Wrightson down 41.5 per cent and Fisher & Paykel Appliances down 38.7 per cent.

All three had very dilutive capital raisings which skewed the figures. But on the basis that this is the decline you would have suffered if you were an investor unwilling or unable to stump up the cash to maintain the relative size of your stake, and the fact that if the companies had done better they wouldn't have needed the cash in the first place, we feel they've earned this recognition.

ALL QUIET DOWN SOUTH

Since the resignation of chief executive Lachie McLeod late last month there's been little news out of troubled South Canterbury Finance.

In November it was reported a new company incorporating three assets handled by controlling shareholder Allan Hubbard were likely to be listed early next year. Word had it that newly registered Southbury Corporation would be listed and include a smaller South Canterbury Finance, Helicopters New Zealand and Scales Corporation.

The company's problems emerged mid year and it has taken a few steps to right the ship but there are still some significant issues it has yet to assure the market it has dealt with.

Lately it's been very quiet. Too damn quiet in Stock Take's view.