Stock takes: Waiting game again

NZX's decision on Wednesday to pull the plug on its bid for second tier Australian market operator NSX came as no surprise given the opposition it faced from shareholders.

That leaves NZX's hopes for an Australian presence back with its tortuously delayed AXE ECN venture.

Writing in the Australian this week, columnist Adele Ferguson outlined some of the issues for AXE ECN and other would-be challengers to the ASX's dominance of the Australian equities trading sector - Liquidnet and Chi-X.

All three challengers have market licence applications that have been languishing in the Australian Federal Corporate Law Minister's in tray for months, if not years.

Ferguson reports that Nick Sherry was last week replaced in that role by Chris Bowen, fuelling fears of yet more delays.

However, she also writes that regulatory issues, that have an-all-too-familiar whiff about them, may be another reason for the procrastination.

In the context of dissatisfaction with the ASX's dual role as market operator and regulator, there is some speculation that the Federal Government may be waiting on a report from the Australian Securities and Investment Commission on ASX's execution of its regulatory functions before making any decision over issuing new market licences.

ASIC's assessment is due out any day.

As a listed entity, writes Ferguson, "the ASX is one of the few exchanges in the world that has been allowed to keep all its supervisory powers intact and continue to police its own customers".

She quotes a market watcher who sounds a familiar note: "Having this dual role is like the police force being allowed by law to operate a money making business alongside its regulatory duties. The obvious conflict of interest would undermine law enforcers' capacity to perform their duties efficiently."

NZX shares closed at $7.55 yesterday.

SUGAR RUSH

Sir Ron Brierley has welcomed news from Australian sugar, aluminium and building products conglomerate CSR's board of a plan to spin off its sugar business, said to be worth more than A$1 billion, as well as its renewable energy division.

Sir Ron's Guinness Peat Group holds just under 5 per cent of the company and this week said the move was a step in the right direction that should have been made long ago.

"GPG has put forward over a period of time credible proposals to unlock value for all CSR shareholders.

"Substantial shareholder value has been forgone by not taking advantage of restructuring opportunities before the company's dilutive capital raising late last year," it said in a statement.

While also noting the proposal looks well overdue, some Australian commentators question why CSR has made the decision to pursue this all of a sudden.

Given Sir Ron's quick response to the announcement, Stock Takes wonders whether GPG hasn't had something to do with it.

CSR says the demerger will be completed by the end of March next year and will probably include an equity raising to strengthen the balance sheets of the two separate ASX-listed entities.

We wouldn't be surprised if GPG takes some kind of prominent role in CSR's plans as they unfold.

CSR's shares gained 6 per cent to A$1.59 on Wednesday when the announcement was made but dipped to A$1.55 by the end of trading yesterday.

GPG shares closed at 71c on the NZX.

CAESAR'S WIFE

One of our readers got in touch yesterday, saying she was distressed to learn in a Business Herald story about Cynotech's capital raising a couple of weeks ago that receiver Richard Agnew of PricewaterhouseCoopers is a shareholder in the company.

Our story focused on the fact that Cynotech's Allan Hawkins had not seen fit to disclose his admittedly well-known criminal convictions and subsequent jail sentence on fraud charges related to Equiticorp back in the roaring Eighties in the prospectus for the capital raising.

One of Cynotech's businesses is buying the loan books of failed finance companies and then collecting what it can from them, which is hopefully more than what it pays for them. One of the books it has purchased was that of National Finance 2000 or an associated company. What riled our reader, who has lost money in the National Finance failure, is the receiver for both companies is PricewaterhouseCoopers.

PwC yesterday pointed out that Agnew is not actually the receiver for National Finance, but Colin McCloy, who is, said the potential conflict of interest was identified early and steps were taken to ensure that Agnew has nothing to do with what was a contestable sale process for the National Finance book.

Our reader feels, and Stock Takes has some sympathy for this view, that it's hardly a good look for Agnew to hold even a relatively minor stake in Cynotech given his day job involves recovering as much value as possible for investors in failed businesses including finance companies.

STATE OWNERSHIP

Now that the dust has settled somewhat from the Nuplex and Fisher & Paykel capital raisings, Stock Takes was interested to receive some relatively up to date information on who the top shareholders are in each.

We're pleased to report that biggest stakeholders in Nuplex are you and I - the taxpayers of New Zealand.

In Nuplex, the ACC is still the biggest single shareholder, having gone from 4.52 per cent in September to 6.04 per cent now. The New Zealand Superannuation Fund holds 3.12 per cent, up from 2.03 per cent. Of course China's Haier is now the largest shareholder in Fisher & Paykel Appliances, with 16.67 per cent.

The ACC and Super Fund a year ago held 3.9 per cent of F&P Appliances apiece. The ACC has since upped its stake to 4.4 per cent but the Superfund is now down to 2.3 per cent.

WHEN THE BUZZ HAS GONE IT'S TIME TO FLY

Fisher Funds Management last week notified the market it had sold up its holdings in bee products company Comvita, between May 20 and June 10 selling 2.1 million shares or 7.2 per cent on market at the equivalent of 75.6c per share.

Fisher at one point held close to 15 per cent of the company and paid well north of its sale price for the shares, including $3 a share for half a million in an October 2006 placement.

So why sell when the price is not far off the stock's all-time low of 73c?

"We've been disappointed at the company's abilities to make profits not just sales revenue," said Carmel Fisher yesterday.

Fisher pointed out almost every stock on the market is significantly lower than a couple of years ago, but why not, as investors have been often exhorted to do, ride out this downturn until the inevitable market recovery?

It's a question of relative attractiveness, says Fisher, "there are other stocks that were better priced considering the value".

But she doesn't rule out buying back in, even at higher prices. "I think there's a difference between price and value.

"If in a year's time the price is double what it is today but it's worth a whole lot more than is indicated by the share price then we wouldn't have any hesitation in buying some more."

Comvita shares closed 2c higher at 86c yesterday.

THE JUICE, THE WHOLE JUICE AND NOTHING BUT THE JUICE

Juice business Charlie's appears to have been rather successful this week in spinning the line that it has been batting away insufficiently rich offers from would-be suitors when the word in the market is that it has been the one doing the chasing.

As Stock Takes noted a month ago, market chatter had it that Charlie's engaged ABN Amro Craigs to sound out investors regarding a possible capital raising.

Given that the gossip now proves to have been on the mark, Stock Takes wonders whether engaging advisers to seek out either new investors or potential buyers is something that should have been disclosed to the market? Mind you, you might wonder whether the breach of its banking covenants disclosed in its interim report in March was something that should have been given a little more prominence in the interests of an informed market.

Oh well, as the company said in its half-year result, it "continues to enjoy strong support from its bankers, ANZ, who have confirmed ongoing facilities of both current and long-term funding".

Charlie's shares were up 0.5c to 11.5c yesterday.