Stock takes: Xero-ing in on Australia

Rod Drury says Xero now has more than 12,000 customers. Photo / Mark Mitchell

The Australian business media was this week carrying one or two stories about Rod Drury's accounting software company Xero and its "Australian market launch".

Actually, Xero's been in Australia for some time. Last year we reported the reseller agreement Xero struck with Telstra.

However Drury told us yesterday that the Aussie media were only now aware of their existence and showing some interest. Xero has got staff in Sydney, Melbourne and Brisbane and is recruiting partners, "now we've got that basic infrastructure in place we're just starting to set a few things up".

Much of the Australian coverage has focused on rival acccounting software company MYOB's founder Craig Winkler's involvement with Xero after his $18 million investment in the company last year.

Less than a year ago, Xero had 6000 customers. That is now 12,000 and it remains on track to break even by next year, "but we have plenty of cash and can make further investment decisions if we need to". Xero shares were up 3c to $1.65 yesterday.

IN THE SHADOWS

It's not so strange that those behind Marchmont Securities Trust's 10c-in-the-dollar offer for Strategic Finance's debentures prefer to remain anonymous. As the Securities Commission and Perpetual Trust pointed out this week, the offer is opportunistic, probably undervalues Strategic's debentures considerably and has been directed at a group of investors, some of whom are probably fairly desperate by now. In short, it's not the kind of thing most of us would take pride in offering.

Christchurch solicitors RA Fraser & Associates are refusing to say who their clients are in this instance. One of our readers, however, pointed out that the firm has done a fair amount of work for Christchurch property developers Bernard and Tristram Whimp.

Our reader has had dealings with the brothers and RA Fraser & Associates and told us he wouldn't be surprised if the Whimps were behind the Marchmont offer.

We found nothing about Marchmont Securities Trust on the Companies Office website or from other sources. However, we did note the registered address for Bernard Whimp is on Woodend Rd, Rangiora and the place is, as it turns out, virtually on the corner of Rangiora's Marchmont Rd. How about that?

RA Fraser & Associates' Amy Hutton yesterday refused to either confirm or deny the Whimps were behind Marchmont Securities.

TOURNIQUET

Stock Takes feels compelled to acknowledge our predictions of a bloodbath once Hanover Finance debentures were converted to Allied Farmers shares and began trading have so far proved wide of the mark.

However, we weren't the only ones expecting a heavy sell-off in Allied Farmers shares.

In his most recent weekly commentary, McDouall Stuart analyst John Kidd writes that he also believed "that many ex-Hanover investors, particularly those in pressing need for cash, would look to sell quickly".

However, he notes that by the start of this week, only 57 million Allied shares had been traded since the conversion. That's the equivalent of just over $16 million of original Hanover debenture money.

It's difficult to disagree with Kidd's conclusion that "most investors are prepared to take the time to see what unfolds as Allied Farmers starts to realise the loan assets it has acquired".

Some market watchers had expected Allied to receive support from institutional investors because the company appeared poised to enter the NZX-50 index.

However, that hasn't happened. Not yet at any rate.

Kidd observes that Allied could qualify for the top 50 in either February or March - unless the company's shares fall badly before then. Kidd reckons a price below 6c per share would likely exclude it from the inclusion in March.

Shares closed at 10.5c yesterday, down 0.6c from the previous day.

MORE GOOD NEWS

Resin maker Nuplex's increased market guidance last week was the third increase in its expected first half result in as many months. It's good to see the company go from strength to strength following its problems early last year.

On the other hand, one local broker points out it doesn't reflect particularly well on management's ability to understand how much money they're making.

The broker suspects management was a bit burned by not meeting the market's expectations when it was struggling in the months leading up to its capital raising, and "perhaps they are being particularly conservative on the way up".

Nuplex shares closed at $3.25 yesterday, 15c shy of the 14-month high they hit in the days following last week's revised guidance.

HEALTHY RESULT

Its shares might have dipped 18c on the day but Abano Healthcare's result this week was generally seen as pretty good.

The company posted a record first half net profit of $80 million which was boosted by the $76.6 million gain booked on the sale of its Bay Audiology business to long-time suitor Crescent Capital's National Hearing Care in October.

Excluding the gain on the sale, net profit was $3.4 million, down from $4.1 a year earlier. Not surprising given the removal of earnings from the audiology business.

Stock Takes spoke to one fund manager yesterday who had chosen not to participate in the company's recent $5.93 a share buyback, reasoning that the sum offered was not enough.

The company itself commented on the lack of takeup for the buyback, taking that as a vote of confidence in the company.

Abano's strategy to build up its Australian and Asian business is seen as "exciting" by some market watchers but it is not without risk.

Nevertheless, as Shane Solly of Mint Asset Management pointed out to us this week, the company has "an attractive growth path" and its management team has a pretty good record of delivering on what they promise.

Abano shares were unchanged at $5.90 yesterday.

SUMMER DAZE

Amid what remains pretty quiet New Year trading on the NZX, listed property stocks got a bit of a knock last week on a Tax Working Group suggestion that depreciation on buildings might be scrapped as part of a rejig of the tax system.

However, the soft patch was relatively shortlived, and they have been recovering.

Sector bellweather Goodman Property Trust, for example, went from $1.07 down to $1.01 on increased volume.

Yesterday it closed at $1.03.

It was, said one market watcher, typical of the "sell first and ask questions later" approach of many investors.

"It's perhaps more of reflection of how the market often assumes the worst, particularly in the liquid stocks where it doesn't take a lot of sellers to see prices drop 4 or 5 per cent in a day."

Given the scale of the sell-off and recovery, however, the reaction looks more like a fairly languid twitch than a full-blown, knee-jerk reaction.

Such is summertime on the NZSX.