KEY POINTS:
Privately, there are now some senior brokers who think the Yellow Pages bond offer doesn't look too bad - as long as you're the kind of investor who has some appetite for risk. That means they still have reservations about its appeal to mum and dad investors.
On Wednesday, Yellow Pages Group confirmed expectations that the $300 million offer had been downsized - to $100 million, with up to $50 million of oversubscriptions.
Investors holding the NZX listed bonds will rank below the banks - which are holding $1.175 billion of senior debt. But they will be ahead of the $780 million that private equity investors have put in to the company.
One way of looking at it is that bond investors will be sharing almost as much risk as the equity investors but only get limited access to the upside if it all goes to plan.
Having said that, if you have faith in the board and a management team to keep Yellow Pages on target for the next couple of years then the debt to ebitda ratio (the figure bothering the sceptics) will start to look a lot less risky.
It could be - as ABN Amro chief Simon Allen says - a great opportunity to take advantage of short-term market volatility. Two or three years from now being locked in to an interest rate of 11 per cent plus might be pretty sweet.
But the current crop of finance company failures should be a pointed reminder to investors to make sure they have a clear picture of the risk involved in an investment, and that it matches their personal appetite for risk.
As long as investors make decisions with those two sides of the risk equation accurately balanced then - whether they make or lose money - they should at least be able to steer off the kind of emotional pain and anger that many aggrieved finance company debenture holders are feeling right now.
Resin result
Not being the sexiest stock on the market, resins manufacturer Nuplex sometimes gets overlooked in the rush of results season but analysts have been impressed by its latest set of numbers.
Nuplex delivered a full year profit (excluding one-offs) of $37.7 million, up 6 per cent on last year and ahead of expectations.
Stephen Hudson at Macquarie has shifted his recommendation from perform to outperform.
Rodney Deacon at Goldman Sachs has retained his buy recommendation and has a 12-month target price on the stock of $7.49.
The net profit was 20 per cent up on his estimate ($31.3 million) and ebitda at $104.1 million came in slightly ahead of his forecasts ($102.5 million) although in line with company guidance.
The dividends also looked good Deacon said. They came to a total of 36c per share - 7.5 per cent up on last year.
The big negatives in the result were all one off costs which won't recur in 2008. Nuplex will also benefit from the removal of a number of loss making operations and is expected to encounter lower raw material costs. Deacon's investment view is that Nuplex is on track to hit its forecast earnings growth in 2008 and 2009. And, given it is currently trading on multiples that are lower than its peers and its historic average, it looks undervalued, he says.
Finance fallout
The meltdown in the finance sector has gone from bad to worse. Some of the bigger listed finance companies - all of which have declared their ongoing viability to the NZX - are having their share prices hit hard on the negative sentiment.
Dorchester Pacific has fallen 48 per cent since the start of June to close at $1.05 yesterday. Dominion Finance is down 32 per cent over the same period to $1.56.
Lombard dropped another 44c yesterday. It is now down 67 per cent in three months to close at 79c last night.
Stranger than reality
The latest twist in the long and convoluted history of NZAX-listed Plus SMS has taken another twist with the company making a move into the South American reality TV market. The operating company - now called Cre8 - yesterday announced a subsidiary company which would "produce ground-breaking reality shows that offer interactive entertainment". Expansion plans for a regional rollout throughout Latin America were in advanced stages, the company said.
What's the bet there's a few local investors who never realised they'd be dabbling in that sector? The shares, which once traded at 80c, were unmoved at 8c yesterday.
Growing on trees
Listed investment company Rubicon has dropped a big hint in its annual review that its cornerstone biotech investment ArborGen is close to commercialisation - and presumably a public listing, most likely on a US market.
ArborGen is a world leader in the genetic engineering of pine trees. Rubicon holds a 32 per cent stake.
ArborGen is genetically modifying eucalyptus trees to make the wood softer and more easily and cheaply processed into pulp and paper. It is also working on projects to make loblolly pine trees grow faster and eucalyptus grow better in cooler climates.
This week's review said: "ArborGen had entered into a series of agreements to acquire the respective tree improvement operations of its three partners International Paper, MeadWestvaco and Rubicon (i.e. our Horizon2 business) ... The acquisition of these businesses fundamentally repositioned ArborGen overnight, from a business in development to an established commercial entity."
Those who know the industry say the timeframe between this kind of commercial agreement and a public listing could be as little as 18 months. That could mean a big increase in the value of Rubicon.
Shares closed at $1.01 yesterday.
Top of the hill
With Air New Zealand's shares down on the threat from Pacific Blue's entry into the local market, Michael Hill International has pulled clear in the race to be the year's best performer on the NZX - that's even including the takeover premium propping up Auckland International Airport. Michael Hill shares closed at $10.02 yesterday. That's a return of 50 per cent for the year to date.
Auckland International Airport is second on the list - still propped up by takeover speculation - at $3.05, a rise of about 35 per cent for the year. Next was Port of Tauranga at $7.10, a return of 21.7 per cent, followed by Tourism Holdings at $2.27, a return of 21.3 per cent.
Red sheds shed value
Shares in The Warehouse have dropped through any hypothetical level of support being offered by the $5.75 bid that Stephen Tindall put on the table when he tried to privatise the company last October.
The shares have dropped 50c in the past month to close at $5.61 last night. They touched a high of $7.32 in April.
Does this mean that Tindall could be in for a bargain?
That still depends on the outcome of legal challenges by Woolworths and Foodstuffs to the Commerce Commission's ruling that they cannot buy the Red Sheds.
On the face of it you would think holding The Warehouse looks like a better and better proposition the closer we get to the High Court showdown in October.
That's because the opportunity cost (relative to having your money invested elsewhere) of hanging in there in the hope of scoring a big takeover premium is getting smaller as the wait for a potential payout shortens.
But as with everything in the past month, normal service has been interrupted. The cash crunch in the US has hedge funds - which like to invest in this kind of takeover play - pulling out in droves. Local investors clearly don't have enough of an appetite for risk to come in and fill the vacuum. At least not yet.
While private equity investors are also adjusting their risk appetites, there is no suggestion out of Australia that Pacific Equity Partners - which is believed to be a likely co-investor in a Tindall bid - has stopped looking for new assets.
A three-way scramble still isn't out of the question.
