Stock takes: One step behind

Dividend blunder

It's hard not to feel for Telecommunications Minister David Cunliffe, who appears to have shot himself in the foot simply by parroting opinions that had been in the market for a few days. In a May 12 report (Cunliffe talked to Bloomberg on May 16), Goldman Sachs JB Were analyst Andrew White makes the same call about the sad outlook for Telecom dividends. But White's comments also show why it was such a bad call by the minister.

"Any change in behaviour by TEL will have to incorporate a lower dividend setting to placate the Government," he writes. "Again failure to do so is likely to result in Government action that delivers the same result."

Cunliffe has (inadvertently one assumes) added some serious weight to White's view on the prospect of further Government action. He might argue that, despite being the minister, there is no inside information on that issue right now. But how would we know? And can offshore investors - who probably don't even understand the extent of this Government's powers - be expected to know?

For the record, White believes the dividend outlook is so grim that he will not consider re-rating the stock from a "sell" until it is in the $3.50-$3.70 range. The shares closed at $4.56 yesterday.

Dunne and dusted

So the great GPG tax battle is over and surprise, surprise, Tony Gibbs has come up smiling. The Government - in a move which is becoming a trademark of its regime - has decided to make a last-minute u-turn to keep the punters happy. Too bad for revenue Minister Peter Dunne, who had to take on Gibbs in a public slanging match over the merits of the tax and GPG's right to call itself a New Zealand company. Gibbs - ever the good sport - has congratulated all the ministers for their open-minded approach.

But not everyone is happy - particularly those who still remain opposed to the changes.

This was a classic "divide-and-conquer" tactic, said Cameron Watson, of ABN Amro Craigs. "This is an attempt by the Government to silence one of its most vocal critics."

While happy for GPG shareholders, Watson argues there is no logical reason for one company to get an exemption while others don't.

"How does GPG differ from the other approximately 20 English investment trust companies listed in New Zealand ... that have a large number of New Zealand shareholders?"

GPG shares leapt 10c on Wednesday as the news broke but have quickly stabilised. The stock had already recovered from a slump.

Magic crystals

Wonder stock Rakon has eased back a little in the past couple of days as the lucky piggies who got a piece of the IPO take some of their 40 per cent plus profits. Now, of course, management has the unenviable task of living up to the hype. Investors in growth stocks can be unforgiving and will expect regular good news. Odds are the directors already have a few prospective deals in the pipeline.

Long-term story

A big drop in the bottom-line profit is never a good look, and that was reflected in a mini-selloff of shares in the infrastructure company Infratil this week after it reported an 80 per cent fall in profit. The shares - that had traded as high as $4.52 before the announcement - have been on the slide since and closed down 11c at $4.29 yesterday.

That hasn't stopped Rob Mercer, of Forsyth Barr, from maintaining a buy recommendation and giving the company a valuation of $5.26.

Despite this week's result being "mixed", and the company facing "a huge task to turn around negative sentiment towards its European airport strategy", Mercer believes Infratil's long-term strategy will continue to grow its net asset value above its cost of capital. Basically, the company faces some big challenges, but has significantly grown its asset base in the past year and laid down a solid platform for future growth. For some reason, selling such a growth story seems to be hard work in the present climate.

The dreaded question

Copping a "please explain" from the stock exchange seems to have become a kiss of death for companies with soaring share prices. The last two price spike inquiries - directed at Provenco and Postie Plus - have been followed by profit downgrades. What's up? Does New Zealand have the world's stupidest insider traders? Are the companies so scared of the NZX that they are over-compensating with downgrades to prove a point?

OK, it could just be a weird coincidence. Provenco certainly got hammered for downgrading its full-year forecast by $2 million this week. But Wednesday's 18 per cent sell-off seemed a little strong given the chairman's assurance that there was no loss of revenue, just a timing issue with some earnings pushed back to the next financial year.

Mark Lister, of ABN Amro Craigs, is sticking with his buy recommendation, although he has lowered its price target from $1 to 89c.

"Although sentiment could be against it in the short term, we still like PVO's long-term prospects."

Good apples

Given the appetite for foreign companies to snap up anything that moves on the NZX, it was nice to see Kiwi shareholders buying back a bit of the farm when a chunk of Renaissance came on the market last week.

Renaissance is the only local company with distribution rights for Apple computers. The world can't get seem to get enough of those iPod things. The rights to sell the MP3 players is close to a licence to print money. So why would Singapore-registered stakeholder Acma suddenly sell its 26 per cent stake?

Its latest annual report offers some clues. The group has a loss before taxation of nearly S$6 million for the year ended last December 31. It has net current liabilities amounting to S$69.63 million and S$105.15 million respectively as at December 31. It also has S$140.58 million and S$93.71 million of borrowings from bankers respectively, which are repayable within 12 months of the financial year-end. Yikes ... and it gets worse.

"The company is unlikely to be able to meet the loan repayment of S$24 million which is due in August 2006 and is renegotiating the repayment schedule. These factors indicate the existence of a material uncertainty which may cast significant doubt about the ability of the group and the company to continue as going concerns." Right then ... good luck.

Blonde on blonde

As we in the media know its great fun to keep kicking someone when they are down. Annette Presley, the irrepressible founder of internet provider Slingshot, has no intention of letting up on Theresa Gattung.

Today she goes public with a bid for the top job at Telecom. She wants the job for one year - enough time to complete a structural separation - and all she asks is $40,000 in salary and a million long-term share options in each of the new companies.

Whether she is prepared to let Theresa run Slingshot in her absence is not clear.