Twisted logic
For a bit of a laugh last week I floated the possibility of Graeme Hart and Burns Philp buying Telecom. The idea has a certain twisted logic but I pointed out just how far-fetched it seemed. There was no suggestion the piece was based on inside knowledge.
In the past few days, a rival daily newspaper, TV news and (weirdly) a student radio station have run the idea as if it were based in fact.
Stranger things have happened but - let's be clear - the story as it has been reported so far is not coming from sources close to Hart. Bankers who have dealt with Hart aren't taking the story seriously and, unless any further information emerges, neither should investors. Shares in Telecom rose 9c yesterday to close at $4.58 - that might have had something to do with a new chairman.
Goodman worries
A more pressing concern for those who follow the fortunes of Graeme Hart is that Goodman Fielder shares dipped briefly below the issue price of A$2 for the first time on the back of a UBS report that it might not meet its prospectus targets.
The shares closed at NZ$2.40 yesterday. That's still above the NZ listing price - but mainly thanks to a change in the exchange rate since December.
Don't mention the war
Investors are still piling into freshly listed technology stock Rakon. Its shares are now trading at $2.75; a premium of more than 70 per cent on the listing price and up 28c since a Weekend Herald feature raised some serious questions about its business.
The stock price is still running on the initial post-float momentum, says Mark Lister at ABN Amro Craigs.
"I think the investment community will focus more on fundamental financials.
"To me, it's no different to a stock like Sky City. If people feel uncomfortable owning a company in the casino business because they have ethical concerns, then don't own SKC, it's as simple as that."
He believes it's hard to say if the stock is overvalued - as it will depend on the GPS market's growth, meaning a wide range of valuations may apply.
"If it's only 5 per cent [per annum] it's overvalued - if it's 35 per cent there's plenty more upside ... we know the growth is there but it's difficult to put an exact number and time frame on."
In the end, it's one of those stocks that runs on investor confidence - and plenty of Kiwis have the necessary confidence.
Good catch
Fishing company Sanford has already featured in this column as the likely beneficiary of a lower dollar. After a steep 25 per cent rise in March on the back of the dollar's drop, the shares have stabilised around the $5 mark.
But after its announcement of a better-than-expected half year, Goldman Sachs has upgraded its long-term view to "buy" (to match its short-term view) and lifted its valuation to $5.63 from $5.03.
The strong result managed to beat expectations despite an operating period when oil was at an all-time high and the dollar was still trading at an average of US68c.
The main reason for that was an improved performance by the deep water and Pacific tuna operations - where catch rates and international prices were up.
Analyst Rodney Deacon said a combination of the falling dollar, the positive momentum in earnings and prudent management were enough to suggest the company would outperform the market in the short and long terms.
The two serious risks for Sanford is probably the cost of fuel - which impacts on diesel costs for fishing boats and the cost of transporting the catch to export markets. The relative lack of liquidity in the stock could also inhibit growth.
Piping hot
As the mornings get colder, a nice hot shower is one of the best things going. Mmmmm ... let's hold that thought and consider the small-but-perfectly-formed listed manufacturer Methven. The company designs, makes and supplies taps, shower heads and water control valves for the Australasian market.
Its shares have been on a bumpy but substantial rise since the start of the year and could still have some way to go based on a valuation by Forsyth Barr analyst John Cairns, who is putting a $1.65 valuation on the shares, which closed at $1.45 yesterday.
Last week, Methven reported a 4.2 per cent increase in operating profit for the 2006 year - to $12.4 million. That was ahead of expectations and looked as if it could be put down to the success of its Australian growth strategy, Cairns said.
The company has established its Satinjet technology as a showerware brand across the Tasman and has now set up a small marketing team in New York. The US foray has some real potential but was included in Cairns' forecasting.
Another plus is Methven's strong cashflow position and debt-free status. Cairns has upgraded his profit outlook for 2007 and 2008 by 6.7 per cent and 7.3 per cent respectively. The risk for the company is that it faces a more challenging retail environment in New Zealand and Australia.
Another bites the dust
Well there you go, Gullivers Travel is being sold, as tipped here last week. Cornerstone shareholder Andrew Bagnall has been in talks across the Tasman and is selling out. Australian travel agent S8 - which has launched a $235 million bid for full control conditional on getting 50 per cent - is in the thick of a sizeable consolidation of the industry.
S8 has also made takeover bids for two other Australian companies, one for Travelscene and the other, which went unconditional on Tuesday, for Transonic Travel.
Unfortunately for the NZX, investors are going to find it hard to ignore the 40 per cent premium being offered.
The shares closed at $2.38 yesterday, just 3c above the offer price.
Analysts say S8 could conservatively expect to harvest synergies of about $10 million by 2008 if it is successful in merging all three companies.
Wanting a bargain
Even worse news for the NZX would be a foreign takeover of The Warehouse. And that's looking increasingly like a matter of "when" not "if" as founder and largest shareholder Stephen Tindall bats off an ongoing barrage of offers.
An approach by UK grocery retailer Sainsbury's late last year is one of several he is understood to have declined.
But there are those who say he has lost his enthusiasm for the Red Sheds.
The failure in Australia, the move into the sale of liquor and the departure of the last of his original management team are all cited as evidence he may soon sell. The one thing that may keep him in there for a while longer is price. The shares are at a cyclical low. As the Ian Morrice overhaul plan is completed, it may add the value that makes selling inevitable. Warehouse shares closed up 3c at $3.90 yesterday.
High-flying investor
He might have completed a rather dramatic selldown of his stake in text-messaging company Plus SMS but multi-millionaire investor Craig Heatley is still investing.
In his latest investment report, David McEwen notes that Heatley picked up 250,000 Delegat's shares in the March IPO and - more intriguingly - has bought a significant holding of about 500,000 Air New Zealand shares.
Given the fuel price scenario, it seems a counter-cyclical manoeuvre. But he is known to have a serious passion for aviation. One story has it that he paid a small fortune to the Russian airforce for a stratospheric ride in a MiG fighter jet.
Then, this year, he was tipped to be buying a private jet in partnership with Trevor Farmer.
Then again the Air NZ investment could be just a well-timed punt that the new Qantas code share agreement will avoid any regulatory turbulence.
Plus SMS shares were up 2c to close at 56c yesterday.
Air NZ shares were down 2c yesterday $1.22.
Hydro float
It's not as if local investors needed convincing the Origin merger proposal with Contact Energy is undervaluing the New Zealand company. The deal is shaping up as one of the most emphatic examples of a foreign suitor being sent packing that the local market has mustered for some time.
Talk has already turned to when and how Origin will sweeten the deal. Don't bet on them waiting until late August when shareholders are scheduled to vote on the proposal. In the meantime, it will be worth keeping an eye on this month's float of Victorian state-owned power company Snowy Hydro.
It's not exactly apples with apples but it's a good indication of the enormous Australian appetite for infrastructure investment - and what they are prepared to pay. More than 100,000 people have pre-registered for shares already and latest guesses suggest the float could raise up to A$3 billion ($3.5 billion).
That's before international investors even get a look in. The IPO is open to Australians only ... if only the New Zealand market had the depth for that kind of nationalism.
<i>Stock takes:</i> A bit of a laugh
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