KEY POINTS:
Excitement about the decidedly non-cut-price sale of Australian retailer Coles continues to nudge up shares in The Warehouse. They closed at $7.15 yesterday - up 39c since Wesfarmers' $22 billion bid for Coles last week.
Despite the fact that Red Shed's fate now hangs on a Commerce Commission decision, some investors have been unable to resist the lure of higher multiples that can be assumed for the sale of Australasian retailers.
The Wesfarmers consortium is expected to have its record bid topped by a rival consortium led by US private equity firm Kohlberg Kravis Roberts.
Further confusing the issue, both The Warehouse and its potential buyer, Woolworths, are expressing interest in Coles assets if they are sold off by the new owners. In fact, say sources quoted by Dow Jones, Woolworths may even get drawn into the KKR consortium.
With Pacific Equity Partners - which has links to the potential Warehouse buyer Foodstuffs - already a part of the Wesfarmers consortium, the whole thing is starting to look pretty incestuous.
Meanwhile, First NZ Capital analyst Sandra Urlich noted this week that both Foodstuffs and Woolworths are expected by the market to get Commerce Commission clearance.
If that happens (roll on D-Day, April 27) then the potential for The Warehouse to get drawn into one monster of an industry consolidation looks pretty good. And that will be pretty good for shareholders.
Brain Drain
One of New Zealand's most highly regarded investment bankers is heading overseas next month.
First NZ Capital director of investment banking, Matt Whineray, is moving to Hong Kong to join parent company Credit Suisse First Boston as head of Financial Sponsor Coverage. That's basically a fancy name for heading up a team in charge of private equity deals for Asia.
So, a great opportunity, and a loss for the local investment community. Whineray - who has worked closely with Graeme Hart's Rank Group and advised on Burns Philp's takeover of Goodman Fielder and the float of that company in 2005 - has already done one foreign tour of duty in New York.
Let's hope we see him back in a few years with even more high-level experience under his belt.
ABN Goes Green
Well, their logo was already sort of greenish, but good on the Australian and New Zealand branches of ABN Amro for making the move to become carbon-neutral by the end of the year.
In line with the Dutch bank's head office policy, the carbon footprint of the Auckland branch has been duly calculated and a number of energy, waste and water efficiency measures are being implemented.
Whether that means we'll see the local ABN team joining Shareholders Association chairman Bruce Shepherd on the city's cycleways remains to be seen. It's probably a safe bet they won't be following his sandal-wearing lead on the footwear front.
Fair Deal
It's nice to see companies looking after their loyal shareholders. First we had tech company Rakon offering its retail investors the chance to pick up shares at the same discounted rate as an earlier offer to the big institutions.
Now health products company Comvita has declared a price of $3.66 for shareholders who want to reinvest their dividends in the company. That's a pretty sizeable discount to Comvita's closing price of $4.03 yesterday.
The price is worked out as a weighted average of trading over the past 60 days with a 5 per cent discount tacked on for good measure, the company says.
While investor appetite is so strong there is always the opportunity to screw a little extra cash out of the market. But Comvita and Rakon are in high-growth phases and looking to expand fast.
So they are keen to look after shareholders as they are likely to continue to seek capital in the years ahead. On face value it may look like they are offering easy money. It should hopefully ensure goodwill and continued support as the companies expand.
In one of those good-news stories that got buried in the Easter rush, Comvita has bought Hong Kong-based GreenLife for $9.03 million, in cash.
Meanwhile, Rakon this year bought the Frequency Control Products division of C-Mac MicroTechnology for US$37 million.
Rakon stock fell this week as some of those who took up the latest share offer cashed in on the discount to market price. But the volume of selling was light and the stock bounced back 3c to close at $4.85 yesterday - an indication that most investors are happy to be in for the long haul.
August results will tell if Cavotec is ship-shape
UBS has initiated coverage of Europe-based but NZX-listed Cavotec MSL - the company formed by the merger of Mooring Systems and larger Dutch firm Cavotec. The stock gets an initial "neutral" recommendation from analyst Stuart Graham who says the next result - due in August - holds the key to really understanding if they are on track.
Dutch company Cavotec - specialising in mobile power supply solutions - is a mature business which has developed over 30 years.
It had a good year for sales in 2006, expanding revenue by 34 per cent and ebit by 80 per cent but is forecasting revenue growth of about 10 per cent for 2007.
From there the business is likely to be fairly stable with revenue growth of about 4.5 per cent a year - just ahead of GDP growth in its key markets.
The Mooring Systems part of the business is much smaller but provides one of four high-growth prospects for the company.
That high-growth part is much harder to value, Graham says.
So he gives the core Cavotec business a discounted cash flow (DCF) valuation of $3.15.
He gives the growth part of the business a DCF value of $2.15 but then discounts that by 20 per cent because of the risk in predicting. That gives the business a combined DCF value of $4.87. The same formula applied to a price target gives Cavotec a core value of $3.50 plus $2.38 for the growth (minus 20 per cent for the risk) to get a target of $5.41.
But even with the discount priced into the growth part of the business, that part will really have to perform or the stock price will be under pressure, Graham concludes.
The shares closed at $4.70 yesterday.
Sayonara Strategy
Goldman Sachs JBWere economist and property analyst Shamubeel Eaqub has offered his view on ING Property Trust's announcement last week that it will be focusing its attentions on Japan instead of New Zealand.
The move - staggering to those who recall the heady days of Japan's economic boom in the 1980s - is based on the view that local property is at cyclical highs and Japan's depressed market may be starting to come right. Add to that the extremely low interest rates in Japan, and relatively high rental yields, and the logic isn't hard to see.
But there are a couple of real risks, Eaqub says in a research note. The present situation in Japan may be a relatively short-term phenomenon as interest rates normalise, and property investments are typically long-term plays.
Another risk is that the hints of Japanese economic recovery may come to nothing. The Japanese economy has been flat since the early 90s and there have been plenty of false dawns in that time.
Also, ING is still consolidating its local portfolio and further diversification before that process is complete "appears a risky strategy".
ING Property shares closed up 1c at $1.30 yesterday.