KEY POINTS:
Telecom chief financial officer Marko Bogoievski's Wednesday warning about the costs of implementing regulatory change put almost as much of a dent in the NZX-50 index as the Wall Street sell-off. The downbeat speech certainly contributed to the heavyweight stock's 14c fall and can presumably be blamed for selling which continued yesterday while the rest of the market rebounded.
While it's always a bit ominous when a company starts talking itself down, Bogoievski wasn't really telling the market anything analysts haven't been saying for several months.
ABN Amro was one of the first out of the blocks with a fresh report on Wednesday. But Telecom's stern words only prompted ABN's Ian Martin to reiterate his current "sell" recommendation and valuation of $4.25 on the stock.
The Bogoievski speech was unlikely to have generated much work for Goldman Sachs JBWere analyst Andrew White either. He's been trying to warn the market about a disconnect between Telecom's regulation risks and the market price for several months - a view which has been well documented in this column. He already has a valuation of just $3.95 on the stock.
Despite its view that Telecom has plenty more pain to go through, ABN's Martin sees a few positives on the horizon. He likes what the telco is doing with mobile, its strategy with IT subsidiary Gen-i and the company's plans for Australia. But it is too early to say whether moves that could increase its value there will be enough to offset regulation-related losses in its traditional business.
Telecom shares closed down 5c at $4.65.
Tower New Zealand
Tower New Zealand has been tipped as a takeover target since it was born out of the split with its Australian division in November last year.
For that reason it's worth keeping an eye on its share register. In the last month a boutique Australian equity fund, Paradice Cooper, has popped up as the second biggest shareholder after GPG. It has an 8.34 per cent stake.
Macquarie Bank has also turned up as a substantial security holder with a 6 per cent stake, although it is understood that Macquarie had been just below the threshold for disclosure for some time.
Some consolidation of its Tower shares between itself and Brook Asset Management (which it owns half of) seems to have been behind that jump rather than any targeted buying. Tower NZ closed down 1c at $2.25 yesterday.
Watching Brief
Another takeover-tipped share is Tourism Holdings. US private equity fund Drake bought its way to a 15.9 per cent stake last year - enough to raise eyebrows on its own.
A big spike in trading (about nine times normal volume) on Tuesday turned out to be Tower Asset Management selling down by about 1 per cent. Exactly who was doing the buying wasn't clear, but Drake would not need to disclose anything if its buy was less than 1 per cent. But another Substantial Security Holder notice from those guys in the next few days would hardly come as a surprise.
Plus SMS
After last year's fuss it is interesting to see that Plus SMS shares still move in mysterious ways - even in its current penny-dreadful state.
The shares dropped 25 per cent on Monday (okay, that is just 3c) but they then recovered all that ground before losing it all again by the close on Tuesday. So they closed that day about even despite even bigger trading volumes than Monday. Then after a breather they leaped back up 18 per cent to close at 11c yesterday. What's up with that?
Property Magnate
Global volatility hasn't done Auckland International Airport any harm. The stock hit a record high of $2.42 this week. It closed at $2.38 yesterday. The company certainly fits all the criteria brokers like when markets get choppy. Blue-chip stock, infrastructure company with a monopoly etc etc. Vector - which closed steady at $2.86 yesterday - has been doing all right on this basis. But Auckland Airport may also be attracting interest from those picking it will set up its own property trust to take advantage of tax changes in that sector.
Xero To Hero
Online accounting software company Xero has been testing the waters of the local investment community with a view to listing later this year. It's early days but word is that the company - set up by IT entrepreneur Rod Drury - has been getting positive feedback from brokers and the chances of it going through with a float are good.
Cup Runneth Over
Goldman Sachs initiated coverage of Delegat's with a bang last week, copping the blame for a price spike after the company got a "please explain" query from the NZX.
Whether the report really was to blame - management also pointed to a Business Herald article on the grape harvest - it certainly put a high value on the stock and had nice things to say about its outlook.
Adrian Allbon gave the company a value of $3.05 a share - they were trading at $2.50 at the time. They closed at $2.60 yesterday.
The "buy" recommendation reflected confidence in Delegat's long-term growth profile, a positive outlook for the price of New Zealand wines and a sustainable premium for the Oyster Bay brand.
Allbon also factored in increased operating leverage in processing and overheads over the next three years. Most of the benefit is expected to be achieved this year with ebitda margin increasing from 25 per cent to 34 per cent.
So his forecast is for currency adjusted net profit growth of 95 per cent per annum - $38.6 million by FY 2009.
Just Bluffing?
Feeling jittery about the stock market? How about taking a punt on the oil industry. No, not NZOG shares, Southland property of course.
With the black stuff washing up on the shores of Stewart Island it can't be long until the multinationals have their engineers poking around all over the show - or so the theory goes. Any serious oil finds would bring hundreds of itinerant workers to town and send prices soaring.
And despite the property boom there's still houses in Bluff selling for less than $100,000. It might sound far-fetched but one senior banking figure only had his tongue half in his cheek when he suggested it recently.
It's Easy Being Green
Going green can be good for your financial health, at least if you're an energy company.
The Shanghai blip of February 27 aside, Contact Energy shares have been going great guns in the past month or so. They hit a record high of $9.13 yesterday, up almost 10 per cent (90c) since the start of the year.
A few theories are bubbling away about what's driving this one. Last month Contact said it would pursue a $2 billion renewable energy strategy. That kind of news might have attracted some buying attention from the sizeable "green investment funds" that operate in the US, one broker noted.
In Australia the AGL merger with Contact's parent company, Origin, has collapsed. That has some analysts factoring in the possibility of more hostile takeover action as the inevitable consolidation of the Australian industry rolls on.
But by far the most interesting story doing the rounds involves undeveloped geothermal fields near Rotorua which Contact shares with Mighty River Power. These had been considered uneconomic but word is that in the new pro-renewable, carbon-tax environment Mighty River and Contact have a taken a serious second look. In fact, speculation is that the field is "extremely viable", giving Contact potential geothermal output of up to seven times what analysts have previously calculated in their valuations.
That - if correct - could provide some serious upside to the Contact price.