Meat co gains on merger rumour

After a slow start, the share price of newly listed meat company Richmond has climbed 5.5 per cent in two weeks.

The rise, from $2.35 in late February to $2.48 yesterday, follows speculation about a possible merger and an export boost for Richmond because of Britain's two epidemics - mad cow disease and foot-and-mouth.

Hastings-based Richmond, the country's largest meat exporter, listed its shares on the stock exchange at $2.40 each on February 13. The shares previously traded on the secondary board for about $2.20.

After falling to $2.35 a week after listing, the shares jumped 9c on February 28 and continued to inch up.

Some brokers are picking the stock could hit a share price high of $3.33 within 12 months.

The stock is seen as cheap, given that the meat sector is getting good prices and export demand is strong.

It has a price-earnings ratio of 5.4, about a third of the market average at present, brokers say.

The short-term outlook for Richmond is good, too.

Its managing director, former WestpacTrust investment banker John Loughlin, bullishly predicted before the listing that Richmond stock could rise by 20 to 30 per cent within two years. But that doesn't convince everyone.

"The sector was virtually on its knees a few years ago. But now it's doing pretty well. Richmond is reflecting what's happening within the sector," one analyst said.

The share price turnaround has coincided with media reports that New Zealand's richest private farmer, multimillionaire Peter Spencer, wants to steer a merger of Richmond with its North Island meat-processing rival Affco.

The reports, denied by Richmond chairman Sam Robinson, followed the surprise resignation of Affco chief executive Ross Townshend, who will leave next month.

Industry insiders say the merger is important to Mr Spencer, who owns 19.7 per cent of Affco and 10 per cent of Richmond. He was linked to South Island company PPCS' failed bid to climb aboard Richmond before it listed.

- NZPA