Allied rebound 'driven by speculators'

Allied Farmers managing director Rob Alloway. Photo / Dean Purcell

Speculators are likely to be behind yesterday's 22 per cent price rebound in Allied Farmers, say market commentators.

Shares in the farming services company, which last week acquired the assets of troubled finance company Hanover, bounced up to 13.5c yesterday before falling back to close on 13.3c.

The shares had hit a low of 9.8c on Tuesday.

"It's invariably speculative buyers driving the price," Craigs Investment Partners investment adviser Nigel Scott said.

Allied issued 1.9 billion new shares to former Hanover and United Finance debenture-holder on Monday as part of the new deal.

But Scott said fewer than 22 million shares had changed hands this week in a likely sign that most Hanover investors were sitting tight.

"I think most people who were in that are going to be in a period where unless they need the money, they are going to say 'it has been voted for, I'll see how it goes'."

Market commentator Arthur Lim said it was likely to be the New Year before the bulk of the shares came back to the market.

"A lot of brokers will have closed down now for Christmas. It will be mainly speculators playing in and out."

Two notices to the stock exchange also revealed the extent of the watering down for shareholders who previously had a major stake under the former company.

Allied Capital, the investment vehicle of Allied Farmers managing director Rob Alloway and previously the larger shareholder, now owns just 0.279 per cent of the business, falling from 14.4 per cent.

Former second-largest shareholder John Hynds, founder of pipemaker the Hynds Group, saw his share of the company fall from 12.64 per cent to 0.251 per cent even after he bought another 125,000 shares.

The question now remains who will be the biggest shareholder in Allied.

Lim said it could potentially be a former Hanover debenture holder.

But even an investment of around $3 million in Hanover would now only be around 1 per cent of Allied.

"There is now a huge wide shareholder base."

Lim said there were a lot of potential sellers and it was difficult to know just who would buy all those shares.

"The company is now so dependent on those big projects coming through," he said.

Scott said it was difficult for people to make a decision based on the company itself as there was very little information around.

Previously Allied Farmers had been too small for brokers to cover and now the company had a market cap of $212 million it would have to prove itself a worthwhile investment before analysts would start to consider it.