Stock takes: Beware the quiet Lion

A roaring lion kills no game - or so the old African proverb goes. Well, Lion Nathan certainly isn't roaring about a takeover of Michael Erceg's Independent Distillers.

The company maintains that it has made no approach either official or unofficial to the brewer despite the snowballing hype about it being a potential buyer.

The speculation that Lion was in the hunt was kicked off on Monday when Goldman Sachs JBWere analyst Paul Ryan tipped the former New Zealand beer brewer as the most likely candidate to take out the Erceg empire.

He valued Independent at A$1.1 billion ($1.2 million) and made the point that there were big synergies to be gained for a transtasman player such as Lion.

But let's not forget that there was no love lost between Erceg and Lion. In fact, he just didn't like Lion much at all, says one industry source.

Independent Distillers remains tightly controlled by Erceg's family and they have made no comment on whether they are even considering a sale.

But rumours are doing the rounds that a banker has been engaged to investigate.

It seems unlikely the family would act in a way that directly conflicted with Erceg's wishes.

However, Erceg was a clever businessman and, like all businessmen, must have had a price at which he was prepared to sell.

Also weighing against a Lion bid is the fact that the Commerce Commission is likely to have a problem with the merger of the two biggest "ready-to-drink" players.

That means Lion would have to divest some of the most lucrative parts of the New Zealand business.

Commodity meltdown

It has looked like easy money for a while now. The unprecedented demand from China for commodities and strong investor demand for gold has meant record profits for mining companies around the world.

The stocks soared through 2005 and they have proved a tempting dabble for many local investors who have also been looking to leverage off the high dollar and get into foreign markets.

But the party ended this week as prices for oil, gold and other valuable metals such as copper and steel tumbled.

In Australia, mining companies such as BHP Billiton and steel producer Bluescope have led the market down. In the UK, a similar collapse in mining stocks has weighed the Footsie down.

Local investors still thinking of taking a punt now need to be aware that they may be joining the party just as the punchbowl is beginning to empty.

On the plus side, says one analyst, falling steel prices will be good news for oil and gas companies such as NZOG, which have been struggling to keep a lid on costs. For example, the high price of steel has been one of the main reasons for the spiralling costs of piping gas from the Kupe field to shore.

Seagulls squawk

Those pesky hedge funds don't want to leave Graeme Hart alone.

Word is that they are piling back into Carter Holt Harvey and talking about trying to extract $2.90 a share from the thrifty billionaire.

"We call them seagulls," says one broker, who is confident the hedge funds are back in play. "You can't have a decent feed of fish 'n' chips without them flying in to take their cut."

Like the gulls, the funds are perennial optimists always prepared to take a punt on an offer going higher - even when other investors think a bidder has done his dash.

The funds don't seem to have noticed the "all-or-nothing" tag that Hart has put on the offer - or more likely they just don't buy it.

A lot now hangs on the new independent valuation, says the broker. If the report comes back valuing the company at $2.65, then people won't be able to sell fast enough, he says.

But if it's $2.80 or $2.85 then watch out - the seagulls will be eyeing those chips.

CHH shares closed at $2.73 yesterday.

Pumpkin Patch

When kids clothing retailer Pumpkin Patch delivers its six-month result next Wednesday, it will provide the first real glimpse of how its expansion into the United States is tracking, says Forsyth Barr retail analyst Guy Hallwright.

The result will include the first six months of US trading.

"It's going to be pretty small in the scheme of things but, in the last result, all we got was the start-up costs," Hallwright says.

No one is expecting the US to be in the black yet but any clues to how things are tracking will be well and truly pored over by brokers.

Getting a foothold in the US is the kind of coup that would dramatically broaden the horizons for Pumpkin Patch.

Last year, the company reported a stellar first half with profit growth of 129 per cent - taking it to $12.5 million.

The growth story isn't likely to be that spectacular this year, Hallwright says.

But while there are the general worries about an economic downturn, he is still picking a solid result with sales growth in a more normal double digit range.

Not that brokers have much to go on as the company hasn't provided detailed guidance or indications of its Christmas sales.

Pumpkin Patch shares closed at $3.35 yesterday.

Golden boy

The gods continue to smile on former Air New Zealand boss Ralph Norris.

Now the head of ASB parent company the Commonwealth Bank of Australia (CBA), Norris is next week expected to deliver the good news that profits at the bank have topped A$2 billion in its first half year.

It's the first result Norris has fronted for the company and not a bad way to introduce himself.

It hasn't been a total honeymoon for him across the Tasman; there have been suggestions that CBA hasn't been doing well in the fight to attract medium-sized business customers.

But after the struggle to keep New Zealand's national carrier in the skies, there can't be too much keeping him awake at night these days.

Biotech blues

Yet another promising technology company has ignored the local market in the hunt for capital.

This time it is Virionyx that is taking its promising HIV treatment to the United States where it has found private investors and is now mulling over a public listing.

This is just the continuation of a trend for good science companies. Biotech companies Neuren and BrainZ have done a Russell Crowe and listed in Australia in the past year.

As Virionyx chief executive Simon Wilkinson says: "The key difference between them [our new US investors] and our early New Zealand shareholders is that they have the capacity of putting another one or two zeros on the end of the cheque."

From an operational point of view, none of these companies want to leave New Zealand - we are a cheap place in which to do research after all.

But the harsh reality seems to be that if a local company is good enough to attract international investors, it doesn't need to list here.

Which points to the unpalatable possibility that if a tech company does need to list in New Zealand, there could be something wrong with it.