Stock takes: Amphibious boat-maker may have found its Sealegs at last

Sealegs founder Maurice Bryham (left) with shareholder Chris Dixon and CEO David McKee Wright. Photo / Dean Purcell

Shares in amphibious boat-maker Sealegs spiked this week on news of its maiden profit.

But the 9c rise, which saw the shares hit 26c, was a small victory in the wider history of the company.

The spike was still short of the 27c year-high hit on October 30 last year and is a long way off the 98c reached at the peak of the sharemarket boom in mid-2007.

Sealegs entered the market through a backdoor-style listing in 2002 when tech investor IT Capital acquired 70 per cent of the business.

It had a difficult start and has had a bumpy ride over the years.

But chief executive David McKee Wright is confident the company has found its feet.

"We know we have an amphibious boat engine market that exists ... Sealegs can make a boat that works and we've got a business that can be profitable," he told the Herald this week.

Let's hope the share price will also start motoring now. Yesterday Sealegs closed down 1c on 22c.




ME TOO

Plans by Australia to jump on the financial hub bandwagon may make it harder for New Zealand to get in on the action.

Australia's Government this week unveiled tax cuts designed to reduce funding costs for foreign banks' local subsidiaries as part of its budget.

It also said it supported, in principle, a shake-up of the tax rules applying to its funds management industry.

Australia already has a managed fund industry worth A$1.7 trillion.

A report on New Zealand's potential to create an international fund services industry is due to be made to the Government by the end of this month.

Ernst & Young tax partner Aaron Quintal reckons the Australian move will mark the end of New Zealand plans.

"It's difficult to see if the Australian plans go ahead, how New Zealand is going to compete with that."

Quintal says New Zealand could wait and see what Australia does but it could take some time before it finalises plans.

"I don't think we would want to commit to anything that would rely on getting scale."

But Craig Stobo, the man in charge of the private sector group putting together the report, says knowing where Australia is going to play will be helpful in forming New Zealand's plans.

"What will be interesting is the degree to which we can be complementary."

Stobo says Australia has a large front-end business on the banking and asset management front.

But New Zealand is "not necessarily interested in that".

He says New Zealand has to be smart about how it manages its hub roll-out.

WAIT AND SEE

Despite Prime Minister John Key's enthusiasm for the idea it doesn't seem the hub concept is a done deal.

When Stock Takes asked Economic Minister Gerry Brownlee what the Australian plans meant for New Zealand and how New Zealand would be able to compete, he was coy on the potential impact.

"The concept of New Zealand playing a greater role than it presently does in the financial services area came from a broad review of the country's capital markets.

"It sounded like a promising area for further investigation, which is why we appointed a group of private sector experts to do more work assessing what opportunities exist, and how we might go about taking advantage of them.

"The group's report will take into account Australia's situation, position and developments. Only once we've reviewed their work will we have a clearer idea about the country's potential to grow this sector."

SUPER REGULATOR

Commerce Minister Simon Power's big speech to the finance industry's INFINZ awards about the new Financial Markets Authority had the industry buzzing about who would head the organisation and be appointed to the new board.

But more than two weeks after the announcement some are beginning to wonder why nothing more has happened, given the tight timeframe.

Power plans to have the FMA set up by early next year before a review of the Securities Act.

Stock Takes hears an announcement on the establishment board will not be made until the other side of the Budget.

That gives the Government just seven months or less considering Parliament breaks up before the end of the year.

BIG BUSINESS BUDGET

Business leaders and investors will be closely watching next Thursday's Budget announcements to give a final indication on where things are going with GST, property depreciation and any potential changes in personal or corporate taxes.

Mint Asset Management's Shane Solly said the proposed changes were likely to have already been priced into the sharemarket. "But the question is by how much? It is on people's minds."

Early budget announcements seem to have had a varied effect on stock prices.

The $321 million research, science and technology funding package revealed on Tuesday failed to have much of an impact on the share price of Fisher & Paykel Healthcare - a company expected to benefit specifically from the funding.

It closed down 7c to $3.40 on the day of the announcement and had only clawed back 4c by the end of yesterday.

But yesterday's $30 million tourism funding boost seemed to have a much more positive impact on stocks.

Tourism Holdings traded up 1c to close on 91c while Air New Zealand was also up 2c to close on $1.25.

TIMING IS EVERYTHING

Kiwi Income Property Trust, the owners of Auckland's Sylvia Park shopping centre, will announce its full-year result on Budget day - a move which has some critical of the poor timing.

Journalists often suspect a company of wanting to hide bad news on any announcement that is timed with a big event but market commentators say it is just a coincidence in this case.

Forsyth Barr's Jeremy Simpson is upbeat on Kiwi and has it on its accumulate list with a valuation of $1.16.

In his research note Simpson said Kiwi had relatively defensive cashflows and was one of its preferred property trusts.

"Sylvia Park has been a successful development and KIP's prime CBD office portfolio is relatively sound given its low vacancy.

"However, vacancy and rent review risks will remain for CBD office property for some time."

Simpson said half-year results had been in line with expectations and he was picking a full-year net profit after tax of $60.4 million, slightly below the $61 million the property trust made last year.

Yesterday Kiwi's shares closed at 99c down on a year high of $1.12.

TELCO TUMBLE

Top stock Telecom has fallen to the bottom of the charts for share price performance in the past year.

Now last out of 50 New Zealand listed stocks, Telecom was yesterday down 13.3 per cent on a year earlier at $2.11.

Its performance against other telcos has also been poor.

Britain's listed telco BT Group was down 10.74 per cent as at 5pm yesterday while Australia's Telstra has fallen 8.77 per cent.

Vodafone Group was also down 4 per cent, according to Bloomberg figures.

Analysts are also expecting Telecom's dividends to be lower next year, especially for foreign investors who won't be able to cash in on imputation credits.

Speaking at last week's third-quarter result, Telecom chief financial officer Russ Houlden said the company would not be extending its 24c dividend floor beyond the 2010 financial year because that could put the company's credit rating at risk and it would not be sustainable on a fully imputed basis.

Telecom will instead use a payout ratio of 90 per cent of adjusted net earnings with a fully imputed dividend.

Houlden said the ratio would produce a shareholder dividend yield for the 2011 financial year which was consistent with 2010 for New Zealand resident shareholders after allowing for nil imputation in 2010 and full imputation in 2011.

That won't be music to the ears of foreign investors who won't be able to claim the imputation credit.