Stock takes: Hardly fair

Simon Botherway's appointment as chairman of the establishment board for the FMA has been well received. Photo / Dean Purcell

Not that the flaws in the regulatory regime need more highlighting, but it seems bizarre that an administrative error and memory lapse cost broker Goldman Sachs JBWere almost as much as the $37,500 fine handed out to former Blue Chip director Mark Bryers. OK, Goldman's not short of cash but it just highlights how light Bryers' penalties were.

Bryers will also do 75 hours of community service after his 34 convictions over book and record-keeping failures. Blue Chip collapsed in 2008, leaving more than 2000 investors $80 million out of pocket.

NZX's disciplinary body stung Goldman with a $30,000 fine as part of a settlement agreement for two breaches of NZX participant rules for one client.

The breaches involved failing to enter a sell order for Babcock & Brown subordinated notes in 2008 and then telling its client there were no market bidders and so the notes were not sold.

The disciplinary body found the sell order had never been entered. Goldman admitted the breach and blamed it on an administrative oversight.

Goldman also admitted the second breach and said it had resulted from an "inaccurate recall of information" given the time lag between the client's order and the date in which it responded to the client's complaint. On top of the fine Goldman will also have to pay costs to help cover the investigation.

JUST SUPER

The appointment of the establishment board for the new super regulator seems to have been well received by those in the industry.

Market players spoken to by Stock Takes say the board has a good mix of people although some reckon it will "put the cat among the pigeons".

Chairman and former activist fund manager Simon Botherway is seen as a good call because he has been in the industry but has now stepped away and isn't seen as having any strong conflicts of interest.

Botherway says the new role will be a lot of work but says he will balance it with his existing positions as director of Fisher & Paykel Appliances, a member of the Securities Commission and the Electricity Authority Establishment Board.

"At this stage I think I can manage the workload," said Botherway, "But it would be fair to say I won't be looking for any more work."

TOP JOB

Botherway's name was widely talked about after the Financial Markets Authority was announced by Commerce Minister Simon Power last month as a possible contender for the head of the new super regulator.

In the past those who have chaired set-up committee's have traditionally gone on to be the chair of the new organisation.

Botherway said being on the establishment board did not rule out any of the members being potentially appointed as commissioners or executives but was coy on who would suit the top job.

Another person who has been talked about as a potential leader for the FMA is Wellington lawyer Stephen Franks.

Franks, a former Act Party list member, said he didn't put his hand up for the establishment board but would be keen to get involved either as a commissioner or on the executive of the new regulator if it was going in the right direction.

"I've got some pretty clear ideas about where money and time should go. It would be something I would love to put some time and effort behind, " he said.

Some in the market have questioned whether Franks would be right for the new FMA given his opposition to the formation of the Takeovers Code and dislike of increased regulation.

But Franks said he did not believe a lack of laws was the problem.

"There hasn't been anything wrong with the laws but what has been wrong is the will to use them."

Franks said the super regulator shouldn't be there to stop people taking risks by being the fence at the top of the cliff but should have a "machine gun to shoot down people who try to push others off the cliff".

SHAREHOLDERS SHAKE-UP

Stock Takes hears the New Zealand Shareholders Association is about to face major changes.

The association, which was formed in 2001 to help clean up poor board and company performance, has been growing steadily in recent years and has become a well-respected force at company meetings.

Outspoken chairman Bruce Sheppard, who has also been appointed to the FMA establishment board, didn't want to comment about the changes.

An announcement is expected next week.

HEALTHY PROFIT

Fisher & Paykel Healthcare reported a healthy full-year profit this week but its forecast sent shareholders running, with the price plummeting 15c on Wednesday to $3.25.

Research firm Morningstar said Healthcare's net profit guidance of $70 million to $75 million was "disappointing" and had "spooked" investors.

But the firm is still keen on the stock.

"We think the stock is reasonably priced at current levels for long-term investors wanting exposure to a quality name." Obviously some investors agree. Shares bounced back 6c yesterday to close at $3.31.

BROWN SELLS DOWN

Former NZX head of market products, Geoff Brown, who left the exchange suddenly last week, also sold his shares in the stock exchange operator.

Brown sold 550,00 shares in the NZX for $1.55 per share netting $852,500 this week.

It appears Brown sold at the worst possible time with the price marking a year low for the stock exchange operator.

Yesterday NZX shares were back up to $1.60. Waiting just a few more days could have netted Brown an extra $27,500.

Auckland-based Fiona McKenzie has been announced as his replacement.

BARELY A BLINK

It seems the major listed property trusts have barely blinked since last week's Budget announcement of an end to depreciation claims.

From April 1 deductions will no longer be allowed for buildings with an estimated useful life of 50 years or more from April 1.

The move is expected to hit commercial property investors in the pocket.

But share prices have yet to reflect any major concerns from investors.

In a market which has had red ink all over it this week, listed property trusts have dipped modestly.

Kiwi Income Property was at 96c the night before the Budget and yesterday closed at 92c. Goodman Property Trust was at 95c pre-Budget and closed yesterday at 92c. ING Property Trust was at 74c and closed yesterday at 72c. AMP NZ Office Trust was at 72c before the Budget, closing yesterday at 71c.

Craigs Investment Partners head of research, Mark Lister, said AMP NZ Office Trust and Kiwi Income actually rallied a bit on Budget day because the announcements meant greater certainty.

Lister said the depreciation change would likely push dividends down by between 2 per cent and 7.5 per cent, with the average down around 5 per cent.

AMP told the market this week its dividend would probably drop between 7 per cent and 9 per cent as a result of the depreciation change.

Lister said AMP was "about what we expected" but was at the top end of those affected because its buildings were newer and would have been able to claim more depreciation over the lifetime of the assets.

Smaller player National Property Trust has also said its dividend will be down 5.3 per cent.

Lister said having the changes qualified was good news for the sector.

"People can put that to bed and refocus on fundamentals. It's one less thing to worry about," he said.

INFLATION UPSIDE

One group of investors who will be patting themselves on the back after last week's Budget will be those who bought into the $75 million Transpower bond issue.

The bonds are inflation linked and with inflation expected to jump to 5.9 per cent after the GST rise, Transpower bond investors can expect to receive a healthy 10 per cent return. Not bad for a state-owned power company.

PRICE OF FISH

Lower fish prices and a high New Zealand dollar have walloped fish exporter Sanford in the pocket.

The fishing company reported a 79 per cent drop in net profits this week for the six months to March 31.

The company has blamed the poor result on ongoing fallout from the global financial crisis with demand and prices slow to pick up, particularly in southern Europe and the United Kingdom.

But Sanford chairman Bruce Cole and managing director Eric Barratt are expecting a "reasonable recovery" in the next six months.

Sanford's share price closed down 19c at $4.27 yesterday.

Its low for the year is $4.20.