Stock takes: Review? What review?

The Registrar of Companies' report on finance company failures highlighted concerns about the lack of regulation or oversight for those companies that secured moratoriums or deferred repayment plans from their investors.

The first out of the blocks in this regard was Geneva Finance but at least part of its restructuring plan saw it list on the NZAX.

Geneva made its third repayment of capital under the plan this week, paying 15c in the original dollar of investors' capital, taking total cash repayments to date to 40c in the dollar.

Fifteen per cent of the original capital was converted into shares now quoted on the NZAX. The shares were issued at a nominal value of 36.5c each and last traded at 7c.

Still, at least Geneva, unlike other finance companies in moratorium, is subject to the market's continuous disclosure requirements.

In November the company disclosed that although it had breached banking covenants, it had reached an agreement with the bank concerned, Bank of Scotland International, allowing it to retain its $35 million facility which included "an ongoing process of review of performance against agreed milestones".

The first review was scheduled for March this year, yet there has been no update to the market about the outcome.

Geneva Finance managing director David O'Connell had yet to return Stock Takes' calls by press time.

BIG WEDNESDAY

With its $405 million placement of new shares to institutions, Wednesday was a big day not only for Fletcher Building, but also Goldman Sachs JBWere, the co-lead manager and underwriter.

Not only was Goldman running its half of the deal, which involved taking on $200 million of risk, it was also the underwriter and lead manager of Kiwi Income Property Trust's $50 million capital raising. The firm reckons this is the first time two such deals have been done in one day on the New Zealand market.

The Fletcher Building capital raising stands in contrast to Nuplex's among other things because it was fully underwritten from the start. That meant institutional investors were unable to hold a gun to the company's head and extract a more favourable price and terms.

In fact, Stock Takes understands one or two institutions did, early on Wednesday, attempt to get a better price from Goldman for the new Fletcher shares, but were sent packing. They later called back looking for shares at the asking price.

Fletcher Building shares, which came out of their trading halt yesterday morning, closed down 35c at $5.85, while Kiwi Income units were down 5c at 91c.

STICK WITH IT

Two years after they were introduced, it looks as though investors are still having trouble understanding the "fair dividend rate" rules that apply to their direct holdings in overseas companies.

Who can blame them, Revenue Minister Peter Dunne reckons, based on recent articles, some of us in the business media don't get them either.

It's easy if you apply a little common sense.

Essentially, the most you're ever going to pay is the tax on 5 per cent of the New Zealand dollar value of your offshore shares even if the actual return is far higher. If the value of your portfolio increases by less than 5 per cent, you pay tax on that lesser gain. If there's no increase or a loss, you pay nothing.

Simple really and better than offshore investments held via an investment vehicle which pays tax, albeit at just 30 per cent, on 5 per cent of the value of its offshore holdings whatever they do - up or down.

"It's not hugely technically difficult," says Craig McAlister of the Institute of Chartered Accountants, although he warns it can get tricky if investors are actively trading in foreign securities.

Institute members are reporting that a number of clients, intimidated by the apparent complexity, are simply selling out of their foreign shares.

Once people get used to them, says McAlister, "they will realise the rules are simpler than they thought at first".

SHORTS SIGHTED

Stock Takes wasn't buying it a few weeks back when told by the NZX that short selling on its market was so rare as to not be an issue. Especially when the market operator confirmed a few weeks earlier that short selling had occurred in PGG Wrightson shares around the time of the company's abortive merger attempt with meat processor Silver Fern Farms.

Fisher & Paykel Appliances has obviously been enduring a torrid time on the market of late and a couple of sources believe it is or has been shorted.

To the point, says one local broker, "where you can't borrow stock".

"The people that were lending it have stopped, it's all been used up."

Another investment professional suggest the volume of Fisher & Paykel stock changing hands recently "suggests either short covering or something is happening in the background".

Stock Takes sees nothing wrong with short selling as long there's a degree of transparency around it and investors are not surreptitiously holding short positions in companies while spreading damaging rumours about them.

But unlike in other markets, market operator NZX, while requiring short positions to be reported, doesn't see fit to then publicly disclose them. Stock Takes has yet to find a broker that thinks this is a justifiable or sound stance.

NZX was yesterday unable to confirm whether short positions in Fisher & Paykel Appliances had been reported to it.

NO COUNTRY FOR OLD MEN AND WOMEN

The final form of Nuplex's ill-starred capital raising has seen a group of institutional investors get a better deal than what is on offer to retail investors.

One group of investors gets an extra pool of 99 million 23c options beyond their entitlement in the rights issue.

This looks to Stock Takes like another illustration of why sharemarkets these days, and arguably the NZX in particular, are slanted against retail investors.

Unless they have great connections, institutions and other major investors will always have the drop on retail investors because their size gives them influence over companies as well as better access to, well let's just say useful information which may take some time to find its way to the wider market.

Then again, trading in Nuplex's 23c rights, which began on the NZX yesterday, suggests at least some retail investors are more than capable of blowing off a few of their own toes themselves. Stock Takes understands Nuplex is widely held by retail investors and market commentator Arthur Lim believed it was them, rather than institutions, responsible for some strange-looking initial trading yesterday.

For some reason people were paying up to 39c for Nuplex's existing shares. At the same time you could have picked up the rights at 8.5c each which with the exercise price of 23c translated into an overall price of 31.5c for the new shares. By late morning the shares were trading at about 33c, and the rights at 6.9c, for an overall price of 29.9c.

"People need their heads read!" said Lim.

FAST-FOOD FIRM FRYING HIGH

Investors have been satisfying their craving for shares in fast-food company Restaurant Brands at ever-increasing prices of late.

They were trading at 60c in late February but closed at 83c yesterday.

AMP sold out of its 10 per cent stake in late January at 53c a share which is looking like a bit of a gift now.

So what's driving the stock higher? Around the time its stock began to recover, the company said full-year profit excluding non-trading items would be better than forecast.

And Restaurant Brands' talks with US company Yum Brands over Pizza Hut are tipped to be close to a deal.

Pizza Hut, operating in a very competitive market, has long been a problem for Restaurant Brands but it is understood Yum had insisted Restaurant Brands hang on to the franchise as a condition of its access to the far more lucrative KFC brand here.