Stock takes: Shares flying high as market recovers

Air New Zealand shares have climbed more than 19 per cent in the past year. Photo / Paul Estcourt

Fast food retailer Restaurant Brands not only served up a strong result this week but has also had the best performing share price in the last year.

Shares in the company which owns the KFC, Starbucks and Pizza Hut brands in New Zealand are up 26.7 per cent and were continuing to rise yesterday.

The shares hit an eight-year high on Wednesday after its full year profits grew 70 per cent to $19.9 million. Investors who bought in at 58c in November 2008 will be patting themselves on the back.

Yesterday they closed up 3c at $2.13. The company could be close to beating its 1997 listing price of $2.20 for the first time.

Close on the coat-tails of Restaurant Brands is resins manufacturer Nuplex, which was up about 23.5 per cent yesterday on $3.49 after surviving its capital raising last year.

The top four are rounded out by two tourism-related stocks - Tourism Holdings and Air New Zealand. THL was up 21.2 per cent to 95c while our national carrier has climbed more than 19 per cent to $1.42.

MARKET COMEBACK

Jitters which hit the market at the start of the year appear to have eased. The NZX-50 index is travelling at an 18-month high, dipping slightly yesterday to 3307.76.

The index began to head south on January 9 amid wobbles in the US markets and news of Greece's debt woes.

Pundits will be hoping the share price growth is a sign that the New Zealand market has avoided the W-shaped double dip into bear market territory many had feared.

WHAT DOES IT TAKE?

Beleaguered text message marketing company Plus SMS has finally been booted off the NZAX in what could be the first company to be forcibly removed from the exchange.

The NZX's regulatory arm advised the market on Wednesday that today would be the last day of trading for the firm after repeated infringements, failure to comply with a ruling from its disciplinary tribunal in February, and its inability to meet its financial obligations to the NZX.

Stock Takes can't help applauding the move but wonders why it has taken so long.

Plus SMS backdoor-listed in 2005 using the shell of failed retailer RetailX but it didn't take long for it to come under the eye of the regulators.

The Securities Commission began investigating the company in September 2006 after Plus SMS admitted making false statements to investors. Founder Garry Donoghue resigned and handed back $10 million.

The commission looked into the company for a year before shelving its decision and it wasn't until last year it finally released the report which cleared those associated with the company of insider trading but remained non-committal on possible related market manipulation.

But things never really got any better. Last year the entire board accidentally resigned and then reinstated themselves. The company failed to file its half-year results and blamed it on the departure of its chief executive officer and chief financial officer.

In February the NZX ordered the company to pay $50,000 as a result of the breach, giving them 20 working days to pay. But it waited until April to kick them off the exchange.

POCKET PAIN

Industry insiders reckon it wasn't until the NZX began to feel the financial pain of not being paid by Plus SMS that the operator made the move. It's another reason why the regulatory arm of the NZX should be separated from the business.

When one part of the company makes money through listings and another is in charge of regulating companies and potentially removing them from the exchange, there are going to be natural conflicts.

But NZX chief executive Mark Weldon says delisting is only used as a last resort.

"The people who are punished the most by unlisting a company is retail shareholders. In this case it was the directors who were the problem not shareholders. We wanted to give people a chance to trade out."

Weldon said the decision was made to delist Plus SMS because of a number of factors. Plus SMS last traded at half a cent but hasn't traded in over a year.

QUALITY LISTINGS

Shareholders Association chairman Bruce Sheppard says Plus SMS should never have been allowed to list in the first place.

But he says the exchange obviously isn't in any hurry to get rid of listings. Just look at Feltex. It failed in 2006 losing investors $250 million and still has a ticker code on the exchange.

Others in the market point to the weak companies which are allowed to list on the New Zealand stock exchange.

One major investment player said he was shocked recently when the market was tested for a potential listing of a business which wanted to set up a gondola on Auckland's North Shore.

He says the company was just looking for cash to keep it going.

FONTERRA'S DILEMMA

Fonterra's latest capital restructure plans may have soothed the worst fears of farmers but hasn't exactly thrilled potential investors.

The dairy co-operative wants to allow farmers to trade shares in the company between themselves and also set up a Fonterra Shareholders Fund which members of the public could buy units in.

The fund would pay farmers for the right to receive dividends and the gain or loss on the shares but unit holders would have no voting rights or say in the management of the company.

Paul Richardson, head of Westpac's investment arm, BT Funds Management, says the fund is a good idea in principle and is likely to attract interest from overseas investors.

But the lack of say in how the co-op is run will put off many of the bigger investors like sovereign funds. Investors may also expect to be paid a higher premium for not having any control.

Shareholders Association chairman Bruce Sheppard says it equates to buying a bond with a variable payment and investors can already get access to that by buying into a company like Nestle. "So why would you do it?"

DONE BEFORE?

Some have also pointed to the fact that the fund idea has been done before. NZX-listed Dairy Equity set up in business in 2006 on the same principle of helping farmers free-up cash by selling the rights to the value-added part of Fonterra's shares.

But it has spent the last two years winding down the business. Chairman Peter Jensen said it was a successful model, it just failed to fly because Fonterra didn't support it.

So is he annoyed that Fonterra now has come up with a similar idea? "There's not much point in being annoyed. The concept was right - it was just a bit before its time."

Fonterra's Andrew Ferrier certainly believes he can do it better.

"In the past this was all done by a third party simply trying to set up an investment vehicle that suited them. We think by taking control of it ourselves we can ensure that it's fair to farmers and we can bring the scale in that'll make the thing work materially better than anything that's been thought of before."

SLICE OF THE PIE

Fonterra has been very careful not to mention the NZX being involved in the trading of the units after the negative reaction it got from farmers over its previous proposal of a partial listing.

But it has suggested an "exchange" would be the best format for trading the units.

The obvious choice is the NZX and chief executive Mark Weldon says the company would be keen to get involved.

"We have not spoken to Fonterra about the proposal. But logically we hope we would be involved."

Weldon said the NZX already ran a similar trading platform for co-op Livestock Improvement on the NZAX market. "Our systems are more than adequate."

But Weldon said it was premature to talk about exactly how the Fonterra unit trading would work.