Stock Takes: Sticky situation for CSR

CSR says the delay is proving expensive. Photo / NZ Herald

Australian conglomerate CSR is said to be annoyed by the delay in getting the sign-off for the sale of its sugar business to Singapore firm Wilmar International.

The A$1.75 billion ($2.3 billion) deal which includes the New Zealand Sugar Company - owner of the Chelsea brand and Birkenhead refinery - was done in July but is still waiting approval from New Zealand's Overseas Investment Office.

CSR chief executive Jeremy Sutcliffe told the Australian the delay in the deal, which has been signed off by Australia's foreign investment regulator, was costing the company as much as A$300,000 a day in foregone interest on the purchase price.

"It shows a remarkable lack of commercial reality on their part," Sutcliffe said.

But the OIO remains adamant the process is taking no longer than it normally would.

An OIO spokesman said it typically aimed to make a decision within 50 working days but it "really depends on the complexity of the proposal".

The OIO has no statutory timeframe, unlike Australia's Foreign Investment Review Board which had a time limit of 30 days with a provision for a maximum 90-day extension. The FIRB gave approval for it last month.

PIKE GLITCH

The NZX says the error which saw Pike River Coal's shares begin trading for a brief period last Thursday was a "technology glitch".

Pike River Coal - which had been suspended from the exchange since November 22 - resumed trading at 2.02pm after the entire exchange came off a two-minute trading halt as a mark of respect for the 29 men who lost their lives in the mine.

In less than 30 seconds 18 trades were lodged, dropping the share price from 88c to 20c and wiping $275 million off the value of the company.

The NZX then cancelled the trades and reversed them.

NZX spokeswoman Rowan Macrae said the situation came about after the unusual decision to halt trading across the exchange for two minutes.

The exchange had decided on the halt after requests from other companies and some market participants, but as far as she knew it had never happened before.

That meant when the halt was lifted across the market it also lifted for those stocks already on a trading halt. It was not just Pike River that was affected.

Macrae says about five other stocks also came off halts, although no trades went ahead.

It then accidentally lifted again at 3.45pm as the NZX was examining the problem, but Macrae said yesterday the situation had been fixed and would not happen again.

WHO'S THE BUYER?

The fact that the trades went through at 20c shows someone out there seems willing to buy Pike River's shares, despite its disastrous situation.

One market player believed it was likely to be a series of different people, but that would seem strange given the price was set at 20c for all 38 trades which mistakenly went through.

Perhaps it will be clearer once the company does come off suspension.

LET THE MARKET DECIDE

There is a growing number of voices out there who suggest it should come off the suspension soon.

Markets set share prices based on the quality of information available on a company and, while it's not clear exactly what Pike River's future holds at this stage, the same information is available to all participants.

One analyst said it was odd that New Zealand Oil & Gas - which has a significant stake in Pike River - had been allowed to revalue and resume trading while Pike River remained suspended.

NZX's Macrae said it was talking to the company almost on a daily basis about coming off its suspension.

The exchange in principle also believed that it should come off the suspension, but the company's position was that it had been through an extreme event and needed time to work through it.

WRONG VALUE?

The indication that Pike River's shares would likely fall to 20c or less once it does begin trading has some worried that its suspension is artificially keeping the NZX-50 index higher than it should be.

Pike makes up about 0.54 per cent of the index and if its value fell to nothing it could mean investors who buy into index-tracking funds now are paying half a per cent too much. Talk in the market is that some trustees have already told fund managers to drop the value of their Pike investment to 20c or less to ensure new investors are not overpaying.

But the NZX, which has its own index-tracking fund, has said its indices are based on a methodology which "does not provide for a stock to be removed from an index when in a trading halt".

It says halted securities must remain in indices at their last closing price. The NZX-50 closed down 13.78 points on 3280.56 points yesterday.

DREAM FLOAT

Talk in the Australian media of Fairfax floating online auction site Trade Me has the local market excited.

But there are also reservations as to why the company would want to sell off its crown jewel.

"I think everyone would love it to be true," one market commentator said. "But you've got to question why they would want to sell their best asset."

The main market players are expected to be keen to talk to Fairfax in light of the speculation, but it's thought very little will happen until the company settles on a new chief executive.

Fairfax chief executive Brian McCarthy resigned on Tuesday to be replaced by former executive and journalist Greg Hywood, who will run the company on an "acting" basis.

WHAT'S IT WORTH?

Fairfax were criticised for paying too much for Trade Me when the deal was done in 2006 for $720 million, but a recent revaluation has suggested it could be worth more than double that.

Morgan Stanley analysts Andrew McLeod and Mark Goodridge said in a note that the website could be worth as much as $1.67 billion after strong expansion into the real estate and online job market.

Trade Me generated earnings of $88 million in the latest financial year and that was forecast to rise to $102 million in 2011.

The change in leadership at Fairfax certainly hasn't put off at least one investor. Australian rich-lister and mining magnate Gina Rinehart is believed to have bought a stake in the firm this week.

Rinehart, the chairman of Hancock Prospecting, is estimated to be worth more than A$4.5 billion ($5.9 million).

Fairfax shares closed up 2.5c at A$1.39c on the ASX yesterday.

TELECOM DOWN

At least one broking firm appears to have taken a dislike to the confirmation that Telecom won't be getting some parts of the ultra-fast broadband tender that the Government is rolling out.

Crown Fibre Holdings confirmed this week that it had selected NorthPower to be its partner in Whangarei and Ultra Fast Fibre - owned by WEL Networks - to cover the Waikato, New Plymouth and Wanganui areas.

Crown Fibre had already indicated it was in negotiations with three parties, including the two who are now confirmed, back in September.

But a day after the announcement Telecom had its rating cut from "hold" to "sell" by analysts at Goldman Sachs & Partners Australia.

Goldman Sachs Australia is also advising Telecom on its broadband bid.

Telecom shares fell 3c on the news to $2.15. Yesterday they closed down 6c on $2.09.

VOLATILE VITAL

Trading of rights in Vital Healthcare Property Trust has been a very volatile affair with the rights hitting the top of both the biggest gainers and biggest decliners' list on the NZX several times in the last week.

The rights have traded in a range of between 7c and 1c and closed on 2c yesterday. One market commentator said the volatility was likely related to its high retail ownership, with some investors selling rights to allow them to participate in the capital raising.