Stock takes: Roll up, roll up ...

The sad saga of Feltex Carpets descended into "lucky dip" territory this week as the company continued negotiating for its life. In one simultaneous hit, luckless shareholders were told that the stock - on a halt since Monday - was about to begin trading again and that the outcome of negotiations was likely to make the shares worth "materially less" than their current price.

Eh? How much is material on a share that has already lost 90 per cent of its value? How long is a piece of string? Well, about 8c as it turned out as the shares quickly dropped to about 13c. They closed at 11.2c yesterday. That's not to say the market actually knows what the final value will be when (or if) a deal is finally done, it's just that for many investors there is a certain price point where it is no longer worth cutting their losses.

Any real value in the company has now been wiped out; all that remains is potential to create new value. Feltex is now effectively a start-up, which - for a once proud manufacturer with a globally respected brand - is a national disgrace.

Rubber dub-dub

If it weren't for your gumboots where would you be?

Well, in the case of Skellerup you'd probably be stripped down to your disposable assets and sold off to private equity companies all around the world. Given its tumultuous corporate history dating back to the 1940s, it has to be the strength of that classic Kiwi brand that has enabled Skellerup to keep bouncing back.

In the past week, it has copped a couple of downgrades from researchers at Forsyth Barr and First NZ Capital but they came with a positive spin.

First NZ downgraded its view to "underperform" from "neutral" because the share price had overshot the target valuation of $1.40. The shares spiked up to $1.42 on July 14 but have since dropped back to close at $1.33 last night. Forsyth Barr has a target valuation of $1.61 but downgraded to "accumulate" from "buy" because of the narrowing gap between the actual price and the target. But Forsyth Barr's John Cairns says that, after a meeting with management, he remains confident Skellerup will meet its profit target of $13 million for 2006. This would be a good result given a disappointing first half.

For those with long memories, the original Skellerup listed in 1947 and was bought out by Brierley in 1987. It was floated again in 1993 and proceeded through an implosion, mostly off market, after a highly leveraged management buyout in 1995. It was reborn as Skellmax and listed in 2002 before changing its name back to Skellerup last year. It just goes to show what a strong brand can endure ... a lesson for Feltex perhaps?

Sowing the seeds

Could PGG Wrightson's move to set up a real estate business in Melbourne this week be a hint of things to come for the ambitious rural services company? In theory, all the planets appear to be lined up for an attempt at some kind of Australian expansion.

The most obvious cause for suspicion is simply Craig Norgate's involvement in the sector. A rare local combination of "strategic thinker" and "doer", Norgate has never been one to sit still for long. After driving a decade of complex and politically charged consolidation in the dairy industry (which resulted in Fonterra), it took him little more than a year to sweep through rural services, amalgamating three of its largest companies.

Neither he nor PGW's management have been keen to talk much about Australia so far - they have deferred to the need to bed down the merger. Fair enough, there was plenty of bedding to be done. But, as Forsyth Barr noted this week, the merger is now largely complete with redundant outlets having been closed, the removal of duplicated office support and the renegotiation of terms of trade with suppliers. Forsyth Barr has a valuation of $2.10 on the shares which closed at $2.02 yesterday.

It's been a tough year for the rural sector as the high dollar has eroded export earnings but the outlook is generally positive with the likes of Fonterra through the currency peak.

The drought-ravaged Australian rural sector has had a much tougher time and is still in a position of relative weakness. Although it, too, should start to pick up as the Aussie dollar eases.

So if PGW has larger Australian ambitions, there is logic for moving sooner rather than later.

Fonterra has already jumped with its RD1 brand doing a 50/50 joint venture with Australia's Landmark. Somehow it is hard to imagine that competition with Fonterra would rattle Norgate.

Better believe it...

"Don't believe everything you read in the papers," goes the shocking headline on Goldman Sachs JBWere's latest piece of research about takeover target Gullivers Travel.

Here at the Business Herald we were bemused by this outrageous suggestion until we saw that it was a piece of reporting in Queensland's Courier Mail that was being called into question. Phew. Last week, the Mail ran an article reporting that S8 (which is bidding for Gullivers) was under investigation "by the Office of Fair Trading for allegedly ripping off millions of dollars from holiday unit holders".

Terrible ... but hang on there cobber, writes Goldman's Matt Henry. It all sounds pretty dramatic but the facts are a lot less sensational. First off, it is hardly breaking news and the case dates back 15 months but trading in GLS around July 20 seems to indicate there were a few rattled shareholders.

Henry goes on to lay out the facts in a more dispassionate tone. The body corporate (PBC) of one S8 managed property opposed S8 including the building's management and letting rights in the S8 Property Trust. S8 initiated action against PBC through the official industry commissioner. PBC responded by accusing S8 of taking "secret commissions". The commissioner found in favour of S8. Now PBC is appealing. It all sounds like fairly run of the mill property industry legal hassles and is not, says Henry, something that is likely to derail the S8 offer for Gullivers.

The S8 bidders' statement is due by the close of play today.

Flying low

How many companies could double their net asset valuation without the news having any material effect on the share price? Auckland International Airport managed it this week. The company upped its valuation to $2.7 billion from $1.3 billion. However, by the time you throw in accounting changes and airline accusations that it is just angling for an excuse to beef up landing fees, it appears there was little left to impress investors.

Airport shares closed at $2.12 yesterday - up just 1c since Monday's announcement.

Cash in the bank

Genesis Research and Development confirmed this week that it had banked its US$5.5 million cash settlement for relinquishing its stake in Arborgen (the GM pine tree project part owned by Rubicon). That gives the biotech company healthy-looking cash reserves of $11.7 million.

Okay, so it is true that the company has a share chart worse than Feltex - $7 plus in 2000 down to yesterday's close of 28c - but the new money does give the stock a cash backing value of 45c per share.

On that basis, the market's valuation of all the company's intellectual property at negative 17c a share looks pretty harsh.

Chief executive Stephen Hall says the money will allow Genesis to pursue its therapeutics business with "additional vigour". In reality, it is only the belief, enthusiasm and vigour of staff and a small core of shareholders that has kept the company afloat for the past few years. Too bad you can't bottle vigour.

Wine buying

Another week and another substantial shareholder notice (SSH) from Fisher Funds on another freshly listed stock. Last week it was Rakon which Carmel Fisher and her investing team were buying up (at around the $3 mark), this week a notice to NZX shows she still likes the look of Delegat's at $2 a share. An SSH notice lodged on Wednesday shows the fund now has a 7.57 per cent stake in Delegat's. That notice presumably had something to do with the big spike in Delegat's turnover on Monday.

At the risk of obsessing about one investor in particular, it is interesting to get an insight into what a savvy player like Fisher is buying and at what price.