Tenon profit upgrade outshines bid

By PAM GRAHAM

Tenon put out a profit upgrade yesterday which shunted its share price a further 2c away from bidder Rubicon.

Tenon's shares closed at $1.90, 5c above the $1.85 Rubicon is offering for a controlling stake in the concern.

All eyes are on the per share value in the independent report by Grant Samuel, expected today or tomorrow, which will help make up the minds of both the shareholders and rival bidders, if there are any.

The profit forecast was Tenon's third so far this year.

Based on actual results to the end of April, Tenon, the former Fletcher Challenge Forests, is forecasting earnings before interest, tax and amortisation of $64 million in the year to June 30.

That is up from a range of $58 million to $60 million in a statement in April and $45 million in a memorandum to shareholders on the sale of its forest estate in January.

It is also forecasting a $64 million profit in 2005, up from the $58 million projected in January.

The profit upgrade adds about 8c a share to valuations if you believe that the commodity price increases that underly it are sustainable and using a valuation multiple of six times earnings, say brokers.

Tenon attributed the upgrade to a rise in the mouldings and better lumber price in the United States, efficiency gains at its Taupo mouldings plant and an improvement in its structural products business.

The profit upgrade was seen as a defensive tactic to the unsolicited partial bid from 19.9 per cent shareholder Rubicon.

Other institutional shareholders are waiting for the independent report and say an opt-out clause in Rubicon's offer gives some flexibility.

Shareholders can withdraw from accepting the Rubicon partial offer if a full takeover offer on no less favourable terms emerges.

It is the first time such an opt-out has been offered in New Zealand.