Tower finding Australians hard to sway

By RICHARD BRADDELL

At little more than their float price, Tower Ltd's shares are causing little excitement, even though managing director James Boonzaier waxes lyrical about the company's prospects.

The problem is that at 10 times earnings, the share price is nothing to skite about. It's also a far cry from the 18 to 19 times that Colonial was sold to Commonwealth Bank for, and the 25 times the current Australian darling, Perpetual, is selling at.

But Mr Boonzaier says that Perpetual also had its time in the shade 18 months ago, when the market was far from impressed with it.

It may be a matter of Tower being listed in the wrong country.

"It's been put to me that we've got the wrong postal code and it's not easy to get the Australian marketplace excited about what is perceived to be a New Zealand company."

New Zealanders still account for 55 per cent of the shareholder base, but he expects that to change by the end of next year. That could be the trigger for a move in Tower's listing and incorporation to Australia.

Mr Boonzaier says it is not so much a matter of Tower being intrinsically a better company for being Australian-based, but he does find the travel burdensome now that two-thirds of its business is in Australia.

But perception counts for a lot, and while, "since Tower listed we haven't done an awful lot of things wrong," capturing those benefits in the share price has been elusive.

In the past two weeks, Tower has made a two shrewd moves. A 25 per cent stake in Financial Services Partners has given it access to 300 Australian financial planners, while its $A168 million ($212 million) takeover of Australian financial planning group Bridges is a coup that gives it access to the Australian credit union market.

According to Eureka Strategic Research, in 1998 13 per cent of Australians regarded credit unions as their main financial institution.

Some 72 per cent of customers were also satisfied with credit unions, double the figure for the big four banks and ahead of Australia's regional banks that were on 50 per cent.

With support like that, credit unions are the perfect vehicle for cross-selling other financial services. But Tower nearly missed out on Bridges, an organisation with 110 financial planners on board.

Although Tower was an ideal partner, because it had no banking activities that might be in conflict with Bridges' credit union business, it was not among the 24 financial institutions invited to tender.

According to Mr Boonzaier, it was a case of common cultures working together at the last minute that brought Bridges into the Tower fold.

The move also closed a gap in Tower's product line with Bridges' strength in discretionary master trusts. These trusts, which give the investor choice between a range of fund managers, are the fastest growing part of Australia's superannuation market, growing at 30 per cent a year, or double the market as a whole.

Locally, Tower is also hoping to close the gap in the master trust arena through a new relationship with New Zealand Post, the heads of agreement for which were finalised last Friday.