Stock takes: IPO scope narrows

A small number of companies are said to be waiting in the wings to raise capital, but ructions on world markets are not making life easy for those wanting to make the leap. Wellington-based retirement village owner, operator and developer Summerset has been tipped as a possible candidate for an initial public offering as has Auckland's Vision Senior Living.

But so far it's been all talk, and in fairly hushed tones at that. Participants are placing a great deal of importance on the Government's partial privatisation plans for its power generators, and for the sell-down of its Air NZ stake. But the tone of the market remains tentative, to say the least, even though those contemplating an issue would doubtless be keen to do so before the Government stepped into the ring.

Which brings to mind listed cancer diagnostics company Pacific Edge (market capitalisation: $41.3 million). Stock Takes understands that Pacific Edge is close to doing the rounds among the institutions to garner support for a capital raising to fund its expansion, which will involve setting up a lab in the United States. Pacific Edge shareholders will also be part of the fundraising mix.

Although Pacific Edge's issue is understood to be small - in the low tens of millions of dollars - it will nevertheless be an interesting litmus test of the market's appetite for risk. It has not been a happy hunting ground for capital raisings over the past few years and the scope for such exercises appears to be narrowing by the day.

The Rugby World Cup (September 9 to October 23) is looming. Then there is the November 26 election, which the Government intends to use as a plebiscite for its partial privatisation plans. The summer months are typically a dead loss for the financial markets, so the window of opportunity for those seeking to raise funds is closing by the day.

TELECOM SMILE

Telecom shareholders finally have something to smile about. The company's share price has risen steadily from a 21-month low of $1.98 in mid-April to last week's 21-month high of $2.67.5.

Telecom's fortunes changed as it became the favourite in the Government broadband tender, which it was awarded the bulk of on May 24, ending years of regulatory uncertainty.

And analysts believe the stock will continue to rise - First NZ Capital's Greg Main thinks it will climb to $2.72 and Forsyth Barr's Guy Hallwright said it could reach $2.73.

As part of its broadband contracts, Telecom will now split from its network arm Chorus, which will become a separate public company to roll out fibre internet cable in 24 towns and cities around New Zealand. The split is due to happen over the next year and by then analysts predict Telecom shares could be sitting around $3. Telecom rose 0.5c yesterday to $2.65.

VITAL MANAGEMENT

There appears to be no end in sight over the issue of Vital Property Trust's management. Vital, which specialises in owning medical-related properties, is managed by the ANZ unit OnePath, which had proposed to sell the management contract to investors in Vital for $14 million.

Investors balked at the price tag, so OnePath dropped the price to $8 million.

"Unfortunately, we still could not reach agreement with the independent directors on this basis," OnePath director John Body said.

The Shareholders Association has weighed in, saying OnePath should be given a $5.5 million severance payment.

DEVON SELECTED

The Guardians of New Zealand Superannuation have appointed Devon Funds Management to manage an active New Zealand equities mandate. The mandate, which includes latitude to invest in Australian equities, is benchmarked against the NZX50 capped index.

Devon Funds Management, which is headed by former Brook Asset Management fund manager Paul Glass, is an Auckland-based investment management business specialising in investing in businesses listed on the Australian and New Zealand share markets. Devon has just over $800 million in funds under management.

TOUGH RETAIL

Goldman Sachs research confirms the difficult conditions many retailers are enduring.

Analyst Buffy Gill says although recent electronic card transaction data suggests a pick-up in overall sales, more detailed analysis shows this momentum has been driven purely by consumables, hospitality and services whereas apparel and durables have been stagnant.

A late start to winter has also harmed apparel sales and resulted in deeper discounting than normal.

With the exception of Kathmandu, the firm retained an underweight preference for retail based on a total sector return of 10 per cent versus its strategy team's expectations for the New Zealand market of 14 per cent.

Goldman has a buy recommendation for Kathmandu, hold for Hallenstein Glasson and Pumpkin Patch and sell for The Warehouse.

NEW NZX WEBSITE

The NZX launched its new website - nzx.com - yesterday. The NZX has been working on it for the past eight months following a survey of users. The general tenor of feedback was that people wanted the site to be a bit more interactive and intuitive.

The NZX has added other features like movement of indices, gainers and decliners, and filtering tools so that users can tailor the information more readily to what they want to see.

The NZX has dispensed with its news feed, as most site users who responded to its survey said they looked elsewhere for their news.

Stock Takes' initial impressions: the type face is bigger, which will suit older investors. The graphs are also a vast improvement.