Friday, March 10, 2006

Stock takes: Delegat's not yet ripe

By Liam Dann

The Delegat's float, widely expected to go ahead in the first half of this year, is no longer a certainty. The wine company still plans to do an equity raising but it is understood to be having another look at private capital raising options. The rethink comes even though fund managers were treated to a Marlborough winery visit earlier this week and draft prospectuses are already in the hands of a chosen few.

The talk of a private placement seems to confirm rumours that the reaction to the IPO's pricing has so far been lukewarm. Stock Takes reported last week that NZX boss Mark Weldon had given some of the nation's most senior brokers a bit of a talking to about negativity they were exhibiting towards new listings. Sources close to the company said it would be presumptuous to assume that a poor broker response was the reason for the company taking its time to decide. It could equally be related to renewed positive interest from private investors. True - Pacific Equity certainly threw that kind of spanner in the works with the Goodman float. But surely if the sentiment around the IPO had been enthusiastic, it would have been well on the way to market right now.

Once were foresters

Shares in wood products company Tenon have shrugged off a pretty lousy half-year result to soar this week. The company reported an 81 per cent fall in first-half operating profit blaming the high dollar and difficult trading conditions in one of its North American operations.

It looks like a combination of the share buy-back effect (the company is buying back 5 per cent) and this week's dramatic fall in the dollar are behind the rise.

New Zealand forestry companies were already struggling with low commodity prices when the dollar began its long climb up in 2001. But the exchange rate really finished them off. Tenon - which is basically the old Fletcher Forests business minus the actual trees - is a still a big export company and looks certain to benefit. I guess the dollar's fall is great news for all those long-suffering Carter Holt shareholders too ... oh yeah, that's right, never mind.

Load of rubbish

One man's trash is another man's treasure - or something like that. The old saying couldn't be truer for Waste Management.

Common sense would dictate that the future looks pretty good for the garbage business - it's not like anyone is about to stop making the stuff.

Getting rid of it in an environmentally sound way is becoming more important - morally and legally.

"Momentum Building" is the headline of a Goldman Sachs JBWere report - which gives Waste Management a long-term valuation of $7.20. The shares closed at $6.50 yesterday.

The report draws the conclusion that Waste Management is the cheapest waste company in Australasia.

Domestically, the business is experiencing solid growth from a dominant market position. The big question mark is Australia, where it has already invested $80 million on mostly small to medium-sized acquisitions in the past four years.

Waste Management is looking to expand further there with some sizeable acquisitions.

It has its eye on the sale of WSN Environmental Solutions by the New South Wales Government - valued at A$250 million ($283 million) - and Cleanaway Australia which is also up for sale.

There isn't really any good reason to assume management can't successfully pull off this kind of transtasman foray, other than good old-fashioned kiwi pessimism and superstition - which would dictate that any company venturing across the Ditch is doomed to return with its tail between its legs and several million dollars lighter a couple of years later.

Ship ahoy

Mooring Systems is one of New Zealand's most impressive manufacturing companies. For those who don't know much about it, it has developed a revolutionary new automated system for docking ships. It has managed to impress port companies all over the world but convincing them to bring ancient mooring techniques into the 21st century has been a pretty slow process.

This is a company with the technology to conquer the world but it won't be easy. So it was great to see it had signed a $3.1 million deal to sell four mooring units to Salalah Port Services, Oman.

The order is for four MoorMaster 600s, which can moor some of the largest container ships in the world and can cater to ships that are more than 300m long, weighing up to 100,000 tonnes.

Brits join NZX

The NZX's newest listing - Witan - slipped quietly on to the exchange on Wednesday.

Witan is a heavyweight investment trust which has its primary listing on the London exchange. It has assets worth more than £1.2 billion ($3.2 billion). According to, its largest holdings as of January 31 were in: BP, HSBC, GlaxosSmithKline, Royal Dutch Shell and Vodafone. That's a pretty impressive portfolio by any standards. The obvious question is: Why is it doing a dual-listing here? Apparently the trust - which dates back to 1909 - has a long history with local investors and already has about 50 Kiwi shareholders on board through the London exchange. Witan shares traded on the NZX at $11.70 yesterday.

Laughing all the way to spa

An inquiring journalist trying to get hold of multi-millionaire economist Gareth Morgan at 9.30am on Wednesday foolishly tried to find him at work.

She eventually tracked him down in his spa-pool where he laughed his way through the interview. Frankly, who could blame him. If your son had just made you $47 million, where would you be?

Transtasman swap

Theresa Gattung has told the Australian newspaper that Telecom would "swap places with Telstra in a heart beat". No, not just because Telecom would then be bigger and make more money. She's talking about the relative regulatory environments, of course. It turns out Gattung would be happy to see "the local loop" unbundled here but only if there was no regulation of wholesale prices.

Oh, and as this is not an IT page, here's a reminder of what all that jargon means. The local loop is basically those wires that still hang from wooden poles along most streets in this country. And unbundling means sharing. So Gattung is saying she'd be more than happy to share the wires if she could charge what she wanted for the privilege.

Gee, if only we could all share things that way.

Mayoral decree wins big yawn

Dick Hubbard's suggestion that Auckland City should sell its airport shares didn't even rate a blip on the market this week.

One is forced to draw the stunning conclusion that the broking community has no faith in the ability of local government politicians to make good on anything they say within a time frame that doesn't require a degree in geology to comprehend.

In the past, when councils have sold shares in Auckland International Airport, the stock has always dropped briefly, recalls Macquarie Equities investment director Arthur Lim. Although they have generally recovered quickly after the sale.

But, he says, several issues surrounding Hubbard's proclamation have ensured a collective yawn from the market.

First, the Tank Farm issue has a long way to go before financing the redevelopment becomes a reality.

Second, almost every council that has sold its stake in the airport has missed out on huge profits.

Lim said if Waitakere and North Shore had held on to their stakes when the airport listed in 1998, they would have made enough money for some pretty amazing public developments.

Third, selling Auckland City's remaining 12.8 per cent shareholding (worth $300 million) would really open the airport up to a takeover by one of the big international infrastructure funds.

That threat would bring another level of political pressure to bear on any sale plans.

The airport put out some interesting monthly figures this week. They showed that international passenger growth was up by 1.6 per cent for the year to date - not bad considering that everyone has been talking about the collapse of the tourism sector.

Auckland Airport shares closed at $1. 87 yesterday.


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