Friday, March 24, 2006

Stock takes: Rolling in it

Usually the adage "too much of a good thing" doesn't apply to money. But it seems the past few years have been so sweet for Fletcher Building that it can't spend its cash fast enough.

At ABN Amro's "New Zealand day" in Sydney this month, chief executive Ralph Waters told the Aussie brokers that if the company couldn't find something to buy in the next 12 months it would have to start looking at "capital management".

That's a subtle way of saying the company might have to look at a special dividend or some other form of return to shareholders.

Waters went on to say he preferred "not to think about this, as we'd really much rather buy something".

Hmmmm ... could be a few shareholders out there will be hoping that no tempting opportunities cross his path in the next 12 months.

In his report about the day - at which ABN offers New Zealand's blue-chip companies the opportunity to talk their book - Mark Lister notes that Fletcher Building has taken on about $1.6 billion of acquisitions since December 2003. Despite that, cashflows have been so strong that the debt-to-equity ratio has fallen from 48.4 per cent to 40.9 per cent.

Old brother Hubbard

The emperor of Timaru, Allan Hubbard (no relation to Mayor Dick), was in the action this week moving and shaking with a stand in the market for 19.9 per cent of Hirequip.

Despite being 70-something, Hubbard - whom the NBR Rich List values at $400 million - is a director of nearly 230 companies (according to the Companies Office website). That's an incredible number, even though many of them are farm, tiny Timaru-based businesses and holding companies. Clearly, he has no plans for a leisurely retirement.

Hubbard has, however, done a great job of avoiding the stock exchange. None of his directorships are for listed companies - although his biggest firm, South Canterbury Finance, talked up a float before pulling the plug late last year.

Time for a breather

Fisher & Paykel Healthcare shares have been riding the low dollar wave to new highs in the past couple of weeks. They hit $4.09 yesterday before dropping back to close at $4. "Time for a breather," says Goldman Sachs JBWere in a research report. The broker has lowered its short-term recommendation from "outperform" to "market perform" and gives it a valuation of $3.90.

"The innovative export company's share price now fully incorporates the value associated with underlying growth and a depreciating currency," writes analyst Marcus Curley.

It is important to note that since writing the report, Goldman Sachs has further dropped its full-year outlook for the kiwi - but the point is still a good one. It is entirely possible for the market to get ahead of itself on export stocks, opening up the possibility of some short-term risk. If the US dollar dips suddenly, the kiwi could suddenly bounce back up.

But the news is not all good for exporters. Most of them, particularly manufacturers who need to import raw materials, will face rapidly increasing costs in the short term as the kiwi's buying power diminishes.

Endangered species

Now that Graeme Hart has control of Carter Holt Harvey there must be a few nervous executives down at the leafy green head office in Manukau. Hart famously shocked the Australian business community when he got control of Goodman Fielder in 2002. He didn't just downsize head office - he got rid of it. About 500 staff were gone within weeks of the takeover.

The cheery billionaire has a tendency to trust his Rank Group and their professional advisers to look after the big picture. He'll be making sure that CHH's various operations around the country all have good managers in place. That will leave him looking closely at what it is that head office staff actually do - and where they need to be to do. Situated in the heart of Manukau City, the expansive head office grounds must be worth millions.

And as the good Brian Gaynor once pointed out, CHH has one of the highest ratios of staff earning $100,000 plus for the size of its annual revenue.

Marginal play

Interestingly there is still plenty of trading going on in CHH shares. They closed at $2.72 yesterday as some focused money-movers looked to make plays on margins related to how long it will take Hart to mop up and pay the outstanding shareholders.

During the bid, he threatened to make the hold-outs wait the full 30 something days for their money.

Of course, there is a risk for the sellers that Hart was just talking tough. Now he has control, he'll want to get it delisted quickly so he can start work on it.

Tenon malaise

Speaking of forestry companies, it is interesting to see just how spectacularly the falling dollar has failed to boost the fortunes of Tenon.

The former Fletcher Forests did see a small rise this month as the dollar started dropping, but a lot of that is down to a share buyback.

The prospect of improving returns as its US dollar earnings come back to this country has done little to move the stock from its long-term malaise.

Good on ya, cobber

In a business world cluttered with jargon and bumph, it's always refreshing to deal with a straight talker like Briscoe's Aussie boss Rod Duke.

Okay, so the press release that accompanied the strong half-year result last week quoted him as saying: "Despite the general view of a slowing retail environment we are positive about the ensuing year ..." etc etc.

But when you actually get him on the phone, his take on matters is more in the "Mad Butcher" style:

"... even since Christmas some of the other competitors have said it's been crook. Well, not with me, mate. I'm actually doing okay."

And then (not that he's naming any big red competitors in particular): "We just get a sense that customers are no longer looking for cheap, poor-quality rubbish." Maybe they should get rid of that Briscoe woman and let Duke front the TV ads.

The bad old days

Great to the see the 1980s fashion revival boosting profits at Hallenstein Glasson.

Apparently every teenage boy in the country has bought a polo shirt there in past six months (you know, like the ones with the little crocodile on them).

The 80s revival has been gathering pace in the business community for a while. For starters, Allan "The Hawk" Hawkins and Rod Petricevic are back in the news.

But looking even further forward, some other listed companies are likely to benefit from the look. Gold jewellery and ear rings for men were big in the 80s so that has got to be good for Michael Hill ... and hasn't there always been something a little bit 1980s about that guy? Leg warmers, track suit bottoms and aerobics in general were also huge ... so step forward Rebel Sport. And may be Telecom should cash in with a range of giant retro-cellphones.

Of course, the sharemarket had a dream run in the 80s - well mostly. Let's hope the revival never gets past 1986.


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