Stock takes: Waltus and all

Those considering investing in the property syndicates enjoying something of a resurgence might like to cast their minds back to, or ask someone who remembers, what happened last time these structures became popular.

Perhaps the most prominent syndicates back in the 1990s were those in the Waltus Group, run by Lower Hutt father and son team John and Shayne Hodge.

Set up in 1985, by March 2000 Waltus managed 44 syndicates comprising 69 commercial, industrial and retail properties in New Zealand and Australia, which were syndicated to more than 12,500 retail investors.

The capital value of its New Zealand properties was $473 million and its Australia properties A$131 million ($166 million).

But a softening property market, along with falling capital values and shortening lease profiles, created problems for Waltus, and similar outfits including those run by Money Managers' Doug Somers Edgar.

Investors in one Auckland property, the former KPMG building in Princes St, had millions wiped from their portfolio when the cornerstone tenant moved out.

In 1999 Waltus was forced to suspend interest payments to many of its syndicates and the following year came up with a controversial plan to merge its New Zealand syndicates into a single entity.

This was achieved despite stiff opposition from a number of investors often on the grounds that sound syndicates would effectively be subsidising the poorer ones.

Waltus encouraged investors to accept the proposal by pointing out individual syndicates faced risks associated with having a single property with one or very few tenants. That sounds familiar.

The merged entity eventually renamed itself Urbus and in 2003 was listed on the sharemarket.

In 2004, after being dogged for years by criticism over poor returns to investors, the size of the management fees the Hodges paid themselves, and a string of court cases, the family sold to ING.

An associated finance company Waltus Property Finance, which had a run in with the Securities Commission over its prospectus in 2000, was eventually sold off to Australian firm MFS and became MFS Pacific Finance, which is another story.

Drive tech pulls back

Wellington Drive Technologies is one of those companies perennially poised on the verge of great things.

A state-of-the-art widget maker that has secured contracts with some big offshore appliance makers, what's not to like?

Of course being on the brink of success means investors are more likely to support you when you are seeking new capital. The company last did this in February, raising $11.4 million in a rights issue and placement to institutions.

Its trading update this week will hardly be welcome news with the company expecting first half revenue of $10.5 million, ahead of the same period last year but one third down on projections in the capital raising's prospectus.

Accordingly it has reduced its full year revenue expectations from the prospectus's $40 million to $33.7 million which optimistically suggests that while first half was down more than 30 per cent it will be down only 5 per cent on prospectus projections in the second.

Based on these assumptions, the company expects to post a full year net loss of $11.4 million against $9.7 million in its prospectus.

WDT has been on the edge of greatness so long now some might wonder whether it will ever get there.

Its shares, which enjoyed something of a rally in the month following the conclusion of its capital raising, closed unchanged at 15c yesterday.

Door closed

Stock Takes has been following NZX's bid for tiny Australian market operator NSX for some time and last week reported comments from new NSX chairman Steven Pritchard which implicitly suggested success for NZX was unlikely.

The Australian Securities and Investment Commission has asked NSX's board to clarify their position.

The board is clearly loath to come out and say openly they don't recommend the offer ahead of the vote as that would cost the company a A$117,000 break fee.

Since then the board has put out a couple of notices, the latest on Wednesday repeats it is "not making a recommendation to shareholders either in favour of the proposed transaction, or against it".

The board gets to the nub of the matter later in its release to the ASX: "The directors note that it currently appears highly unlikely that the proposed transaction with NZX will be approved."

Why? Because the board represents shareholders with more than enough votes to block the bid and "All directors confirm that they intend to vote any shares which they hold against the resolutions".

It looks as though NZX will have to find something else to do with that portion of the $20.55 million it is raising that had been set aside for the NSX purchase.

Cheers Brian!

Shares in Diligent Board Member Services have picked themselves up off the floor lately, yesterday closing at 25c.

Listed in this country and based in New York, the company produces Diligent Boardbooks, a web-based system to simplify board meeting materials.

It has some well known names on its client list including Burger King, pinball machine maker Bally, and banana company Chiquita.

It is perhaps best known for its inauspicious start on the market when it was revealed founder Brian Henry had failed to disclose details about his and brother Gerald's connection to New Zealand company EnergyCorp, which collapsed spectacularly in the 1980s.

Henry left the company in March although still holds shares.

Days after his departure the company's shares, issued at $1 each in last year's IPO, fell to just 7c.

They began to recover a few days after when the company said it had received US$3 million in new capital from US firms Spring St Partners, and Carroll Capital.

Get it together

The recapitalised Nuplex's shares will be consolidated on a one-for-four basis next week.

It remains to be seen whether the local market will be true to its historical tendency, according to one local market commentator, and trade the new securities at a price below the corresponding sum of the old ones.

Nuplex shares have come off their May 25 48c post-recapitalisation peak and were yesterday trading at 42c implying a post consolidation price of $1.68. The new shares will begin trading on Thursday.

Xero's Sums Games

Shares in Rod Drury's accounting software outfit Xero have come off the highs they hit last month after the announcement of a reseller agreement with British Telecom.

But market-watchers remain hopeful that big things are in store for the company which raised $23 million in April, mostly from a placement to Craig Winkler, a former major shareholder in Australian rival MYOB.

The cash will be used to fund expansion in Britain, Australia and the United States.

Under the BT deal, Xero's products will be offered to the telco's clients from next month. An earlier similar deal with Telstra went live this month.

Back in April the company said it had 6000 customers, up more than 500 per cent on the same time last year. Here's hoping these two new deals will further accelerate uptake of the company's products.

Xero shares closed up 3c at $1.28 yesterday.