Stock Takes

A closer look at the markets by Tamsyn Parker

Stock Takes: Outdoor clothing firm's success bucks the trend

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Kathmandu shares rose after strong sales for December and this month in Australia and New Zealand. Photo / Richard Robinson
Kathmandu shares rose after strong sales for December and this month in Australia and New Zealand. Photo / Richard Robinson

Kathmandu's strong Christmas performance has come in sharp contrast to that of The Warehouse.

The outdoor clothing company on Wednesday said its same store sales for the six months to January 31 were expected to be up between 8.9 per cent and 10.3 per cent, prompting a 25c rise in its share price to $2.05.

Kathmandu has attributed the growth to strong sales in December and January in Australia and New Zealand.

The Warehouse was forced to cut its profit forecast for the six months to January 31 after poor sales over Christmas and New Year. Its sales in the two months ending January 2 were down 2.7 per cent.

The main obvious difference between the two, apart from their target markets, is that Kathmandu is not just New Zealand-based. Investors will not know the breakdown of how New Zealand stores have performed until the half-year results are released on March 17.

But The Warehouse's figures have made some in the market nervous about other New Zealand retailers.

Pumpkin Patch, which is expected to announce its half-year result in early March, is being watched with trepidation. Its share price has fallen more than 10c in the last week. On January 13 it traded as high as $1.78 but yesterday the shares were down 3c at $1.63.

CHRISTMAS CRACKERS

The start of the new year is usually a good time to look forward to what is coming up but Stock Takes thought it would be interesting to remind readers about the news companies chose to dump in the last days of 2010.

First, the stock exchange itself chose to slip out a bit of news on the sale of its 30 per cent stake in Appello Services.

The NZX bought into the online fund management admin business, chaired by well-known industry figure Craig Stobo, in November 2007 for an undisclosed price.

At the time NZX chief Mark Weldon said the move increased its exposure to the managed funds sector after its purchase of research and rating business Fundsource the year before.

But the investment obviously hasn't worked out so well, with NZX declaring a writedown of $70,000 on the sale.

The NZX says it sold out of the business because it no longer fits with its strategy.

YELLOW PAGES LOSS

Directories business Yellow Pages Group also chose Christmas Eve to post its year to June 30 financial results, declaring a $1.44 billion loss on the Companies Office website.

The results had been expected out well in advance of Christmas and were signed off by the auditors on December 20.

Most of the loss - which is one of the largest corporate losses in New Zealand history - is attributed to a $1.61 billion write-down in brand and goodwill value.

The brand and goodwill of the directories themselves have dropped from $2.17 billion in 2009 to $567 million.

It will be interesting to see if the numerous bankers and lenders behind Yellow can agree to a restructure any time soon.

LAST-MINUTE DEAL

Chinese company Agria surprised on Christmas Eve by putting in a joint bid to increase its stake in rural services company PGG Wrightson to 50.01 per cent with fellow Chinese company New Hope Group.

Agria helped bail PGG Wrightson out of financial difficulty last year, initially taking up a 13 per cent stake and then increasing it to 19.1 per cent through its capital raising.

At the time queries about whether Agria would increase its stake further in Wrightson were played down by the Kiwi agriculture company.

But it seems Agria is keen to become a majority owner and it has left the door open for a full buy-out in the future.

While Agria has made it clear it has no intention to go above 50.01 per cent in this offer and ruled out making a further higher offer in the next 12 months, it hasn't ruled out a future takeover.

Agria Corporation (the jointly owned entity) is expected to release its official bidder's statement today.

Wrightson's target company statement will be sent to investors early next month.

GOODBYE FINANCE

One thing Agria has made clear is its keenness to sell off Wrightson's finance arm. Speculation has centred on the sale of the business for the last two years but Wrightson has always proclaimed it is integral to the rest of its business.

If Agria becomes a majority-owner it will have a much greater say in the sale of the finance business.

The company most likely to buy up the business is expected to be the proposed Heartland Bank - the combination of Pyne Gould Corporation's Marac Finance, CBS Canterbury and Southern Cross Building Society.

PGG Wrightson closed up 1c on 54c yesterday.

NEW LISTINGS

The good news is New Zealand's sharemarket listing drought may be coming to an end. Last year property company DNZ and candle retailer Ecoya were the only new equity listings to come to the market but there are already two new listings lined up for this year.

Building Society Holdings (the Heartland Bank) is set down to list on January 31 and Australian mining firm Broken Hill Prospecting is expected to dual list in Australia and New Zealand on February 15.

Broken Hill, which is 29 per cent owned by NZX-listed Heritage Gold, is due to close its initial public offering next week. Heritage chief executive Peter Atkinson says he doesn't expect any problems raising the entire $5 million for the IPO but admits the Pike River disaster has made it harder to raise money in New Zealand.

"At the moment most of it is coming from Australia. I think the New Zealand part of it was probably affected by the events in November which put a dampener on the mining sector."

Broken Hill chairman Geoff Hill will be in town on Monday to try to drum up some last-minute interest from the New Zealand community.

STATE-OWNED LISTINGS?

The market is also keenly anticipating the possibility of the National-led Government finally revealing its plans for partial listings of state-owned assets.

National ruled out SOE-listings in its first term but with an election fast approaching it can't be long until it begins campaigning on what it intends to achieve in its second term, should it be voted in again.

Some in the market have already linked the anticipation to a rise in the NZX's share price.

Before Christmas the sharemarket operator hit a low of $1.43 but this week it traded up to $1.73 - its highest level since May last year.

Yesterday it closed down 4c on $1.69.

ON TREND

The big investment trend being talked about for this year is inflation. Tower's investment chief Sam Stubbs this week said the company had switched its strategy to have more of a focus on equities, property and commodities in a bid to counter some of the inflation pressures expected to build this year.

The sharemarket is expected to do well out of a trend towards this but the general consensus is that shares aren't cheap or expensive at the moment.

Russell Investment's chief investment strategist Andrew Pease says the situation has created some nostalgic feeling for the early part of 2009.

"As bad as markets were then, we knew they were cheap and would hit a turning point. The challenge now is we are heading into the third year of recovery and nothing is cheap or particularly expensive."

Pease says Russell is moderately bullish on the global outlook for investment markets but neutral on Asia where markets are starting to look more expensive than the Western world.

- NZ Herald

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