Stock Takes: GPG devolves

The departure of Gary Weiss (left) from GPG follows the pattern of Tony Gibbs (right). Photo / Paul Estcourt

The devolution of former corporate predator GPG took a step closer yesterday with the departure of long-serving executive director, Gary Weiss.

Weiss will remain as chairman of GPG's wholly owned thread-making company, Coats, for an initial period of at least 12 months, the company said. Weiss led a failed plan last year to break off and lead the Australian operations of GPG.

His departure from GPG follows the pattern of Tony Gibbs, who was kept on as chairman of GPG's Turners & Growers and Tower after being ousted from GPG last year, picking up £1.14 million in compensation in the process, according to GPG's annual report.

Chairman Mark Johnson, who has been in charge of developing a plan for the sale of assets and the orderly wind-down of the company, said he will not be standing for election at GPG's annual meeting on June 8.

As part of GPG's orderly value realisation, the company's investment portfolio may be reduced to the point where an investment in GPG becomes a pure exposure to Coats.

"With the company's new direction in place, the role of chairman will be somewhat different, with an emphasis on asset realisation and an orderly wind-down of activities," GPG said.

"'Mr Johnson feels that his other commitments and priorities are such that, with the company's strategic future determined, it is in GPG's interests for him to stand down and to allow a new chairman to guide the company in its new phase of development," it said.

Guinness Peat Group's shares closed yesterday at 79c, down 0.5c, having rallied strongly since the wind-down was announced in February.

OPUS ON A ROLL

It might be sheer coincidence but shares in Opus International Consultants have performed very strongly since last September's earthquake in Christchurch, and the far more damaging aftershock on February 22.

Just days before the first big one struck, Opus shares were trading at a 52-week low of $1.55. They plateaued at around $1.95 early in February and quickly broke through $2 after the second big one.

They closed yesterday at $2.20, not far off their 52-week high of $2.30. Opus, which has its origins in the Ministry of Works and Development, is an engineering consultancy with more than 2000 staff in New Zealand, Australia, Canada and Britain.

In calendar 2010, its net profit was $22 million, an 18 per cent improvement on the previous year's profit.

The company listed on the NZX in October 2007, raising $47.8 million through the issue shares at $1.65 each.

Opus has around 250 staff in Christchurch and there is no doubt that rebuilding the city, now the whole liquefaction phenomenon is better understood, will represent a colossal engineering challenge for Opus and its peers.

Unlike many listed companies who have disclosed how the quakes will add or detract from their earnings prospects, Opus has remained silent, despite its shares having rallied by about 50 per cent since that fateful day in September.

Perhaps the company's annual meeting in Wellington on April 14 will shed some light on the subject.

Forsyth Barr analyst Andrew Harvey-Green told Stock Takes Opus will clearly benefit from the disaster, and from ongoing spending on general infrastructure.

"Their overseas operations have turned around a little bit, so on a group basis things are looking up for them," Harvey-Green said.

"Given the sectors that they operate in, they will be getting work out of the rebuild of Christchurch," he said.

"They also operate in Australia, so they will probably also get more work from the Queensland floods as well," he said.

BTU THE NEW PRC?

The sharemarket may have lost Pike River Coal to receivership but investors have access to Australia's Bathurst Resources, which has had a stellar run in the few short months since it started trading as listed stock on the NZX last December.

Bathurst floated on the Australian Stock Exchange in January 2008.

In June last year, BTU signed an agreement with L&M Coal Holdings to buy the Buller Coal Project, completing the acquisition last November. The following month, Bathurst gained a secondary listing on the NZX.

The Buller project is BTU's flagship project with more than 10,000 hectares of prospective tenure.

Bathurst last month officially became a coal producer after assuming control of the Eastern operations, being the Takitimu coal mine in Ohai and the Cascade mine on the Buller plateau, near Westport.

Bathurst's acquisition also includes the prospective Whareatea West project, which is adjacent to the company's Escarpment block on the Buller plateau.

On completion, Bathurst paid Australian-listed Galilee Energy A$25.7 million for Eastern, with a balance of about A$6 million due in May. Bathurst's shares have fared well since listing year.

The stock closed yesterday at $1.60, not far off its record high of $1.73, having traded as low as 74c in its few short months as a New Zealand-listed company.

SELLER BEWARE

Stock Takes thinks the old adage, "let the buyer beware", should also apply to sellers, particularly sellers of energy companies.

A case in point: Fletcher Energy. Petrocorp, formally the Petroleum Corporation of NZ, was sold by the Lange government in 1988 to Fletcher Challenge, and became that company's energy division.

In 2001, Fletcher Energy was sold to a Shell/Apache joint venture for the equivalent of $10 a share.

A key assumption in valuing Fletcher Energy at that point was that oil would trade in a range of around US$18 to US$22 a barrel.

No sooner had ink begun to dry on this deal that oil prices started heading north with a velocity few could have expected, hitting a record high of US$147 a barrel in July of 2008.

Prices are gaining once more, with benchmark West Texas Intermediate trading yesterday at US$104 a barrel.

If the situation in Libya and elsewhere in the Arab world continues to escalate, an oil price of US$200 a barrel is not seen as being beyond the realms of possibility.

The Government will no doubt have some regard for history when it looks at Solid Energy, which is understood to be high on its list of possible privatisations.

LICENSED TO AUDIT

Commerce Minister Simon Power has welcomed the Commerce Select Committee's report on the Auditor Regulation and External Reporting Bill.

The bill establishes a new licensing regime for major audits, such as the audits of banks, insurance companies, and companies listed on the stock exchange.

It will not impact on audits of small and medium-sized companies.

The bill strengthens auditor regulation by consolidating all accounting and auditing standards-setting into a reconstituted Accounting Standards Review Board, to be called the External Reporting Board (XRB).

It also requires the Institute of Chartered Accountants (NZICA) to license auditors, and the Financial Markets Authority (FMA) to oversee the NZICA and be responsible for quality reviews.

"This bill is an integral part of the Government's reform programme to restore investor confidence in our financial markets and to strengthen investor protection," Power said.

Subject to the legislation being enacted, the XRB will begin operating on July 1, while the auditor regulation provisions will come into force once the NZICA and the FMA have established new regulatory systems.

While Stock Takes applauds introduction of the XRB, it has to be said that most of the dozens of finance companies that failed over the past few years would have fitted into the small-to-medium sized category.

As if we need to be reminded, this was the part of the finance industry that was responsible for obliterating billions of dollars of investment wealth.

Perhaps the XRB's net should not be designed just for the big fish but for the small fry too, because this was where the problem lay.