Tamsyn Parker 's Opinion

Money Editor for NZ Herald

Stock takes: Bumpy ride

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Qantas Airways has hired investment bank Macquarie to help it fend off possible unwanted advances from private equity investors after its profit warning and share price nosedive.

The Australian airline lost A$1 billion in market value last week after it said it expected losses on international routes to more than double in the year ending June to A$450 million as a result of higher fuel prices and competition from Middle East carriers.

The appointment of Macquarie saw its shares jump 11 per cent to A$1.08 - its biggest gain since November 2006.

But it is hard to know where the company will go from here when it has already made so many cutbacks.

Emirates has said it is considering a commercial arrangement with Qantas but has not talked about an equity investment.

Shareholders rejected a private equity bid in 2006.

HAPPY TIMES?

Meanwhile, outgoing Air New Zealand chief executive Rob Fyfe has painted a positive picture of our national carrier's prospects for the next financial year despite warnings from global aviation group IATA that the industry's profitability is "balancing on a knife edge".

Fyfe told the Herald his optimism was based on cost cuts over the past three years, redeploying aircraft, good domestic results and the positive spin-off from Air NZ's 20 per cent equity stake in a well-performing Virgin Australia.

But shareholders don't seem to have the same enthusiasm. Air New Zealand shares have been falling steadily since midway through last year.

In July they were trading around $1.18, they are now around 84c. Yesterday they closed on 84.5c.

SPOOKED SHAREHOLDERS

SkyCity Entertainment Group shareholders bailed out this week on news the Office of the Auditor-General will be investigating the process of its appointment by the Government to build a $350 million convention centre in Auckland.

Shares fell 12c or 3.4 per cent wiping $69 million off the billion-dollar company on the back of concerns that the centre may be delayed or that the deal may not go ahead at all.

Investors stood steadfast after weeks of political pressure and criticism of the Government and SkyCity for a planned 350 to 500 pokie machine increase being allowed as part of the deal and its possible links to an increase in problem gambling.

But now there is some official involvement shareholders have been spooked.

SkyCity has said it will fully co-operate with the Auditor-General over the inquiry but there will be little it can do to influence the outcome.

Goldman Sachs analyst Marcus Curley this year predicted a fully operational convention centre could add up to $42 million to the casino operator's net profits.

That would be a lot to miss out on if the deal doesn't go ahead.

Shares in SkyCity closed up 6c at $3.47 yesterday.

SELL-DOWN

Accident Compensation Corporation's stake in Allied Farmers has dropped below 5 per cent after it sold 512,000 shares this week.

ACC has been selling down its stake in the company since it was issued a large number of shares in November last year as part of a compensation deal for those who took part in a share placement agreement put in place in August 2010.

ACC bought 60 million Allied shares back then but the terms of the agreement meant that more shares would be issued if the value of Allied's net intangible assets fell below a certain point at June 30, 2011.

That happened and in November it ended up with a 10 per cent stake understood to be the single largest shareholding at the time.

It managed to drop the holding soon after to 6.9 per cent and then sold more shares in March dropping its ownership to 5.5 per cent.

The latest share sell-down takes it to 4.5 per cent.

It has not come with any major windfalls.

ACC made just $15,856 out of selling the latest parcel. Allied Farmers, which acquired the finance company assets of Hanover at the end of 2009, has seen its share price plummet following the deal. Allied shares closed steady at 2.3c yesterday.

MIXED EMOTIONS

Abano Healthcare Group has received a big tick from the New Zealand Shareholders Association for revealing plans to partially reward its directors with shares.

The audiology and dental services group announced this week that its non-executive directors would be taking half of their after-tax fees in the form of Abano Healthcare shares for the next three years.

Abano chairman Trevor Janes said the board believed its directors should own shares in the company to align their interests with its shareholders.

The shares will be acquired on market on a quarterly basis with 50 per cent of participating directors buying shares in one quarter and the other 50 per cent getting them in the following quarter.

Shareholders Association chairman John Hawkins said it was an encouraging development which he hoped would be taken up by more companies.

"There are a few at present [doing this], but we would like to see this as the norm."

But Abano shareholders don't seem to have taken the news quite so cheerfully.

Before the announcement shares were trading at $4.17.

They have since dropped and closed yesterday at $4.02.

LIMPING NEARLY OVER

Brent King's Investment Research Group is to sell down its assets after deciding its overheads are too high.

The financial advisory and media company is the last remaining part of King's listed investment business, formerly Viking Capital.

The former Dorchester Pacific chief executive listed Viking in 2006 with an aggressive growth strategy.

It had some early success with an investment in 42 Below vodka but then suffered major losses after its investment in start-up bio-tech ICP Bio went belly up and a stake in Dorchester was hit badly by the finance company collapses.

Viking acquired Investment Research Group in 2007 from David McEwan and then King changed its name and investment strategy in 2008 to reflect the change in market conditions. Since then the company has struggled to get ahead.

It had received approval to delist from the sharemarket but said this week it would keep the listing as a shell but undertake an orderly disposal of its assets.

King, who may himself buy some or all of the assets, said the trading businesses were sound and had positive cashflows but IRG's overheads were too high.

Chairman Marvin Yee said it was taking advice on the best way to sell the assets. IRG's share price last traded at one third of a cent.

- NZ Herald

Tamsyn Parker

Money Editor for NZ Herald

Tamsyn Parker is the NZ Herald's Money Editor. A business journalist for ten years, she has worked in the UK and NZ for the New Zealand Herald, the National Business Review and a specialist publication on investment products for financial advisors. She is passionate about helping readers learn more about to make their money work for them.

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