Money Editor for NZ Herald

Stock Takes: Green light

Mighty River's last valuation came in at $3.91 billion, which would value the highest possible float portion at $1.916 billion. Photo / Supplied
Mighty River's last valuation came in at $3.91 billion, which would value the highest possible float portion at $1.916 billion. Photo / Supplied


Looks like details of the long-awaited Mighty River Power float are set to be released on Monday with the Government raring to go after receiving the all clear from the Supreme Court.

Investors will be keen to know how much of the 49 per cent the Government is prepared to sell although market watchers believe it is likely to be close to, if not the full amount.

Mighty River's last valuation came in at $3.91 billion, which would value the highest possible float portion at $1.916 billion.

Demand is expected to be strong from both individuals and KiwiSaver funds so the price per share will likely be quite high - possibly in the $4 to $5 range.

The timetable will also be tight to get in ahead of Mighty River's full-year which ends on June 30.

That means the prospectus is likely to be out from early to mid-April.

The tight timeframe will also put pressure on other floats hoping to sneak in ahead of Mighty River. These include the backdoor listing of The Mad Butcher, set to go live in early April, and a proposed float of technology company Arria which has also been touted as an April listing.


The success of the Fonterra Shareholders' Fund, which listed on the stock exchange last year, and its Trading Among Farmers scheme has prompted the Government to look at whether other co-operatives may also like to move on to the exchange.

A document released by ministers this week entitled "Building Capital Markets" proposes to investigate the development of a specialist exchange for co-operatives on the NZX.

It states that: "New Zealand's co-operatives serve their owners well; however, some have difficulty accessing capital given the restriction on outside investors", and says that when seeking external capital co-operatives face a natural tension between satisfying the initial owners' desire to retain adequate control and convincing outside investors that the business will provide them with fair returns.

But the Government seems to have made a fatal error in making this suggestion - they haven't talked to the co-operative sector first.

Co-operative Business New Zealand executive director Ramsey Margolis says it's a nice idea but most co-operatives would say "thanks, but no thanks".

He says it's a myth that co-operatives can't get outside capital.

"If the business case is there co-operatives can get capital." And he reminds that not all co-operatives have done well through listing.

Kiwifruit co-operative Satara, which is listed on the NZAX, was hit hard by the Psa virus and is now going through a merger with rival co-operative Eastpack.

The concept seems to be more wishful thinking from those in the capital markets than the co-operatives. Stock Takes can see why outside investors would like a slice of the action - New Zealand's top 40 co-ops and mutuals pull in $40 billion in revenue a year and include the likes of supermarket group Foodstuffs, Mitre10 and fertiliser group Ravensdown.


Chorus shares fell back down below their listing price this week after news that it will cost another $300 million to build the country's ultrafast broadband network.

The Wellington-based company expects the total UFB build to be between $1.7 billion and $1.9 billion, up from a previous range of between $1.4 billion and $1.6 billion.

Chorus listed at $2.94 in November 2011 after splitting from Telecom. The stock had regained some ground of late after being hit by Commerce Commission regulatory proposals but was back down to $2.89 on Wednesday. But the higher cost hasn't affected Morningstar's accumulate rating on the stock.

Morningstar analyst Michael Wu notes that the long-term value for Chorus depends on the demand for fibre services and it only sees this demand continuing to grow as internet users upgrade to higher data plans and switch to fibre. Chorus shares closed up 1c yesterday at $2.90.


Fisher Funds' acquisition of Tower's investment business this week has left a lot of unanswered questions.

The $79 million deal seems a good buy for Carmel Fisher's company as it will boost her market position in both KiwiSaver and the general fund management industry markedly.

But Fisher and her new 26 per cent shareholder TSB Bank have kept mum on the details, so it's unknown how much the bank has paid to buy into the fund manager and how much money the rest of the shareholders paid versus the extra debt it will draw on from the ANZ.

The figure will eventually come out in TSB's accounts but since the deal doesn't settle until April 2, and conveniently TSB's financial year finishes on March 31, it's going to be a long wait.

It's also not clear what TSB's long-term intentions are for the business. Asked whether TSB planned to buy up the whole of Fisher in the future chief executive Kevin Murphy said it was too early in its relationship with Fisher to comment.

"There is no long-term decision about what we do."

But Stock Takes finds that hard to believe. Banks and fund managers always have a plan for their investments - it's what they do.

There have long been rumours about Fisher Funds being a potential sharemarket listing - it's one of the reasons many believe there was a bust up between Fisher and her former chief investment officer Warren Couillault.

But Fisher scotched any suggestion of a listing this week saying: "That's not at all on the horizon. TSB would not like that."

A listing would open the door for foreign investors ruining its present marketing strategy of a Kiwi-owned business, built by Kiwis, for Kiwis.


Fisher's takeover of Tower also raises the question of how the two will be merged.

The two businesses have very different investment styles with Fisher known for her investment in small, higher-growth stocks and Tower as a value investor based on steady, well developed mid-to-large businesses.

That could mean Fisher keeps more of Tower's investment team on board.

It's difficult to invest large sums of money in small companies because it increases your risk if they fall over.

Fisher has also been seen as a boutique fund manager fighting against the behemoths of the banking and insurance industry but the David versus Goliath tactic is no longer going to work.

Fisher has admitted that keeping Fisher Funds' culture is going to be one of her challenges. One also has to wonder how efficient it will be having three separate offices - Fisher's in Takapuna and Tower's in Auckland and Wellington.

Fisher says she has taken over the leases of the Tower office space and has recently expanded her Takapuna offices to accommodate more staff if needed.

Stock Takes can't see Fisher giving up her beachside spot at Takapuna any time soon. Tower shares have barely changed on the news, dipping 1c on Tuesday when the deal was announced. They closed down 1c yesterday at $1.92.


It was a night for boutique fund managers to celebrate on Wednesday with three out of five of Morningstar's annual awards being taken out by smaller market players. Milford Asset Management took out the KiwiSaver award and the top fund manager gong while Fisher Funds won best domestic equities manager. Tyndall Investments took out best fixed interest and OnePath won the international equities category.

- NZ Herald

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