Stock Takes

A closer look at the markets by Tamsyn Parker

Stock Takes: Mad Butcher's listing details due soon

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The Mad Butcher logo The Mad Butcher sign picture supplied
The Mad Butcher logo The Mad Butcher sign picture supplied

BUTCHER'S DETAILS

A prospectus for the Mad Butcher's back door listing is expected to be out next week.

Veritas Investments' $40 million acquisition is being funded by $20 million in cash and $20 million in shares.

Its initial public offer was expected to go ahead in early March but complications over the back-door nature of it and the need to get approval from three regulators has slowed the process.

The capital raising is expected to be in the range of $22 million to $25 million with the price set by a book build ahead of the prospectus being made available.

In its interim report Veritas said it had firm commitments of $1.2 million for the capital raising with Craigs Investment Partners underwriting a further $12.7 million.

Of that $12.7 million Collins Asset Management has committed to sub-underwrite $2.5 million and RMI Holdings will pick up a further $2 million leaving just $8.2 million to be sold elsewhere.

The company also entered into an agreement with ANZ for a $10 million fixed-rate term-loan facility. Veritas shares closed steady on $1.82 yesterday.

BANK LISTING?
One of the major Australian-owned banks is understood to be in talks with an investment bank about potentially listing its New Zealand arm on the local stock exchange.

The ANZ has been ruled out because of its size and potential competition issues with it having about a third of the market.

That leaves ASB, BNZ and Westpac as possible contenders. Stock Takes has no insight on which one might be at the forefront but in the latest round of full-year results the BNZ was the only local Australian-owned bank not to make a record profit. Its parent National Australia Bank had a tough year in 2012 where its net profit fell 21.8 per cent to A$1.4 billion ($1.7 billion) and its cash earnings were down 0.5 per cent to A$5.4 billion on the back of pressure in its UK business.

So could it be considering a selldown here? A spokeswoman for the BNZ said it did not comment on speculation.

Any listing of a bank subsidiary would certainly be music to the ears of the stock exchange and local brokers. Partial listings of local subsidiaries of financial services firms was a key recommendation in the Capital Markets Development Taskforce report back in 2009. But back then nobody was thinking about new listings and banks were certainly not flavour of the month.

Stock Takes understands that if a listing went ahead it would not be until the early part of next year.

OVERVALUED?
Accountancy software firm Xero's soaring shares paused yesterday but it may soon break through the $12 a share point - a level not achieved by many listed New Zealand companies.

Rumours are that the price is being driven by buyers in the United States linked to Peter Thiel's Valar Ventures and investment advisory group Matrix Capital Management.

Matrix Capital and Valar Ventures put $58 million and $24 million into Xero respectively last November.

Their total investment of $82 million included $60 million of new capital in November and a purchase of $22 million of shares from Xero's three largest shareholders.

Substantial shareholder notices made in November show Matrix has a 9.8 per cent stake while Peter Thiel owns 7 per cent.

Stock Takes hears there are some who believe the company could be worth as much as $20 a share but one local market player said even the current price was hard to justify.

Xero has yet to make a profit and its revenue last year was just $48 million. The company is expected to update the market on its financial performance next month. The company gave back some ground yesterday, closing at $11.15.

TOO EXPENSIVE
Morningstar analyst Nachi Moghe has downgraded his recommendation on Michael Hill International from reduce to sell on the back of the company's share price rise.

Shares in the jeweller have risen about 15 per cent since the start of the year and yesterday closed at $1.39 - well above Moghe's fair value price on the stock of $1.05.

Last month the company posted a 5.9 per cent gain in first-half profit on Australian sales growth but in January it admitted its Christmas trading had missed expectations in a second quarter where its four markets in Australia, New Zealand, Canada and the United States all struggled to gain traction.

Michael Hill is also facing issues with the taxman on both sides of the Tasman over its restructuring in 2008.

Moghe said in a note that store expansion in Australia and Canada offered good long-term growth potentially off-setting the more mature New Zealand market.

But the company is not immune to the cyclicality of the retail sector, exacerbated by the discretionary nature of jewellery.

TOUGH COOKIE
Battle hardened director Michael Stiassny is an interesting backer of the move to mentor young professionals on the boards of listed companies.

Stiassny, Sir Stephen Tindall and the New Zealand Shareholders Association this week launched the Future Directors initiative, which allows selected young people to sit on the board of a company for 12 months to learn the ropes.

While the Vector board has yet to take on a "future director", its long time chairman Stiassny would certainly be able to teach new recruits a thing or two about the tougher parts of being on a board.

So far Auckland Airport and The Warehouse have taken on people under the initiative.

NO PRESSURE
The New Zealand Shareholders Association says its independence will not be compromised by its new sponsorship deal with Australian litigation firm IMF.

IMF is funding a class action in Australia against 12 banks including the big four which own New Zealand's largest banks.

Asked whether the arrangement would lead to any legal action by the association here, chairman John Hawkins said all of its sponsorship arrangements were on a "no strings basis".

"The association is completely independent and will not take any action that compromises that position," he said.

The association also has Telecom and Vector as sponsors as well as a number of other companies which do not want to be publicly named.

Hawkins would not say how much money IMF was giving the association or what it would be used for.

"We have got a lot of things on the go which I'm not at liberty to discuss at this stage."

- NZ Herald

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