Stock Takes: Greece is the word

5:30 AM Friday Jul 8, 2011

KiwiSaver provider Tower Investments said June was a volatile month for risky assets.

"Greece was the word on everyone's lips as fears mounted over whether fractious European authorities would be able to pull together another delaying package to stave off the country's sovereign debt default," chief executive Sam Stubbs said.

The latest bailout at the end of June was a costly way of buying more time.

"Behind Greece stand other horror stories like Ireland, which is heading down a similar road; and Portugal and Spain, which wouldn't take much more of a push to be the next dominoes to topple over into effective, although not official, sovereign default."

Also worrying markets were all the commercial banks that have lent these ailing countries money and would go down with them if not bailed out by the rich countries of the eurozone, he said.

Sluggishness in the US economy dragged markets down as well because the rest of the world is relying on the Americans to consume more goods and services as part of economic growth recovery, Stubbs said.

CHARLIE'S PAY DAY

It's been a long time coming, but Charlie's shareholders have been rewarded for their loyalty.

Over the last 12 months, Charlie's shares have traded as low as 7.7c, but they went to the high 20s in the leadup to Monday's announcement that its major shareholders had agreed to sell their collective 52.17 per cent stake to the giant Japanese brewing company, Asahi Beverages, at 44c a share.

Asahi's offer, which will extend to all shareholders, was at a 57 per cent premium to Friday's closing price. But at the full purchase price of $129.2 million for the company, it's small beer, for Asahi, whose annual turnover stands at around $22.4 billion.

It was 12 years to the day that Charlie's founders Marc Ellis and Stefan Lepionka started squeezing oranges, so what next for Marc and Stefan Inc? The duo will likely be back on the start-up scene before too long.

"Maybe next time we could do it quicker than 12 years," Ellis told Stock Takes. In the bigger picture, Charlie's deal was a reminder that overseas investors see value in this market. Shares closed at 43c yesterday.

FONTERRA MILKS IT

Fonterra, fresh from successfully raising funds in the Chinese currency bond market, has raised A$300 million ($388.3 million) through its first issue of corporate bonds in Australia. The bonds are for a five-year term, maturing in July 2016.

They were priced at a spread of 100 basis points over the equivalent wholesale rate.

IPO JAM

In the fickle world of Initial Public Offers (IPOs), the aged-care market is warming up. Two possible IPOs are understood to be on the investor radar screen, Vision Senior Living and Wellington-based Summerset.

Vision Senior Living is considering an IPO and sharemarket float of between $80 million and $100 million to fund new building projects. The IPO will be aimed at institutional and retail investors.

As it stands, Vision Senior Living is a private equity venture, about 70 per cent owned by Goldman Sachs and Arrow Construction, a New Zealand construction group.

Summerset's then owner, AMP Capital, tried to launch the company as an IPO in 2007 but withdrew, blaming adverse market conditions. Analysts said valuations at the time did not stack up.

"I think the valuations will have to be reworked and certainly the management structure will have to be more in tune with the market this time around," said one investment banking source.

Summerset has 1700 residents and 400 staff.

It is the third largest operator and second largest developer in the industry.

The company originated in 1994 as a provider of rest home and care facilities based in the Kapiti/Horowhenua regions. It is majority owned by the private equity company, Quadrant.

Aged care companies and their owners have been casting an envious eye on Ryman Healthcare, the 22-village aged care and retirement operator, which has enjoyed a very strong run.

In the year to March 31 the company made $100.2 million net after-tax profit, up on last year's profit of $78.4 million.

Shares in Ryman closed yesterday at $2.78, not far off the top of their $1.97 to $2.84 range over the last 52 weeks.

PRINTING MONEY

Opus Print, one of the companies mentioned as possible float candidates at an NZX investor seminar early this year, came close to launching an IPO some weeks back but the offer was pulled.

One fund manager said Opus did not have enough support. "I think that has been the schematic in New Zealand and Australia, in recent months," he said.

"People have been questioning why IPO activity has been so low, and I think vendor expectations have been too high."

Investment bankers are fully aware of the pressure the Government's partial privatisation plans will have on the investment dollar, so the heat is expected to come on to get their IPOs away before that process starts, assuming that National wins the November election.

Across the Ditch, Collins Foods, Queensland's version of Restaurant Brands, is in the throes of being floated by its owners, Pacific Equity Partners.

AMP ECONOMIST

Bevan Graham has been appointed to the role of AMP New Zealand chief economist.

The role was created after the merger of AMP and AXA took effect on March 31, creating a market-leading provider of financial services. Graham was most recently chief economist at AXA Global Investors.