KEY POINTS:
There is understood to be yet another private equity shark in New Zealand waters - this time circling Fisher & Paykel Appliances.
It is not clear who it is but word is they have engaged a local institution and are crunching numbers with intent. It is not the
first time FPA has been sized up. International whiteware giants Whirlpool (US) and Haier (Chinese) have both taken a serious look in the past.
No prospective buyer is going to be keen on a hostile takeover but with the Paykel family stake now diluted to less than 10 per cent and the company's less than stellar performance having becalmed the share price, suitors are growing ever hopeful they can put together an offer that is hard to refuse.
Despite its slow going in the past few months, FPA is hugely attractive to the bigger whiteware players because of its excellent technology and strong position at the premium end of the market in America.
Its distribution network in the US would also be highly attractive to the Chinese.
So while losing FPA would be a big blow for the NZX, a serious private equity bid could be the catalyst for counter-bids from both Whirlpool and Haier. That would at least ensure a battle which could be very lucrative for shareholders.
FPA's share price is certainly recovering very quickly from last week's profit downgrade. It is up 10c in the past week to close at $3.72 yesterday.
Bio-Boom
The Prime Minister's call to arms on the biofuels front this week should have been good news for biotech company Genesis Research.
The NZX minnow - which once hoped to develop a cure for psoriasis - is now pinning its hopes on a biofuel business. It has patented technology for making ethanol out of the cane willow plant but needs funding for a processing plant in Taupo.
In bigger markets signals like the Government's strategic push would be big news to the kind of high-risk investors that play in the biotech space.
But this isn't a big market and despite the bull run there still isn't a lot of investor appetite for this kind of stock. In part that's because Genesis is still tainted by its starring role in the biotech bubble of 2000/2001 (its shares once traded above $7 but closed yesterday at just 28c). But it is also because there are much better returns to be made elsewhere.
Genesis founder Jim Watson said this week that the Government moves didn't go far enough and an opportunity had been missed to put the country on a path to sustainability.
As long as Genesis doesn't run out of cash the tide does seem to be flowing in its favour. But realistically the kind of social shift that is required to make biofuel a serious proposition is going to take years.
Green Machine
Still on the green theme - which sure is fashionable all of a sudden - Matt Henry at Goldman Sachs JBWere has taken a look at TrustPower (in a research note titled Clean Green Profit Machine) and confirmed his positive outlook for Infratil (TrustPower's majority owner) following its latest Australian acquisition.
Infratil has paid A$7 million for a 51 per cent stake in Perth Energy.
Henry's view is based on the belief that the world "will transition to bearing the economic cost of carbon".
That essentially means that consumers are going to have pay more for energy, a nice trend for a company which now has some major energy assets - most notably its 51 per cent stake in TrustPower.
Henry retains his long term "buy" recommendation on Infratil despite a $4.99 target price. The shares closed at $5.80 yesterday.
He does concludes though that direct exposure to the green trend through TrustPower stock is preferable - although possibly limited by liquidity .
He has a long term "buy" rating on TrustPower and a target price of $7.48. The shares closed at $8.60 yesterday.
New Fund
Mint Asset Management- a boutique fund set up by Rebecca Thomas, Mark Ford and Shane Solly last year - is launching its first product for retail investors.
The Mint Australia New Zealand Active Equity Trust has been set up to take advantage of the upcoming tax changes.
Solly will be the portfolio manager. Core holdings of individual stocks within the fund will range from 3 to 20 per cent and the top 10 stocks held are expected to comprise at least 50 per cent of the fund.
Blue Sky Gazing
Retail sector darling Pumpkin Patch reports on Tuesday. It shares have eased back in the past month from a record high of $4.95 on January 22. No doubt some investors are standing back to hear the details of the result and, more important, any hints as to the progress of store growth through the UK, US and Australia.
Carolyn Holmes at ABN Amro is forecasting a 7.5 per cent increase in profit ($15.7m) for the period to December 31 - largely driven by new store openings in Australia and the UK and an improvement in wholesale margins. On the downside, the result is likely to be affected by difficult trading conditions in Australia and the unseasonably cool start to summer in New Zealand.
Holmes also raises a few concerns about the share price getting ahead of itself and is revising her earnings per share forecasts down marginally.
She is wary of factoring in what she calls "blue sky option" value which assumes success in the US and UK and that the company will win new wholesale contracts in Asia.
Holmes revises her 12-month target to $4.49 based on a formula which includes an average of the discounted cash flow - both with and without the blue sky option.
But with the shares closing at $4.70 yesterday there are still plenty prepared to count all those chickens now.
Dairy Doldrums
Plans by NZX listed Dairy Equities (DEL) to let non-farmers take part in Fonterra's share growth have been thwarted - at least for a while - by the co-operative's looming capital restructuring process.
DEL boss Geoff Taylor has been doing the rounds of the broking institutions to explain why patience is required.
For the Dairy Equity plan to get off the ground it needs to buy the rights to the "value added" component of Fonterra shares from farmers.
The "value added" bit refers to Fonterra's branded consumer products and high-tech ingredients divisions.
DEL's target group was big corporate land owners which don't want exposure to the high-risk consumer goods market. Unfortunately, although several companies expressed interest last year, they are now opting to wait for the results of Fonterra's capital restructuring round, which will drag on for most of this year.
The restructuring debate is likely to include a range of options - maybe even splitting Fonterra shares so the company can be partially listed.
But history suggests farmers are unlikely to vote for any major change to the status quo, so DEL could yet come into its own.
Until then it remains a cash holding shell company. At least with interest rates relatively high it's not such a bad time to have cash in the bank.
Rak'n It In - Tech Stock Running Hot
Rakon stock went ballistic on Tuesday. It was ignited by excitement over a $60 million share placement to raise funds for a European acquisition and fuelled by a 24-hour trading halt that allowed heavy demand to build.
When the trading halt lifted the share price soared 10 per cent as those who missed out on the placement at $4.05 decided to get in anyway at prices up to $4.89. It is no secret that the UBS placement was heavily oversubscribed but the company isn't keen to reveal the full extent. Market gossip that it was running at about 5.5 times demand was quickly shot down by management. Whether the numbers were less or more remains classified.
Demand was so hot that it presented company founders Brent and Darren Robinson with a chance to extract more cash from the company, something many Kiwi entrepreneurs have been keen to do in the past.
But no, in a sign which analysts will see as extremely healthy, not only did the brothers retain their current holdings but word is that they briefly considered taking more stock. Clearly they have a lot of confidence in their high-tech baby and its expansion plans.
It seems a desire to take care of the institutional shareholders who have backed them from the start kept them out of the placement.
The same desire to look after loyal investors is behind plans to offer retail shareholders an option to buy $5000 more of shares. The details of the offer aren't expected until the end of the month.
Rakon shares closed steady at $4.78 yesterday.
