KEY POINTS:
Forsyth Barr's Guy Hallwright has delivered a cautious verdict on Briscoe Group after its less than stellar half-year result last week.
He has retained a hold recommendation and still sees the group as one of his preferred exposures to the retail sector. He also has a long-term valuation of $1.82 on the stock. It closed yesterday at $1.50.
But he has downgraded his full-year forecast from $26 million (in line with last year) to $25.1 million. Full-year 2008 and 2009 forecasts are also downgraded by 3 to 4 per cent.
The group is generally delivering good sales growth but its margins are starting to get squeezed, he says.
But the outlook is not particularly encouraging in terms of rising interest rates and high fuel costs which are likely to curb consumer spending, he says.
If the company is to deliver on that $1.82 valuation it needs to successfully roll out another five of its boutique Urban Loft stores and double its Living & Giving chain to 20.
Hallwright has also previewed The Warehouse result. The actual Red Shed numbers are out this morning. But beyond the operating result Hallwright adds his view on the neverending ownership struggle. He reckons The Warehouse is worth $4.76 on fundamentals. But he retains an "accumulate" recommendation in the belief that the stock should still be underpinned by the prospect of another Tindall/PEP offer at $6, with a further upside if either Foodstuffs or Woolworths can win a High Court appeal. The two grocery chains are appealing a Commerce Commission decision to block them buying. The Warehouse shares closed at $5.95.
Reversal rehearsal
After his success with Vistron (which he used for a backdoor listing by Aussie investment firm MFS) shell company specialist Brett Wilkinson is planning to float another purpose-built listing vehicle on the NZAX.
RVL No 3 will be an even more streamlined version of the Vistron model. The No 3 relates to the fact that this is the third vehicle that Wilkinson has brought to market (after Vistron and the still listed Holly Springs).
He hopes there will eventually be an RVL No 4, No 5 and so on. The key to making the reverse listing model work is being cost and time-efficient, Wilkinson says. "The amount of time an executive team puts into producing a prospectus and investment statement is not only costly, but diverts attention from the core focus of operating and growing the business."
Air attraction
Air New Zealand shares have become the subject of a fascinating arbitrage play for keen share traders. That's thanks to an unintended effect of laws designed to protect small shareholders from having unpopular corporate decisions forced on them through a scheme of arrangement style of vote. As a consequence of the rules the airline must now put its plans to spend $6.3 billion on new aeroplanes to a shareholder vote. That's because the spend represents more than half the value of the company's total capital.
No one who has any interest in the long-term future of Air New Zealand could possibly view the purchase as anything other than a good thing. The fact that they have secured these orders at a time when there is a worldwide shortage of new planes is one of the key reasons analysts have been taking such a favourable view of the stock in the past year.
With the Government holding an 80 per cent stake the purchase will certainly be approved. But the law states that shareholders who vote no to the purchase have the right to sell their shares back to the company.
The hope of the arbitrage players is that the sale price will be set by an independent valuer and that may be at a significant premium to where they are now trading. Analyst valuations on Air New Zealand range from $2.75 to $2.21. The shares closed up 3c at $2.25 yesterday as the first of the arbitrage players bought in.
But things may not be as simple as they seem. Sources within Air New Zealand say the law only requires the company to buy back at a price which it deems fair and reasonable.
Then if there is a dispute over the price it goes to an independent arbiter. That could take months, by which time any premium the investor was hoping to make on the play will have been well and truly whittled away.
Stormy waters
In a market where raising cash is increasingly difficult, wheeled boat-builder Sealegs has done well to get backing from four heavyweight investors - including the Accident Compensation Corporation. The investors have agreed to take 2.75 million shares at 58c each - raising about $1.6 million for the company.
That's well short of the $15 million Sealegs had hoped to raise in a rights issue later this year - but chief executive David McKee Wright says it's enough for now.
The rights issue has been delayed until market conditions are more conducive. That sounds prudent. Sealegs has done well to steadily grow its market but wouldn't be wise to over-stretch itself in the present volatile environment.
It's hard going for those involved in capital-raising at the moment, brokers and bankers say. Even this country's high-net-worth individuals - who can usually be relied on to look kindly on smart ideas and motivated entrepreneurs - are taking a very conservative approach to investing.
Need for speed
Owning shares in a car racing track sounds like every school boy's dream. In terms of attracting investor attention by way of glamour and excitement, Taupo Motorsport Park - which is planning to list on the NZAX - is going to have a head start over almost everything else on the local stock market.
That's going to immediately raise a few red flags for market observers concerned about companies which sell themselves on emotion rather than sound financials.
Burger Fuel, for example, copped a lot of flak for appealing to burger lovers who may not have had any experience in assessing the real value of the company. It listed at $1 a share on July 27 and yesterday it closed at just 73c.
While Burger Fuels' long-term success is still to be determined the market seems to have ascribed a more realistic valuation to stock. The 27 per cent loss in just 1 1/2 months is likely to have dampened the enthusiasm of a few young investors.
Like Burger Fuel, there is going to be a lot of emotion attached to investing in a racing track.
Plenty of people like burgers. But unless they are suffering some kind of culinary psychiatric disorder their level of passion will never rival that of the typical petrol-head. Those guys are up there with trainspotters when it comes to obsession.
Adding to that appeal it is understood that shareholders will also get special benefits related to using the track and being involved with the racing.
Taupo Motorsport Park looks at first glance like an investment with plenty of potential and plenty of risks. But there are some experienced and well respected business brains in this float.
So, provided its valuations don't defy any laws of physics and that the risks are transparent to all, it could be a lot of fun to have on the exchange. Stock Takes looks forward to seeing the numbers.
My name is Earl
Earl Stevens - the man behind the listing of ICP Biotechnology - is back in the business of doing business. Stevens resigned as chief executive of ICP in May and was involved in some messy public fallout with the company's major shareholder (Brent King's Viking Capital) over his decision not to take up any stock in a rights issue that ICP was holding.
Stevens is now back playing in a similar space to King, heading up a boutique investment banking group called Stevens Capital Partners.
In fact the investment company dates back to 2001, although Stevens had largely put it on hold during his time with ICP.
Now he is looking for new business opportunities for mergers, acquisitions and stock market floats.
Stevens says most of his attention is focused on the Australian market where there is less risk-aversion to investing in the tech sector.
