KEY POINTS:
Has anyone told that bloke on the telly rustling horses and selling vacuum cleaners to get his $1000 worth of Burger Fuel shares how much of his hard-earned cash will be used just to get the thing listed?
The prospectus estimates the IPO will cost Burger Fuel $1.2
million - that's 8 per cent of the $15 million being raised. A pretty hefty whack, even for a company that believes it is worth $60 million.
Brokerage fees for the float are 3 per cent of the money raised - plus a 1 per cent success fee. That's $600,000. So give or take $30,000 of independent directors fees, it looks like more than $500,000 is being spent on marketing.
It's not hard to see where the money went - the "do you want shares with that?" campaign is slick and must have penetrated the consciousness of every gourmet burger consumer in the country by now. At least it is making the stock market look like a sexy investment option for young people.
But having done that it needs to deliver - or it may turn off a lot of future investors. And experienced brokers and fund managers - essential to a successful float - won't be swayed by those kind of ads, no matter how clever they are.
The IPO closes on July 16.
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Growing on trees
Three announcements in three weeks from the normally quiet biotech and wood products investor Rubicon have sparked some market movement. Its shares have risen 18 per cent since February to close at $1.05 yesterday.
The focus of the attention has been on the biotech company Arborgen, in which Rubicon holds a 32 per cent stake.
Arborgen has received US Department of Agriculture approval to begin field trials of genetically modified (cold-tolerant) eucalyptus trees.
This is good news because it is a significant step towards commercialisation. In the biotech world companies rise in value with each step they take towards getting a product on the market.
Another announcement says Arborgen will be a partner in a new bioenergy project funded by the US Government and based at the University of Tennessee. Arborgen is developing technology which could enable the breeding of trees that are softer (more cellulose and less lignin for the biology buffs) and more easily used to make biofuels. Finally, Arborgen will also be a partner in an international project to map the eucalyptus genome.
Both partnerships have a secondary benefit beyond the scientific value they offer Arborgen.
They will help cement its reputation as a world leader in genetic research into wood production.
That may also increase the chance of a bigger industry player trying to buy the company or, as a means to an end, having a crack at Rubicon - which may eventually look like a company with assets worth more than its total market value.
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Life in the old dog yet
Life may have been pretty quiet so far this year for Guinness Peat Group - with most of the market focus on the progress of its Coates threads business - but the investment company has proved that it can still generate a bit of market excitement across the Tasman.
News that it has taken a 6 per cent stake in Australia's biggest sugar refiner, CSR, on Tuesday prompted a 5c rise in its share price.
CSR owns a pretty incohesive mix of sugar, aluminium and building materials businesses and has already hinted that it might start selling assets.
The move has sparked speculation across the Tasman that GPG will add some impetus to any restructuring plans.
The Aussies still have healthy respect for GPG chairman and founding father Sir Ron Brierley (he turns 70 this year), who is remembered for his corporate plays of the 80s and 90s.
GPG has bought into CSR with the shares trading at about A$3.50. In the past 12 months they've traded as high as A$3.96 and as low as A$2.81.
GPG shares closed yesterday at $2.07.
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Landing charges 'hardly outrageous'
Daniel Keiser at ABN Amro isn't buying the howls of outrage from airlines over Auckland International Airport's increased landing fees. He notes that the increases are slightly less than what had been expected.
But he writes that that announcement was "further sweetened by the avoidance of regulatory intervention".
Because his forecasts had anticipated a bigger rise, he has adjusted them downwards slightly.
He now expects Auckland Airport to post a net profit of $107.4 million for this year, $121.2 million for next and $139 million for 2009.
The removal of the $25 departure tax by the airport is also a shrewd move, he says.
The cost may well get passed on through ticket prices, but it will mean passengers have an extra $25 cash in their pockets that might get spent somewhere around the airport.
Further guidance as to other value drivers such as concession (retail) revenues and progress of ownership discussions wouldn't go amiss, Keiser writes.
"We understand there are now five interested parties. We would also be surprised if the board endorsed one party's offer over the others and we therefore suspect the board will advise interested parties to attempt an on-market purchase of the company."
No new names are mentioned in the ABN Amro report, but another fresh contender being talked about this week is Dubai Airport.
The shares closed steady at $3.30 yesterday.
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Sky high
The departure of Evan Davies was good news for Sky City, concludes Marcus Curley at Goldman Sachs JBWere.
The market delivered a similar verdict last week when the share price rose right after the announcement.
But Curley puts it more bluntly. "We view the appointment of Elmar Toime as the interim replacement for Sky City's managing director [Evan Davies] as a positive development for the implementation of the company's restructuring programme," he writes.
"Toime's experience lends itself well to the tough upcoming decisions on asset disposal and cost reduction."
Curley is sticking with a long-term "buy" recommendation on the stock.
Likely asset sales, cost savings, improvement of Auckland gaming and some industry consolidation could combine to give the stock a value of up to $7.85 a share. Sky City shares closed steady at $5 yesterday.
But Curley warns the big risk to that "buy" recommendation would be a decision not to sell the Adelaide Casino.
If management doesn't act and restructuring is not successful, then the shares have a "base case" discounted cashflow valuation of $4.70 each.
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You call that a bubble? THIS is a bubble
On a price to earnings multiple of about 17 times there are plenty of local market watchers who reckon the NZX is overvalued - or looking pricey at least. To be fair takeover premiums on Auckland Airport and The Warehouse are propping up that multiple a little.
But even so, New Zealand must still look like the Two Dollar Shop to overseas investors who have had anything to do with the Chinese market - the CSI300 now trades on a price/earnings multiple of about 33.
And China can't claim the world's most overvalued exchange.
That title goes to Slovenia - with a market trading on multiples of 39 times.
The tiny republic of 2 million people has seen its market quadruple since 2002.
According to a Bloomberg report, one of the reasons for the excessive value is that Government-owned pension funds invest most of their savings in the local market - foreign investors hold just 5 per cent.
When you think about it, that looks like a pretty good reason for the Cullen fund not to run a similarly patriotic investment policy.
