KEY POINTS:
Tower New Zealand has updated the market on the likely fallout from storms and tornadoes that hit Taranaki, Northland and Auckland last month.
The damage has been estimated at $70 million across the insurance industry.
Rodney Deacon at Goldman Sachs JBWere estimates the claims will knock about $2.7
million off the company's net profit in the second half of 2007.
That translates to a 9 per cent in fall in full-year year net profit from $30.4 million to $27.7 million.
Deacon's forecast was already at the low end of the $30 million to $35 million range indicated by the company - and below the consensus estimate of $33 million.
Given the one-off nature of the claims he makes no change to longer range forecasts. He retains a valuation of $2.67 and a 12-month target price of $2.84. The shares closed yesterday at $2.26.
The drop in earnings was likely to have a short-term impact on the share price but longer term Tower still looked like an attractive investment, Deacon said.
There was still potential for it to take costs out of its business - something that has been identified by Tower management.
Tower was also well positioned to take advantage of KiwiSaver. But though the new savings scheme was launched in July it would be at least October before there was meaningful news about an improved inflow of funds. Any short-term price weakness should be viewed as a long-term buying opportunity, Deacon said. He reiterates his buy recommendation.
Finance fallout
Given the scrutiny of the finance sector that the collapse of Bridgecorp has generated, it seems timely to take a look at how the market is valuing listed finance companies. Not surprisingly, sentiment doesn't appear too bullish, although that does need to be set against a backdrop that has seen some major falls across the NZX (not to mention from New York to Mumbai).
The worst performing of the stocks has been Lombard.
Since the announcement of its 1-100 share consolidation took the price up to $3 a share on June 1, it has lost almost half its value - closing at $1.55 yesterday.
Chief executive Michael Reeves says the company is still trading strongly and he doesn't believe the lacklustre share price is necessarily related to negative sentiment about the sector.
But there is an issue with regards to the amount of positive media attention the sector receives.
Since June, he says, Lombard has produced a $4 million profit and announced a sizeable acquisition with little or no media coverage.
Dorchester Pacific - which does get a fair bit of coverage due to some complex ownership shenanigans - has also slipped back a long way since June 1 - from $2.00 to yesterday's close of $1.30.
Dominion Finance has fallen from $2.35 over the same period to close at $1.95.
New Zealand Finance has experienced far less of a drop - from $1.10 on June 1 to 97c yesterday.
Dairy doldrums
Shareholder frustration is brewing at Dairy Equities, the listed company that has hopes of buying rights to future earnings on the value-added component of Fonterra shares.
The shares are still backed by cash of about 51c but the share price has traded down to just 39c, a discount of about 23 per cent.
Founder Geoff Taylor left in April after conceding the concept hadn't gained the necessary traction with Fonterra's big non-farmer shareholders such as Landcorp and Genesis. At the time, he hinted a cash return and wind-up of the company might not be far away. Some shareholders are wondering why the existing directors are holding on.
Shanghai surprise
Speaking of agitated shareholders, a few Richina Pacific investors are feeling wary about plans by management to restructure its shareholding, as hinted by founder Richard Yan. Parent company Richina Enterprise Holdings seems keen on raising its stake from the present level of about 40 per cent.
Richina is a multi-headed beast that owns construction company Mainzeal, a Beijing aquarium, a Shanghai-based leather tannery and Shanghai property interests.
Long-time shareholders - who have suffered through the poor performance of the tannery, the aquarium and Mainzeal's delay-hit construction of the Vector Arena - aren't so sure they want to see the shares bought up just as the company starts to develop its highly lucrative Shanghai landholdings.
Richina shares closed at 50c yesterday.
Outburst doesn't faze airport suitor
DAE chief Kjeld Binger - on the phone from Mexico, where he has been on his honeymoon - was pretty bullish this week about the chances of his team pulling off an upset win in its bid to buy a controlling stake in Auckland International Airport.
Binger is confident that if he can just sit down with the big shareholders, including the Auckland and Manukau city councils, he can sell them on the value of the deal.
Powerful political forces meddling at a national level could be more difficult to handle. Binger won't be drawn into the game-playing that Trade Minister Phil Goff seems keen to engage in.
Binger won't even say he is disappointed by Goff's expressing his disapproval of any sale.
But the reality is that these guys have been blind-sided by a Government tactic they didn't pick. Airport shares closed yesterday up 6c at $3.16, well short of the $3.80 value DAE puts on its offer.
Binger also reiterated he had no plans to alter the terms of the deal to make it more politically palatable. But that may yet depend on what other bidders come up with. Of the known contenders - the others are Canada Pension Plan, Australia Pacific Airports Corporation and a Macquarie Bank-led consortium - Dubai is actually the one in the best position to make a straight cash offer if push really comes to shove.
Cash hungry
As noted last week, biotech company ICPbio has been on the hunt for $10 million by way of a rights issue - to cover costs related to the building and scale-up of its new manufacturing facility and to the buildup of inventory.
Yesterday, it said its rights issue looked likely to be at least 60 per cent subscribed. Given the negative market mood right now, that seems like a pretty good result.
It was enough to secure the medium-term future and send the share price up almost 10 per cent yesterday - to close at 5.7c.
But the company made it clear it didn't get the backing of major shareholder and former chief executive Earl Stevens.
"Contrary to representations given to the company, the Earl & Tracey Stevens Family Trust did not make an application in respect of its current 20.5 per cent shareholding."
About 20 per cent of shareholders did take up more than their entitlement and that seems to have been enough of a show of faith in the company to convince a few new investors to get involved.
ICPbio makes products for use in animal reproduction, health and the fine biochemicals field.
Last week, the company said it had signed a distribution agreement with a leading US-based distributor.
On the hunt
Infratil's decision to raise a $175 million war chest - to cash in on cheaper assets if an impending credit crunch throws up some bargains - gets the thumbs-up from Rob Bode at First NZ Capital.
"In my view it's the right thing to be doing. If they're not expanding through acquisitions or investing internally in their operations then they are going to struggle on their targeted rates of return."
Bode says Infratil has managed to spend quite a lot of money in the past two years without raising any equity. So it's not surprising to see it going to the market.
Bode is picking the most likely home for the money will be Australian energy assets.
Managing director Lloyd Morrison dropped a hint at the annual meeting when he talked about the potential of commitments of $600 million to $700 million across the Tasman.
It's got more like $400 million over there at the moment.
Despite the fact that most of the media attention seems to focus on Infratil's airports (topic du jour), it's the energy assets that are delivering the bulk of returns.
The European airports aren't profitable yet and are dwarfed in value by the 50.5 per cent stake in TrustPower.
Infratil is still one of the best performing stocks of the year to date - up about 15 per cent - but its fall in the two weeks to Monday was enough for Bode to move his recommendation from neutral to buy.
He has a target price of $3.40 on the stock, which closed at $3.04 yesterday.
