KEY POINTS:
With the hiding the local market has received in the past year or so, it's been pointed out that a number of stocks are looking cheap based on earnings and dividend levels.
But the caveat there has always been how sustainable the earnings, and consequently dividends, are, given
the slowing economy.
This week gave some indication of where things are probably heading with retailers Briscoe Group and Hallenstein Glasson coming out with sales figures that, in Briscoe's case were lower than expected, and for Hallensteins were in line with gloomy forecasts.
Briscoe fell 8c to 76c yesterday but on minuscule volume, while Hallenstein remained steady at $2.38, 2c higher than it was trading at before its announcement on Tuesday.
Meanwhile, Sky TV yesterday forecast a 2009 net profit of between $90 million and $100 million from $98 million this year, which was "effectively a downgrade" according to one local fund manager. The rest of the market probably saw it that way too, selling it down 25c to $3.85.
"These things should not be surprises but as is often the case people panic when they occur," said the fund manager. "The question is, is this the start? Can things get worse from here?"
SLOW JAM
Having banked about A$376 million for the sale of its 29.7 per cent stake in Tower Australia, Sir Ron Brierley's Guinness Peat Group (GPG) may soon sell out of another of its Australian investments, accounting software firm MYOB.
GPG owns 13.6 per cent of MYOB and is one of four investors, between them holding 34 per cent of the company, that have agreed to accept an A$1.15-a-share offer from a private equity consortium comprising Archer Capital and HarbourVest Partners.
The consortium's price will rise to A$1.25 if they get acceptances in excess of 90 per cent.
However the company has just won shareholder backing for an A$50 million capital return to shareholders which at 12.85c a share will reduce Archer and HarbourVest's offer by the same amount.
Having already rejected a previous bid of A$1.90 a share from the same consortium, MYOB's board is apparently not keen, regarding the latest offer as opportunistic.
But GPG's Gary Weiss is reported as saying that when MYOB saw off the earlier bid, it promised shareholders "jam". The capital return looks like the promised jam.
Interesting to note that Weiss also recently said that MYOB's shareholders would prefer "to have jam today".
GPG itself has been promising its own shareholders "jam tomorrow", or more correctly in 2010 when Sir Ron steps down as chairman, for some time now.
Meanwhile another of GPG's Australian investments, CSR, reported an underwhelming first-half profit this week.
The sugar and building products company's result was down 51 per cent on a year ago, with the building products division hit by a slowdown in the housing market and rising asbestos liability and financing costs.
GPG's shares yesterday stayed above the $1 mark after recovering from an all-time low of 90c this week, closing 1c lower at $1.01.
NO DRAMAS
The Trustees Corporation Association yesterday released its 2008 review, and unlike last year when it saw fit to avoid any mention of the string of failures among the finance companies its members oversaw, it has acknowledged the carnage that has seen upwards of $5 billion now tied up in failed or frozen finance companies and mortgage trusts.
Still, Stock Takes reckons the association's rhetoric suggests it is still experiencing some difficulty fully removing its head from the sand.
"While we acknowledge personal distress experienced by many investors, recent events are not in themselves a signal that the system has failed or that it needs major changes," association chairman Clynton Hardy says in a media release.
He then goes on to talk about a range of new regulations for the sector including the Reserve Bank's new role as prudential regulator, the deposit guarantee scheme, and mandatory credit ratings, which sound like major changes.
Hardy goes on to refer to the regulatory shake-up as one of a number of "dramatic changes" over the year. Dramatic but not major then.
"Looking ahead, the association believes that the changes to the regulatory environment will strengthen the hand of trustees and enable them to play a more significant role in maintaining much needed investor confidence."
Here's hoping.
POISONED CHALICE
It was probably drawing a long bow to link the NZX-50's 1.5 per cent gain on Wednesday to Barack Obama's win in the US presidential election and market watchers here reckon our own election tomorrow is likely to have even less effect.
As with the last election, one of the main concerns among market participants spoken to by Stock Takes is that no matter who gets the most votes, a coalition is stitched together quickly.
Markets hate uncertainty, and there was plenty of that following the first election under MMP in 1996 when Winston Peters kept the nation on tenterhooks for a couple of weeks before announcing who NZ First would form a coalition with.
"The best outcome in either case is that the winner has a clear mandate to get on with something," said one broker.
The National Party is widely regarded as being more business friendly than Labour and there is hope that the capital markets here will gain some additional benefit from having John Key, who has considerable market experience, as Prime Minister. Then again, as the broker said: "Quite frankly they are going to inherit a difficult situation, particularly with the backdrop of what's happened in financial markets."
Another market watcher described it more succinctly as a "poisoned chalice".
MARKET REACTIONS
* 1990: Market falling before the election. It continues falling after National's win.
* 1993: Market rising.
After a brief period of uncertainty National is re-elected. Market resumes its upward trend.
* 1996: Market is flat. It remains largely unaffected by the uncertainty despite Winston Peters keeping the nation waiting before backing National.
* 1999: Market in decline before the election. Continues trend after Labour wins power.
* 2002: Market makes gains before the election but dips after Labour is re-elected.
* 2005: Market was rising sharply before the election, largely as a result of corporate activity, and kept on going up afterwards.
* 2008: The last few months have been among the ugliest ever for the NZSX and overseas markets.
IN THE MONEY
NZX is in the money already on its purchase of a 22 per cent stake in the Bond Exchange of South Africa (Besa) a month ago.
NZX paid $5.77 million for the stake but Johannesburg Stock Exchange (JSE) this week offered R173.2 million ($29.73 million) for all of Besa which values NZX's holding at $6.38 million.
NZX, however, is holding out. "NZX's initial view is that the JSE offer price is extremely low, is very significantly below fair value, and NZX would not support a takeover at this offer price."
NZX reckons there's a lot more upside in the business and JSE's offer doesn't take into account Besa's strategic value or the growth options the company has, for which it has just raised capital from "sophisticated local and international shareholders".
It appears that NZX believes Besa is capable of pursuing the same strategy of demutualisation and listing that has seen its own market value rise substantially and likens JSE's bid to the ASX's failed low ball tilt at what was then the NZSE back in 2000.
