Stock Takes: Welcome news for retailer

Hallenstein Glasson's profit forecast is reassuring. Photo / Paul Estcourt

Hallenstein Glasson's positive profit guidance has been music to the ears of investors after poorer news from fellow retailers Kathmandu and Briscoe Group.

The clothing retailer's share price spiked as high as $4 after it said its unaudited profit before tax for the year was projected to be around $28.3 million to $28.8 million - an increase of 55 per cent to 57 per cent.

It seems to be one of the few retailers to have broken the aggressive discounting cycle that so many have fallen into in recent years. Hallenstein Glasson closed 5c down yesterday on $3.85.

SECRET MEETING

Sir Ron Brierley flies into town on Tuesday for his showdown meeting with local institutions over proposals by Guinness Peat Group to split off its Australian business and list it separately.

About 10 institutions are expected to meet Brierley including representatives of AMP, the New Zealand Superannuation Fund and the New Zealand Shareholders Association.

The meeting is so hush-hush that its location is secret. Local analysts and brokers have not been invited and neither will general GPG shareholders get a look-in.

GPG might be a publicly listed company but it's certainly not providing a public forum for all its investors to have a say.

Topics expected to be raised include the concerns over the value of the company's Australian assets and exactly who will be appointed to the board as its new independent directors.

One name being talked about by GPG is thought to be Simon Allen, a former investment banker who helped set up ABN Amro and is a former chairman of the New Zealand Stock Exchange.

But the institutions are understood to be unhappy at the suggestion, not because of who he is, but because it's not a name on their list.

Sir Ron announced back in mid-June that up to three independents would be added to the board as soon as "practical" but nearly two months later it's not turning out to be that easy.

GPG shares closed flat on 65c yesterday; they have traded between 61c and 92c in the past year.

CAPITAL CHALLENGE

Allied Farmers seems to be staring down the barrel of an increasingly difficult situation.

The NZX-listed firm, which bought the assets of Hanover in a debt-for-equity deal last December, just keeps getting and giving out more bad news.

Yesterday it was another write-down on the value of the Hanover and United assets and a credit-rating downgrade from Standard & Poor's for its finance arm, Allied Nationwide, in the wake of its trustee claiming it is in breach of its trust deed.

Allied Farmers has put its capital-raising plans on hold for now until it allays the concerns of its trustee but it's capital the company desperately needs in both the parent and finance arm of the business.

Allied Nationwide has about $144 million in debentures and hasn't missed a payment to investors yet.

But in lowering the firm's rating from B/B to CC/C Standard & Poor's said the rating recognised there was a "strong prospect" that Allied Nationwide could default on its obligations within six months.

The finance firm is covered under the Government's deposit guarantee scheme only until October 12 and its reinvestment rate has fallen to just 29 per cent.

Standard & Poor's said its downgrade also reflected a material weakening of its liquidity position because of slower-than-expected asset sales and some loan repayment delays.

Allied Nationwide needs capital to fix its current breach but also to allow it to meet new capital adequacy rules for non-bank funders expected to come into place by either December or January.

It also has the matter of trying to replace an $86.2 million loan facility from BNZ that the banks wants out of.

Allied Farmers has suggested moving some of the Hanover/United loans over to the finance company might be a way of solving the capital problem but the value of the loans just keeps shrinking.

What was originally sold to investors as worth $396.2 million is now valued at just $94.3 million.

Allied's $19.3 million proposed capital raising was going to be a one-for-three rights issue at 2.5c but the margin that would have made it more attractive a week ago is slowly shrinking as the bad news hits.

Before the capital raising was revealed shares were trading over 5c. Yesterday they fell a further 34 per cent, or 1.3c, to 2.5c. Most of that capital is earmarked for paying Westpac bank back.

Stock Takes doesn't want to see Allied's investors facing any more problems but capital seems the only solution and when two banks want out it's hard to see where the money will come from.

HAPPY ENDING

The NZX's second equity listing of the year is finally lined up for Monday after property fund DNZ pulled off a successful book build on Wednesday.

DNZ managed to raise $45 million - $10 million more than it was aiming for.

Only $8.25 million was taken up by retail shareholders, which was not surprising given most have felt burned by the investment and want to get out of it rather than pour more money in.

Stock Takes understands Accident Compensation Corporation, BT Funds Management - Westpac's investment arm - and ING were pretty strong in their take-up of the offer as well as a Sydney-based property fund.

The book build set a price of 97c - at the upper end of a predicted range of 80c to $1.05 and above the 90c it last traded at on the Unlisted market.

The stock is expected to begin trading around the dollar mark although where it goes from there will depend on how many of the retail investors decide to up and sell.

After the book build, the share register will be split 80 per cent retail and 20 per cent institutional but one source said he expected it to be down to 60 per cent retail 40 per cent institutional by Christmas.

One factor also expected to boost the share price and its institutional shareholding will be its potential entry into the NZX-50 index.

The NZX will review the index in September and, depending on its trading levels, DNZ is expected to join the index which will boost investments from managed funds which track the index.

STILL WAITING

No word yet from the NZX on when its new settlement system, which was supposed to be up and running on July 26, is going live.

A statement to the stock exchange last Friday on listing rule changes in preparation for the new system certainly didn't make it any clearer.

It said: "As the Go-Live Date is dependent on the receipt of necessary regulatory approvals, NZX will advise the market of the Go-Live Date, provided that it shall not be earlier than 20 business days after the date of this notice."

So Stock Takes asked the NZX whether that meant the launch was at least 20 business days away and only got a "we are making good progress towards the launch" reply. It's not exactly building faith in the market operator.

DEAL SEALED

Craigs Investment Partners and Deutsche Bank have finally signed off their new alliance deal four months after it was announced. Deutsche bought 49.9 per cent of Craigs in April for an undisclosed amount but has only now gone unconditional.

Craigs' managing director, Frank Aldridge, said the process had taken a while because it had a scheme of arrangement that meant it had to go through a takeover process which involved getting shareholder approval and sign off by the High Court.

He said the companies had in effect been working alongside each other since the initial announcement and the sign-off was merely a formality.

MORE BANKERS

UBS has beefed up its investment banking team, adding two more members.

Nicholas Ross is joining the team as senior adviser after returning from a 13-year overseas stint with UBS and Christopher Simcock has been appointed executive director after three years as a partner with rival firm Cameron Partners.

It's a turnaround for UBS, which has been shrinking its team in recent years.

UBS is not the only firm to beef up its investment banking team in recent months but Stock Takes wonders where all the work will be coming from to keep the bankers busy given the lack of new deals this year.