Stock takes: Slow burn for candle maker

Ecoya shares waxed and waned by just 1c on its first day. Photo / Supplied

The first week of trading for newly listed Ecoya has failed to produce much in the way of excitement but maybe that's a good thing.

Shares in Geoff Ross' candle business fell by 1c to 99c in its first day on the market but were back up to $1 by day two.

That's a sharp contrast to 42 Below's listing in October 2003 when the company began trading at 40c - 10c below its listing price of 50c. 42 Below's shares fell as low as 31c in its first four months of listing and some began to question the $50 million market cap placed on the company.

But few can dispute the success of 42 Below's sale to Bacardi for $138 million.

Retail investors seem to like what Ross has to offer but those in the institutional market remain sceptical despite the success of 42 Below.

One joke doing the rounds this week had a broker forecasting Ecoya's shares would get down to 58c. Asked why, the broker said the answer was simple - 42 Below. Yesterday Ecoya's shares closed down 2c at 99c.

BANKERS LINE UP

Stock Takes understands a potential sale of the Yellow Pages Group is progressing despite its management saying it is just one of the "options" being considered.

Investment bankers were called to come forward for a beauty parade last week and an appointment is expected to be made by the end of today.

Those hoping to get a chance to flog the assets are thought to include Macquarie, Goldman Sachs, First NZ/Credit Suisse and Cameron Partners/Rothschild Australia and UBS - the former advisers to the Yellow Pages Group.

The investment bankers will be keen to get their hands on such a big deal after a dearth of major corporate action in the past six months. Even the debt raisings that kept the bankers busy last year have virtually dried up.

Commentators have put the value of the business at around $800 million to $1 billion - less than half the $2.4 billion it sold for in 2007. Stock Takes understands Australian telco Telstra has ruled itself out as a potential buyer but private equity buyers could be keen.

THE LONG WAIT

Tonight's predicted showdown at Guinness Peat Group's annual meeting may turn out to be less exciting than people expect.

New Zealand executive Tony Gibbs is up for re-election as is fellow director Ron Langley. But both are thought to be safe. Investors are hoping to hear details about a promised "value return" but Stock Takes fears they could be disappointed.

It's long been recognised that something needs to happen at GPG but it may be a while yet before anything goes ahead.

NICE NORGATE?

The market has been divided this week over the failure of Craig Norgate's Rural Portfolio Investments.

Views seem to be polarised, with some worried the collapse of the business could prompt Norgate to leave the country - a move that would be seen as a loss to the New Zealand business community.

But others have questioned why Norgate has been given such an easy ride given the amount of money his firm has lost on behalf of investors.

Business partner Baird McConnon has been quick to forgive Norgate saying the loss can be "absorbed" but Stock Takes wonders whether other investors are feeling so generous.

The largest single holder of RPI's financing arm Rural Portfolio Capital's preference shares is the RBS Group (NZ) which has around 17 per cent or close to $10 million.

But Custodial Services - an investment vehicle for the country's largest broker Craigs Investment Partners - also has a fair chunk.

Combining all its stakes together means Craigs sold around 21 per cent of the preferences shares to its clients or around $12.6 million.

AMBITIOUS GOALS

The recent capital raising by Craigs Investment Partners for its New Zealand Social Infrastructure Fund shows retail investors are far from ready to pile into the capital markets.

The fund managed to raise $41 million of the $50 million it was targeting but didn't touch the extra $75 million allowed for in oversubscriptions.

Asked why the fund had set oversubscriptions so high Peter Coman, who is in charge of managing the wider PIP Fund which NZSIF will invest into, said it based the figure on the advice of investment bankers. "Where we landed is a good outcome in this market," he says.

Coman also expects another $19 million to come in from other institutional investors that became interested after seeing the retail offer.

The PIP Fund has until October 29 to garner more support from institutions. It already has $100 million committed from the taxpayer-funded New Zealand Superannuation Fund.

JAIL LINE-UP

The fund has been set up to invest in public-private partnerships like the proposed Wiri Prison. But it's unlikely to be able to go it alone in the project, even if it manages to win the tender from the Government.

The prison is expected to cost around $500 million to build and the fund can only commit up to 25 per cent of its money to any one project.

Finance Minister Bill English said earlier this year that the Government was likely to make a decision on Wiri being opened to a PPP by mid-year.

Tenders are supposed to be fair game for anyone pitching, and a least one Aussie firm has said it's keen, but Stock Takes can't help wondering if the PIP Fund will have the political edge.

National campaigned heavily on getting the New Zealand Super Fund to invest 40 per cent of its $15 billion pot in New Zealand. It would be embarrassing for the Government to open up a chance for the Super Fund through PIP to invest in New Zealand only to give it to an Aussie contender.

SHOPPING SPREE

Retail guru Jan Cameron has increased her stake in children's clothing company Pumpkin Patch. Cameron, best known for her sale of Kathmandu to private equity buyers, now owns 9.64 per cent, up from 9.06 per cent.

Pumpkin Patch shares have almost doubled in the past year. This time last year they were trading at $1.21 and recently touched a high of $2.30.

Media-shy Cameron obviously believes they still have more to go. Pumpkin Patch is also expected to be one of the companies pitching itself at investors through the annual Macquarie conference across the ditch this week.

Kathmandu and Fletcher Building have already given their presentations with Kathmandu confirming predictions made in its prospectus. Pumpkin Patch yesterday closed up 1c at $2.14.

REGULATORY HEADWIND

The transtasman alliance between Air New Zealand and Virgin Blue doesn't appear to have flown well with investors this week.

Air New Zealand's share price has fallen in the wake of Monday's announcement which was tipped last week with a confirmation that the two airlines were in talks.

Shares touched a high of $1.40 on April 28 when news broke but have dropped by more than 10c since then.

Yesterday the shares closed down 2c at $1.27. Analysts have been split on the likely success of the deal given an alliance proposal between Air NZ and Qantas was squashed in the past.

The potential financial gains have also been questioned. Air New Zealand has said it expects to make a $20 million to $30 million gain on the deal.