Punters keen for repeat from Telstra

Happy novice investors are hoping to return for another killing in Mark II.


By Giles Parkinson

Sydney View


An old African proverb says "no one tests the depth of a river with both feet".

No one, that is, except for the million or so first-time punters in the likes of Telstra and the TAB, who are feeling pretty happy about life and their bank accounts right now.

Rule number one about sharemarket investments is to diversify.

Those who held on to their AMP shares are beginning to see the logic in that argument, but it is probably lost on the novice punters in Telstra, who made a killing and are probably ready to queue up for a good deal more in Telstra Mark II.

Even though there will be less than half the number of shares on offer, Telstra Mark II will raise more money than the first tranche - probably something over $16 billion - and will be the biggest public offering in the country.

On its coat-tails - both before and after its offering - will come a raft of other telecommunications floats such as Austar, which has already been launched, Hutchinson and Vodafone Australia.

Add another couple of dozen Internet offerings, including the likely new heavyweight, Fairfax Online, and the new financial year offers plenty of juicy possibilities for the profit-seeking punter.

A general belief has formed in the past two years that the easiest way to make a dollar on the sharemarket is through floats.

That has certainly been the case with most of the internet listings to date, although careful inspection shows that the people who obtained the best results stagged soon after the float.

Still, investors are lining up in numbers.

Kerry Packer's internet offering ecorp was 15 times oversubscribed by institutional investors.

Fairfax stock was snapped up after its management confirmed it was looking at a float of its internet business.

Spike sold nearly all its shares on the first day of issue to people who probably did not even bother to look at the prospectus.

But the enthusiasm for issues did not stop at new technology. The National Australia Bank's $1 billion offering of income securities was more than six times oversubscribed.

The best floats of the past year were naturally in the high-technology sector, with a couple of tiddlers that offered stock to little more than their brokers and some of their closest friends, more than doubling in value.

These included Pracom, Queste Communications, Telco and Bourse Data.

The best of the biggest was Cable & Wireless Optus, which managed to put on an 80 per cent gain for the investors who picked up $1.13 billion of its stock late last year.

The worst - and naturally so in these difficult times - included mining stock Tin Australia, closely followed by some ambitious property trust listings such as MTM Office Trust and the Wine Investment Fund, a wine float that became trapped in the sediment.

But there were big gains to be made in established companies as well.

For the record, the biggest gain of any stock over the past six months was posted by Silex Systems, whose boss last week snapped up the mansion of fallen entrepreneur Alan Bond.

The best of the top 100 came from Computershare, which tipped out Aristocrat Leisure and Qantas Airways, two stocks that would have figured a long way down a list of hot stocks at the beginning of the last financial year.

The continuing ascent of Computershare defies another rule of stockmarket investing - that it is better to invest in the previous year's worst-performing stock than the best-performing.

Computershare, however, has been pretty much the best-performing stock in each of the four years it has been listed on the market, which makes its three-fold gain in 1998-99 even more phenomenal.

Telstra Mark II would seem to offer the best of both worlds.

The federal Government will once again be keen to make sure that present Telstra shareholders are further rewarded for their loyalty and that the float is suitably attractive to bring in new investors.

The Government is likely to consider a special dividend, pro-rata entitlements for existing shareholders, a deeper discount for retail investors and, as in the first issue, the use of instalment receipts.

Professional investors are positively gushing about the prospects of Telstra, and probably need to be because they will all have to have plenty of the stock in their portfolio after the listing, which will propel the company to top spot in terms of market capitalisation and carry an index weighting of about 10 per cent.

* Giles Parkinson is deputy editor of the Australian Financial Review.