Stock Takes: Salt into Pumpkin Patch

Di Humphries says she needs more time to turn Pumpkin Patch around after being at the helm for just seven months. Photo / Sarah Ivey

Fund manager Salt has used a slump in Pumpkin Patch's share price to snap up more shares in the stock.

Shares in the children's clothing retailer fell to an all-time low on Wednesday of 55c after the company announced a 98 per cent drop in earnings.

New chief executive Di Humphries has said she needs more time to turn the company around after being at the helm for just seven months.

Salt obviously believes that is possible. The fund manager which manages equities money on behalf of Westpac Bank has boosted its stake to 5.645 per cent.

It has invested $1.76 million in buying up shares in the business, paying an average price of 65.5c per share.

Pumpkin Patch shares closed on 55c yesterday.

More private equity floats?

News that Hirepool's ultimate owner, private equity company Next Capital, may float the company on the NZX this year has prompted Stock Takes to wonder if more private equity players may see the sharemarket as a good exit strategy for their investments.

Jarrod Murphy, a senior associate at Chapman Tripp who looks at merger and acquisition deals, says it's possible. "It is part of the broader confidence we're seeing in the market."

Murphy said when private equity players saw quality assets going well on the market it built confidence for those considering an initial public offer.

But he ruled out a return to the heady days of 2006 when private equity players snapped up assets in highly leveraged deals.

"It's unlikely we will see that kind of frenzy again in the near future."

Murphy said private equity buyers were taking a different approach to buying assets in the post-global financial crisis world and were unlikely to pay "over the odds" for them.

Hirepool could come to the market before June and is expected to have a market capitalisation of around $300 million.

Next Capital has hired Deutsche Bank/Craigs Investment Partners, Macquarie Capital and UBS to manage an initial public offer and NZX listing.

Late again

Diligent shareholders have punished the company again after it revealed it would be late with its annual report. Shares in Diligent, which has suffered from several governance and reporting issues, were trading about $4.40 before the news sank in that its report would not be out until April 30 - a month after the March 31 deadline.

By yesterday morning they had slipped 30c to open on $4.10. Diligent shares have halved in value since May last year when they traded as high as $8.20.

Diligent has blamed the delay on its financial accounts not being audited in time because of the work involved in restating its accounts from 2010, 2011 and 2012.

Shareholders will be hoping the filing of the annual report, when it does come, will be the end of its mishaps. Shares in Diligent closed on $4.25 yesterday.

Ryman expands

Ryman Healthcare's plans to build a further eight villages - five of them in Auckland - has done little to change Morningstar's view on the stock.

Analyst Nachi Moghe raised his fair value on the stock from $6 to $6.50 on Wednesday but still has a reduce recommendation on it due to overvaluation concerns.

"We believe the strong earnings growth is more than adequately factored into the stock price and valuations appear stretched at the moment."

Moghe expects Ryman to deliver underlying earnings growth of 15 per cent per annum on average until 2018 resulting in its net profits doubling from $100.2 million to $201 million.

But he said the current share price implied more than 18 per cent revenue and net profit growth during the next five years.

"While we don't expect the share price to plummet, a slowdown in the New Zealand housing market and/or missteps in Australia could be key negative catalysts that could weigh on the stock."

Ryman shares have risen more than 70 per cent in the past year and yesterday closed on $8.71.

Powering up

Shares in Mighty River Power, Meridian Energy and Contact Energy have all powered ahead this week after a Herald poll revealing support for Labour and leader David Cunliffe has fallen.

It's still six months away but political polls are pointing to a definite victory at the election for National, lowering the likelihood that the Labour/Greens will get in and introduce their single power regulator model.

Contact Energy shares traded as high as $5.38 on Wednesday, well up on the $5.22 they closed on last Friday. Meanwhile Meridian Energy has touched on $1.12, 1c higher than its highest closing price, reached days after its October 29 sharemarket float and well above its $1 issue price.

Mighty River Power is still languishing well below its $2.50 issue price but has traded as high as $2.12. Mighty River has been recovering ground in recent weeks after hitting a low of $1.945 at the end of January.

The energy stock surge bodes well for the pending float of Genesis Energy, although the Genesis float could see some sell-down in the other stocks as investors rebalance portfolios.

Free research

Retail investors will be able to get their hands on some free Genesis research from March 31.

The NZX will host or link to research by Edison, Woodward Partners and Fat Prophets on its website.

The general offer period opens to investors on Saturday week after a two-day bookbuild process is completed next Friday.

The final share price will be announced next Friday before the general offer opens to the public.

New Zealand's broking community is also widely expected to produce research on Genesis although it's unknown how much of that will be made free to the public.

Ward moves on

Long-time Tyndall Investment Management stalwart Rickey Ward has left the firm to move to JBWere. Ward, who was head of equities at Tyndall, finished up last Friday after 18 years with the firm.

Ward will head up JBWere's New Zealand equities team and will be responsible for setting the strategy and direction of the team.

Tyndall chief executive Peter Lynn said James Lindsay had stepped up in the meanwhile as acting head of equities while it hunted for a replacement for Ward.

Lindsay has been with Tyndall for 16 years.