Share Investor

Hugh Fletcher: Silver spoon no recipe for success

2009-12-06T20:54:00.001+13:00

In an interview with Kim Hill on National Radio a few weeks back Fletcher Building Ltd [FBU.NZ] former CEO Hugh Fletcher gives his views on the history of the business and his time there.

Fletcher followed in the footsteps of his father and grandfather at what was then Fletcher Challenge. He remains a director of Fletcher Building to this day.

He is currently on the board of the Reserve Bank of New Zealand in 2002 and chairs the board of directors of IAG New Zealand and is a director at Vector Ltd [VCT.NZ], and a board member of Insurance Australia Group.

The interesting part of the interview is the glossing over by Hugh of his failure as CEO in the 1980s-1990s. Under his reign the company limped towards oblivion in the 1990s as failed expansion attempts led to the breakup of the company into 3 different divisions in 2000.

He made many enemies along the way, notably Sir Ron Trotter, Sir Ron Brierly and Dr Rod Deanne, a former director at Fletcher Challenge and failed former CEO of Telecom NZ [TEL.NZ].

A very interesting view from Mr Fletcher on the history of what is now Fletcher Building and it is ironic that the company went back to its roots in the building industry after its failure under the grandson of the founder.

It just goes to show, leaders and business are not born but made from hard work and ability and often separated from parentage.

Disc: I own a small FBU holding in the Share Investor Portfolio

Fletcher Building @ Share Investor

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From Fishpond.co.nz

The story of his family and their company is told in Fletchers: a Centennial History of Fletcher Building by Paul Goldsmith

c Share Investor 2009

Hanover, Allied Finance deal more of the same

2009-12-04T15:52:00.001+13:00

So the Hanover Finance "rescue" package proposed by Allied Finance has been given the big tick in an "independent report" by Grant Samuels . Well GS does reports on a number of companies and favour in its reports usually falls on the side of the party paying the cheque, so we can largely discount the GS report.

This is what it basically said though:

The Allied Farmers proposal is superior to the status quo and a high risk of receivership for Hanover Finance investors, according to Grant Samuel. NZ Herald

I happen to have an alternative view.

As I said back in November 2009 when Hanover proposed their moratorium, the best thing to do would have been to vote to wind the company up and get what you could get.

Hanover investors instead voted to give Eric Watson and his fellow fraudsters another chance and of course we now know that has blown up in investors faces just one year latter.

Investors in Hanover and United Finance, who Allied are also interested in buying, have the choice again to this time give directors at Allied a chance to get some money back on assets that are not likely to improve in value any time soon, in a property market that is uncertain at best or to simply bury their pride and vote to wind up the companies and get the best they can get at today's market rate.

I bet you Mark Hotchin's $35 million house in Paratei Drive that taking the money now rather than crossing your fingers for a recovery under future management will be the best bet.

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c Share Investor 2009

Share Investor's NZX Market Diary: 7 - 14 Dec 2009

2009-12-04T15:31:00.000+13:00

Share Investor's NZX Weekly Diary: New Zealand's most comprehensive and up to date earnings, dividend, company meetings, upcoming listings dates from the New Zealand Stock Exchange and its listed companies.

Weekly NZX Diary

Diary Dates

Monday, 07 December 2009 to Monday, 14 December 2009

Monday, 07 December
BBI - Babcock & Brown Infrastructure Name Change Ex Date
BRM - Barramundi Limited Ex Div 1.72 cps
CDN - Caledonia Investments Plc Ex Div 10.3 cps
HLG - Hallenstein Glasson Holdings Limited Ex Div 11 cps
IFT - Infratil Limited Ex Div 2.5 cps
ING - ING Property Trust Ex Div 1.875 cps
KFL - Kingfish Limited Ex Div 2.23 cps
KIP - Kiwi Income Property Trust Rights Cease Trading
MFT - Mainfreight Limited Ex Div 8.5 cps
NEW - New Image Group Limited Ex Div 1 cps
RYM - Ryman Healthcare Limited Ex Div 2.7 cps

Tuesday, 08 December
IMP - ING Medical Properties Trust Record Date Interim Dividend
ALF - Special Meeting

Wednesday, 09 December
FPH - Fisher & Paykel Healthcare Corporation Limited Record Date Interim Dividend
IMP - ING Medical Properties Trust Ex Div 2.125 cps
KIP - Kiwi Income Property Trust Rights Issue Application Date

Thursday, 10 December
FPH - Fisher & Paykel Healthcare Corporation Limited Ex Div 5.4 cps

Friday, 11 December
CVT - Comvita Limited Record Date Interim Dividend
SAN - Sanford Limited Record Date Final Dividend
SEK - Seeka Kiwifruit Industries Limited Record Date Interim Dividend
ZIN - Zintel Group Limited Record Date Interim Dividend
DEL - Annual General Meeting

Monday, 14 December
PGW - PGG Wrightson Limited Rights Cease Trading
CVT - Comvita Limited Ex Div 2 cps
SAN - Sanford Limited Ex Div 14 cps
SEK - Seeka Kiwifruit Industries Limited Ex Div 10 cps
ZIN - Zintel Group Limited Ex Div 2.5 cps

Upcoming Dividends

Ex dates from Friday 27 November to Friday 11 December

Code	Company	Period	Ex Date	Amount*	Currency	Imputation Credit*	Payable
WFD		Interim	30 Nov	8.00	NZD	3.9403	04 Dec
CYTPA		Interim	30 Nov	0.19	NZD	0.0000	30 Nov
CAV		Interim	30 Nov	3.00	NZD	1.4776	11 Dec
TPW		Interim	30 Nov	19.00	NZD	6.0000	11 Dec
KIP		Interim	01 Dec	3.75	NZD	0.7500	18 Dec
HED		Interim	01 Dec	8.00	NZD	3.4286	07 Dec
GMT		Interim	04 Dec	2.13	NZD	0.0645	17 Dec
RYM		Interim	07 Dec	2.70	NZD	0.0000	11 Dec
KFL		Interim	07 Dec	2.23	NZD	0.1376	18 Dec
CDN		Interim	07 Dec	10.30	GBP	0.0000	07 Jan
HLG		Final	07 Dec	11.00	NZD	5.4179	11 Dec
NEW		Final	07 Dec	1.00	NZD	0.4286	18 Dec
IFT		Interim	07 Dec	2.50	NZD	1.0714	11 Dec
BRM		Interim	07 Dec	1.72	NZD	0.0000	18 Dec
MFT		Interim	07 Dec	8.50	NZD	3.6429	11 Dec
ING		Interim	07 Dec	1.88	NZD	0.1990	18 Dec
IMP		Interim	09 Dec	2.13	NZD	0.2307	22 Dec
FPH		Interim	10 Dec	5.40	NZD	2.3143	18 Dec
* cents per share

Upcoming Listings

	Company Name	Security Code	Issuer Code	Market	Listing Date
	University of Canterbury	UOC	UOC010	NZDX	07/12/09
	GMT Bond Issuer Limited	GMB	GMB010	NZDX	16/12/09
*	DNZ Property Fund Limited	DNZ	DNZ	NZSX	17/12/09
+	BioVittoria Limited	BIV	BIV	NZSX	18/12/09
*	TrustPower Limited	TPW	TPW080	NZDX	23/12/09
*	TrustPower Limited	TPW	TPW090	NZDX	23/12/09
	Auckland International Airport Limited	AIA	AIA100	NZDX	TBC

Upcoming Result Announcements

Nothing expected

New Zealand Companies - Meeting Dates

Tuesday, 01 December 2009 to Tuesday, 09 February 2010

	Issuer	Type	Date	Location	Time

	Wool Services International Limited	AGM	01/12	The Fairway Lounge, Russley Golf Club, 428 Memorial Ave, Christchurch	2.00pm
	Delegatâ€™s Group Limited	AGM	02/12	The Guineas 1 Room, Ellerslie Convention Centre, Ellerslie Racecourse, 80-100 Ascot Avenue, Greenlane, Auckland	2.00pm
	Scott Technology Limited	AGM	02/12	Scott Technology Limited, 630 Kaikorai Valley Road, Dunedin	4.00pm
*	Allied Farmers Limited	SGM	08/12	Hawera Community Centre Memorial Theatre, Albion Street, Hawera	11.00am
+	Dairy Equity Limited	AGM	11 12	Craigs Investment Partners, 158 Cameron Road, Tauranga	11.00am
	Windflow Technology Limited	AGM	16/12	Mancan House, Corner Cambridge Terrace & Manchester Street, Christchurch	7.30pm
	Hallenstein Glasson Holdings Limited	AGM	17/12	The ChÃ¢teau On The Park, Christchurch	9.30am
	NZ Windfarms Limited	AGM	18/12	TBA	TBA
*	Affco Holdings Limited	AGM	28/01	The Kingsgate Hotel, 100 Garnett Avenue, Hamilton	TBA
*	TOWER Limited	AGM	09/02	The Ellerslie Event Centre, 80-100 Ascot Avenue, Greenlane East, Auckland	10.00am

NZSX & NZAX Markets	Normal trading	Abbreviated trading
Enquiry:	8.00am - 9.00am	8.00am - 9.00am
Pre-open:	9.00am - 10.00am	9.00am - 10.00am
Normal Trading:	10.00am - 4.45pm	10.00am - 3.45pm
Pre-close:	4.45pm - 5.00pm	3.45pm - 4.00pm
Adjust:	5.00pm - 5.30pm	4.00pm - 4.30pm
Enquiry:	5.30pm	4.30pm
NZDX Market
Enquiry:	8.00am – 8.45am	8.00am – 8.45am
Pre-open:	8.45am - 9.00am	8.45am - 9.00am
Normal Trading:	9.00am - 4.45pm	9.00am - 3.45pm
Pre-close:	4.45pm - 5.00pm	3.45pm - 4.00pm
Adjust:	5.00pm - 5.30pm	4.00pm - 4.30pm
Enquiry:	5.30pm	4.30pm
Settlement
Start of Settlement:	9.30am	9.30am
Funds Cut-off:	4.00pm	3.00pm
Registry and FASTER systems close-off:	6.00pm	5.00pm

Market holidays & abbreviated trading days for 2009
New Year's Day: Thurs, 1 Jan	Closed
New Year's Day Holiday: Fri, 2 Jan	Closed
Waitangi Day: Fri, 6 Feb	Closed
Thur, 9 Apr	Abbreviated Trading
Good Friday: Fri, 10 Apr	Closed
Easter Monday: Mon, 13 Apr	Closed
ANZAC Day: Sat, 25 Apr	Closed
Queens Birthday: Mon, 1 Jun	Closed
Labour Day: Mon, 26 Oct	Closed
Thur, 24 Dec	Abbreviated Trading
Christmas Day: Fri, 25 Dec	Closed
Boxing Day: Mon, 28 Dec	Closed
Thur, 31 Dec	Abbreviated

Related Links

Share Investor Blog - Stockmarket & Business commentary
Share Investor New Zealand Business News- Get more business news
Share Investor Forum - Discuss NZX listed companies

Security Analysis: The Classic 1934 Edition by GRAHAM
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c Share Investor 2009

Warehouse strike opportunity to buy

2009-12-03T07:52:00.003+13:00

News earlier this week that less than a third of The Warehouse Group [WHS.NZ] workers will go on strike because they see the company as the big bad Christmas Grinch is bad short term for the company because it comes at a time of year when the bulk of their sales and profit is made but it is nonetheless another opportunity for people like myself to load up on the Christmas bargain that Warehouse shares could become if the industrial dispute drags on.

"Project Invigorate" the Warehouse' initiative to streamline and save costs includes the ability for management to direct workers into more flexible hours and conditions. Approximately 7500 staff work at the big red sheds and the bulk of the staff, who are not unionised, agree with management and so don't have a problem.

As I said above the short term prognosis if a strike is called and it drags on means that sales and profit for the next reporting period will be down but in the long term savings from increased labour flexibility along with logistics changes and inventory tweaks will mean bigger profits and more dividends for owners like myself and clearly that aint a bad thing.

The company is getting bad press in the mainstream media and they are largely behind the union from what I have been reading but below is typical of some of the coverage:

"All the staff were happy in their job. The managers used to be more flexible with the hours, they understood our personal circumstances, they used to work around our lives instead of us trying to work around the company's life. NZ Herald

I mean hang on a sec, don't you realise your boss is employing you ! at a time when economic circumstances are tough.

While I am for treating workers well, one has to realise that the company is there to make money and while you are an important part of that the company deserves the right to do what it sees fit to run their business.

The majority of Warehouse employees agree with management and only a handful of workers whipped up by a socialist union are pissing in the wind.

Time for them to go elsewhere get another job and let us run the company how we see fit.

With every cloud though there is a silver lining. I will be poised to buy if the share price drops.

Thanks to the Union for that.

Warehouse shares dropped 10c yesterday on the news and my interest will be piqued at around the $3.75 mark.

The Warehouse Group @ Share Investor

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c Share Investor 2009

Mike Pero and Air New Zealand: Capitalism vs Socialism

2009-12-01T07:42:00.004+13:00

The fuss made by Air New Zealand [AIR.NZ] over Mike Pero's generous offer last week to provide a plane for families of victims of the 1979 Mt Erebus crash to visit the crash site has come to a head today when Air New Zealand seems to have relented because of embarrassment over a pitiful 6 individuals allowed to go to the site for the 30th anniversary of the crash last week.

The pilot of the fateful Air New Zealand DC10 that killed 257 people was blamed by Air New Zealand management at the time for the crash but evidence was clear that the fault lay first and foremost at Air NZ's feet and that management lied and covered up to rescue the company reputation.

It seems Rob Fyfe and his fellow board members have learned little over the years.

The company that he runs, which is majority owned and financially supported by Kiwi taxpayers has had a history under Fyfe's ownership of socialistic tendencies. That is, its CEO Fyfe has muttered that his company needs more taxpayer moola to run it, using fake science to attack competitors and making public comments that really shouldn't be made by a CEO in a publicly listed company.

Air New Zealand is to all intents a government department and it is run that way.

You can see that in its response to Mike Pero's offer to get a charter plane up to Erebus. Pero made the offer, Air NZ was "offended" by it, then changed its mind and now wants to do it itself, with taxpayer money - pure politics in operation and nothing else.

The failure by Fyfe at the top to be proactive and supply a plane for as many family members of victims who wanted to go is the real story.

Of course the fact that Jim Collins, the pilot of the 1979 flight, hasn't been publicly vindicated is the biggest shame of all and politics is again to blame for that.

As taxpayers, we are all Air NZ shareholders and we should all be angry about that. Those that have made a choice to buy Air NZ shares on the NZX should be seriously looking elsewhere to make money - this company aint going anywhere good in the long-term.

I salute you Mike for standing up to the mediocrity of socialism and using your fine capitalistic skills to try and make a difference for "victims" of the Erebus disaster.

Lets hope you go ahead with the flight. I know which flight I would rather be on.

Air New Zealand @ Share Investor

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c Share Investor 2009

Stock of the Week - Reprise: Contact Energy Ltd

2009-11-30T07:54:00.003+13:00

Contact Energy Ltd [CEN.NZ] was a Stock of the Week pick back in June and I picked it then because the share price was heading below 6 bucks and there seems to be some resistance to the stock price falling too far past the $5.50 mark and that is why I have included it again.

The stock has retrenched below $6 4 times this year and has always retraced back above that mark. As high as just over $6.50 on one occasion.

A good stock for you short termers out there and a good opportunity for those of you looking for a good company on the cheap for a long-term proposition.

I must repeat though that management of this company is poor but even a monkey running this company can make money.

Could go lower than its current $5.84, with a low this year of $5.47.

Buy on further weakness if this stock has been on your watchlist.

Contact @ Share Investor Blog

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Stock of the Week Series

Restaurant Brands
NZ Refining
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Rod Oram: On the Prius to Obscurity

2009-11-28T00:35:00.006+13:00

Let me just say that Rod Oram is probably a very nice guy if you get to know him on a personal basis. There my praise for him ends however.

Mr Oram has the distinction of being widely published, I do not. He is influential because of that, I am not.

His business columns are syndicated by the left wing media and snapped up by an unsuspecting and intellectually lazy New Zealand public because the alternative means you have to have the ability to think and reason rather than soak up garbage like a wet liberal sponge.

Because of this and his views about so-called "global warming" he is also a very dangerous person, as are all advocates of GW in all their various political colours and stages of delusion.

The GW agenda is being pushed as a means of control, higher taxes and will be fatal for business and the global economy when emission trading schemes inevitably collapse in a heap of harmless (in terms of the gas not the fallout for the global economy) carbon dioxide.

Last week, evidence of fraud, lies and cover-ups from the GW pushers themselves - via leaked emails and better known as Climategate - was uncovered that should completely blow GW and its followers out of the water but Rod Oram chose to ignore this last Sunday when yet another diatribe from him about GW pushed the line that he keeps trying to sell his readers - that GW is the most important thing since that first atom exploded quite some time ago and you better be on board the GW Prius or by god you will not be the chosen one and you are gonna go straight to hell in your Range Rover Vogue.

In New Zealand NIWA has been fudging figures to suit their purposes and Mr Oram would be aware of this.

Why then does he continue to push this line?

Is he stupid? I don't think so.

Is he ignorant of the facts? Surely he cant be? He has Google on his computer and can read the scientific evidence against GW.

Does he have an agenda? Like most of us, yes he does, but his agenda is hidden under reams of Climate-babble.

But why?

Well, like most other proponents of GW there is a question of dirty filthy capitalistic profit ( Oh you are such a sarcastic bastard Darren! ) One can only imagine then that for Mr Oram it is also about money.

Al Gore, the number one peddler of the GW myth has become very rich from his connection to the GW religion and the conflicted business interests that he invests in.

We know Mr Oram offsets his "Carbon Footprint" by buying carbon credits when he jets off to the next GW conference in Brazil, London or Wairoa and we also know he pushes "Green Technology" and a fancy new way to run the global economy - see "Green Jobs" for an explanation - at every opportunity.

How much money does Mr Oram have invested in the "Green Economy", an "economy" that relies upon the GW machine to continue to function regardless of the fraud on which it is clearly based?

We don't know but I challenge Rod to come clean and let us know in one of his future columns on this topic just what financial interest he has in keeping the GW windmill spinning.

Until then anything he writes should be viewed with a least suspicion and at worst contempt.

I am convinced that contempt is the most appropriate adjective for him and he deserves the obscurity he so clearly craves as the thread continues to unwind on the emperors clothes.

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c Share Investor 2009

Kiwi Income Property debt levels should be a worry to investors

2009-11-27T17:01:00.000+13:00

I only have 1000 Kiwi Income Property [KIP.NZ] shares so the outcome of decisions made by management has little material effect on me but it is well worth noting their recent plethora of capital raising attempts over the last few months.

Back in April they raised $50 million in an institutional and shareholder offer for additional shares and just recently I received a very glossy (and no doubt expensive) prospectus asking for an additional $125 million from shareholders.

Now I am not against companies raising capital from time to time, it is part of being a shareholder, but the dilution for shareholders if they don't take up the offer is something that cannot be ignored.

The high debt levels are a worry too in an economy that is yet to bottom.

The company has massive debt levels of almost NZ$1 billion which is just slightly half of the value of the assets on its books - assets that are worth $200 million less than last year and are likely to be worth even less next year as the commercial property sector comes under more pressure due to a business slowdown and less rental activity.

Management of various assets has also been a little lax to say the least with a building in Wellington, BP House, only being offered for sale to one interested party when there were others sniffing around - very strange.

The over-reliance on one property for income - Sylvia Park Shopping Centre - and the spending of shareholder capital to continually expand it could also be a concern if the retail sector continues to slide as it has over the last 18 months.

I am starting to backslide on my reasons for buying in the first place and regret my purchase - be it ever so small - I don't like losing money and fear I will with this one if their debt levels overwhelm their asset values, shareholders run out of money to prop it up and institutions lose interest.

KIP Shareholders please keep an eye out for your investment over the coming year.

As a footnote, and it really needs to be said even though it is probably obvious, I did not participate in the April capital raising and will not involve myself in the latest money grab.

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c Share Investor 2009

Sky City to focus on Gaming

2009-11-24T20:42:00.007+13:00

I was going to write about something completely different today but that can wait.

Something I have been writing about for years 1 2 3 has finally happened at Sky City Entertainment Group [SKC.NZ]. They have ditched their money losing Sky City Cinema Division.

CEO Nigel Morrison hinted at it in an interview I did with him back in September:

SI - The SkyCity Cinema division has always been a challenge, to put it mildly. How do you see its fit within your gaming assets given its poor operating history and low to negative returns over a long period?

NM - As I’ve always said since my arrival at SKYCITY, I don’t believe that SKYCITY Cinemas is a core division of our Group. Our Cinemas team, led by Jane Hastings, has done a good job turning around this division in 2009 and we are looking for better performance again in 2010.

He was a little more revealing off the record at the time but either way this Sky City shareholder is very happy about the news.

With the dropping of the cinema division the company will now be able to focus on the casino assets that made the company a shareholder favourite in the 1990s until early 2000s when this asset started to suck money out of the company and the attention of directors and the former CEO Evan Davies.

They are getting NZ$59 million (subject to due diligence and regulatory approval) from Australia based cinema operator Amalgamated Holdings Ltd [AHD.AU] and the good news is that this excludes land and leases held by the company. Presumably this means that if sold in a February deadline Amalgamated will be paying rentals to Sky City - such a lovely thought!

The cinema division was bought for a total of just north of NZ$100 million years ago and was completely written off on the balance sheet 2 years back, so the realisation of nearly $60 million, plus hanging onto assets in the company actually worth something (the cinemas as such made no money) is a great outcome for the company and its long suffering shareholders.

The only decision to be made now is whether the proceeds of the sale will be used to pay down additional debt or distributed to shareholders as a special dividend - I would support the former.

Sky City shares rose 3c in a down market on larger than average volume on the news, indicating that the market has been looking forward to this result.

Disclosure: I own SKC shares in the Share Investor Portfolio

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Long Term Play: The Warehouse Group

2009-11-23T07:22:00.007+13:00

I grabbed another 7000 shares of The Warehouse Group [WHS.NZ] back in July when the price came down below 4 bucks. That was for my long term portfolio.

I gave my readers the heads up back in September that there was short term money to be made by buying WHS stock at just over 4 bucks those that took up the offer would have been able to make a good 10% on their money in a few weeks if they timed things right.

The Warehouse share price hit $4.08 at close of business on the NZX last Friday (see chart above) after ditching its dividend the previous week and this investor is watching closely again for the share price to drift back below his buying price barrier so he can add more stock to his portfolio.

First quarter sales have stabilized and a slight rise is apparent for whatever reason.

The stock is a good yield play with over 6% gross PA return on current shares prices and dividend payouts, so it beats term deposits hands down which currently languish at just over 5%.

My interest is clearly going to be piqued at closer to the $3.72 I paid for additional stock in July and I am going to have to use borrowed money this time to secure any possible purchase.

The revolving credit line I have sits at 5.5% floating so when imputation credits are added I am still up on any possible deal.

I am looking at adding 5000 more to take my long term holding to 20000.

The Warehouse Group @ Share Investor

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Woolworths seek leave to appeal to Supreme Court
Warehouse appeal decision imminent
Warehouse decision a loser for all
Warehouse Court of appeal decision in Commerce Commission's favour
MARKETWATCH: The Warehouse
The Warehouse takeover saga continues
Why did you buy that stock? [The Warehouse]
History of Warehouse takeover players suggest a long winding road
Court of Appeal delays Warehouse bid
The Warehouse set for turbulent 2008
The Warehouse Court of Appeal case lay in "Extras" hands
WHS Court of Appeal case could be dismissed next week
Commerce Commission impacts on the Warehouse bottom line
The Warehouse in play
Outcomes of Commerce Commission decision
The fight for control begins soon

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From Fishpond.co.nz

NEW! "Letters to Aston: Lessons Learned from a Lifetime of Investing" by Martin Hawes

c Share Investor 2009

Are we there yet?

2009-11-20T16:35:00.000+13:00

Has the stockmarket and wider economy in New Zealand and abroad made a recovery as many commentators have pitched or are we in the middle of something that we don't really have any idea about what will happen?

Well, it depends on who you read, watch or listen to.

I am of the strong opinion that in New Zealand we are in a middle of a downturn that could go either way depending on the reactions to economic conditions.

So far that has included pumping large amounts of borrowed moola into financial institutions and other quasi Government diaspora in order to smooth out the financial bumps and "rescue" us from the worst parts of the recession - the opposite of what we should have done and what got us into the economic toilet in the first place.

This has kinda worked if one doesn't go deeper than a politician looking in the mirror but of course it really is a false economy because in order for a sustained crawl back into the black these "stimulus" packages need to continue and in order for that to happen we have the have the Chinese saver ready and willing to continue to have their savings plundered in order for our emperors keep their clothes.

Is that going to happen? clearly not and when we stop gorging off the hard work of the Asian region we have to eventually pay them back and that is when the hard part comes.

All our money going into paying back what we owe not on stimulating the economy, boy its a circular thing aint it?

Many will know that I am of the opinion that those that took the big risks (individuals and institutions) and made the big money should have been left to fail, for that is the natural order of things and of course teaches good life lessons along the way. If we had left things to collapse we would be on a sure upwards trend in terms of the economy and not the present shaky, socialist type unsureness that we currently find ourselves wallowing in.

Our bailouts, stimulus packages and taxpayer funded car and house purchasing is simply delaying the inevitable downturn. When that happens I do not know but it will and will make the current financial melee look like a walk in the park by comparison.

We will get to our destination in the end though, wherever that is.

Recent Share Investor Reading

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From Fishpond.co.nz

c Share Investor 2009

What Infratil sale of Auckland Airport stake means

2009-11-13T17:02:00.000+13:00

The sale of Infratil Ltd [IFT.NZ] 3.87% stake in Auckland International Airport to institutions [AIA.NZ] 3 days ago at first look might not seem good news for existing shareholders.

All is not lost however!

Infratil management state that their reason for selling was "consistent with recent capital management initiatives and provided additional flexibility to fund current and future opportunities".

That means they pretty much took a bath on their short term punt on the airport being sold 2 years ago and when the brakes were put on it by the outgoing Labour Government they held on for too long.

Of course another port sale could be way off in the distance but an investigation into the relaxing of the rules of "sensitive strategic" assets by the National Government earlier this year means that this would be more likely given another bid for the airport.

What is more important to Auckland International Airport shareholders is that the company is doing OK during the current downturn -stagnant profits are all the rage - and is likely to do significantly better in the long term.

The Canadians and Arabs were willing to pay 100% more than the current share price (oh that seems so long ago) so there is still value left in the near monopoly company that is the Auckland Airport.

And that fellow shareholders is the way you should be looking at the Ifratil sale.

Disclosure: I own AIA shares

Auckland International Airport @ Share Investor

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c Share Investor 2009

Stock of the Week: Ryman Healthcare Ltd

2009-11-10T07:25:00.001+13:00

Ryman Healthcare [RYM.NZ] is a stock up there with Fisher & Paykel Healthcare [FPH.NZ] in terms of possible long term gains.

In my opinion it will grow revenue and profit for many years to come.

The reasons I have included it in this week's Stock of the Week are its long term prospects and the fact that I still think it is cheap stock at current prices.

The elder care sector that Ryman competes in has been growing for the company at a rate of 20% per annum for the last 10 years and shows little sign of abating. In fact current growth rates could look quite modest in comparison to future growth.

Demographics show that in the future the elder population that will need such care that companies like Ryman provide will increase by around 150% over the next 20 years or so.

The stock has been cheaper over the year at a 52 week low of NZ$1.14 but at a $1.97 close yesterday and an all-time high of Over $2.70 at its peak, considering its potential growth this still makes Ryman a good long term stock.

Buy on any weakness if this stock is for you.

Good luck!

Disclosure: I own RYM and FPH shares

Stock of the Week Series

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Ryman Healthcare @ Share Investor

Why did you buy that stock? [Ryman Healthcare]
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c Share Investor 2009

Kathmandu IPO: Shares set for discount

2009-11-09T07:25:00.002+13:00

According to a Bloomberg story the Kathmandu Holdings [KMD.NZ]IPO looks set to be oversubscribed, indicating that either this is the best IPO since IPOs were invented or that investors have failed to look close enough into the prospectus for the numerous omissions and sleights of hand made by current owners Milford fund shareholders and their associates and decided there is money to be made.

If the Myer float last week is anything to go by Kathmandu is going to begin trading at a deep discount when the shares begin trading on the NZX and ASX in late November.

Myer Holdings Ltd [MYR.ASX] shares were dumped as institutions holding stock soon realised they couldn't stag the issue and began to sell off.

Those patient investors wanting to get Kathmandu shares may get them for closer to their worth if they are willing to wait a while and let Mr Market decide what the company is worth.

KEY DATES

Prospectus date Friday, 23 October 2009

Retail Offer opens Tuesday, 27 October 2009

Retail Offer closes 5:00pm AEDT/NZDT, Friday, 6 November 2009

Institutional Offer and Institutional Bookbuild opens Tuesday, 10 November

Institutional Offer and Institutional Bookbuild closes Wednesday, 11 November 2009

Pricing and allocation announced Thursday, 12 November 2009

Expected commencement of trading on ASX (conditional and deferred settlement basis)
and on NZX (conditional settlement basis) Friday, 13 November 2009

Institutional Offer settlement and last day of conditional trading Tuesday, 17 November 2009

Shares expected to begin trading on a normal basis on NZX Wednesday, 18 November 2009

Expected despatch of holding statements and any refund payments if required Thursday, 19 November 2009

Shares expected to begin trading on a normal settlement basis on ASX Friday, 20 November 2009

Kathmandu @ Share Investor

Kathmandu IPO: Prospectus Analysis
Kathmandu IPO: Jan Cameron lands a blow to IPO
Kathmandu IPO: What is it worth?
Kathmandu IPO: Retail Interest High
Kathmandu IPO: A tough mountain to climb
Kathmandu No.1 but IPO should get the Bullet
Download the detailed Kathmandu Value Cruncher Report - Requires free registration at Share Investor Forum to download
Download Kathmandu IPO Prospectus

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c Share Investor 2009

Has Warren Buffett Gone Nuts?

2009-11-06T19:52:00.000+13:00

Make no mistake, I am a big fan of Warren Buffett. I follow his investment style in my own Share Investor Portfolio as faithfully as I can given my individual circumstances and background and have followed his fortunes closely in the years that I have known about him but I think he has gone a little nuts over the last year or so.

The past 12 months of financial turmoil has seen saturation coverage of the billionaire as he professes to be "Buying American", doing very large deals to buy stakes or debt in Harley Davision, Mars/Wrigley, Goldman Sachs, Tiffany, a whole host of other stocks and his latest coup de grace, the full takeover of Burlington Northern Santa Fe, the large North American railroad freight mover.

His media over-exposure on its own seems a little desperate but the move on Burlington seems a little over the top considering he seems to be paying full price for the company, something he usually tries to avoid.

This deal will be Buffett's Berkshire Hathaway largest deal ever to take full control of the 77% of the company it doesn't already own and comes on top of news that his company will do a 50:1 share split of its "B" listed shares, something that Buffett has talked against for as long as he has run Berkshire.

None of these things on their own -with the exception of the Burlington purchase - indicate anything else other than looking to buy a "bargain" during the current economic downturn but the latest large purchase just seems to smack of putting it "all in" in an attempt to score the big one. Something he has done many times successfully in the past.

I know alot less than Buffett about the rail freight business, it may be a great long term purchase and there could be an ulterior motive to the move apart from the freight business but if you pay too much for an asset, well that is something Buffett has written books about. He normally wouldnt do it.

He really has me a little worried about the real state of affairs of the current financial turmoil. It is worse than what most would have us believe but Warren's actions smack of a man who knows that things could be alot worse.

Warren Buffett @ Share Investor

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Kathmandu IPO: Prospectus Analysis

2009-11-01T03:57:00.000+13:00

Right from the get go the Kathmandu IPO Prospectus (Requires free registration at Share Investor Forum to download ) is all about the flash, the sheen, the image and impact of the Kathmandu brand - at first glance the document looks more like a catalogue for their product rather than a prospectus - and to be sure the brand is part of what the present owners are selling and it is a great loyally followed brand but what of the bones, the inside, the guts of the company, how are they selling prospective investors that?

Well in short the present sellers are not telling investors the full story. Pro Forma figures - figures based on an "as if" scenario rather than reality - are used throughout the document.

Pro-forma figures do not show investors the true state of a companies books and this alone should have prospective investors running for the hills (without a Kathmandu backpack).

I will go on however.

For example pro forma sales figures from 2007 and 2009 indicate that in 2007 Kathmandu sales were $A151.4 million and in 2009 A$215 million and respective store numbers were 58 and 82. That works out roughly the same level of sales per store for each of these years. Very hard to get this sort of consistency in any sector of the economy, least the retail industry. These particular figures have clearly been manipulated or "smoothed" to make things look good and we can safely assume this for other comparisons made. This makes the figures misleading to say the very least.

It is pointless to make any further comment about the prospectus' other figures or comparisons used except to say they cannot be trusted.

Some more key points but they rank in far less import for potential investors than do the inclusion of pro forma figures to make comparisons year to year to sell the company.

1. management are more than halving their stake - not alot of faith there in the company and they are insiders!

2. $85 million in debt to be paid off - not a high figure considering indications that debt in July 2008 was more than double that.

3. IPO costs of more than $15 million, far too high.

4. Investors will not know how much their application for shares will cost them until after the IPO has closed. At NZ$2.01 - $2.32 per share a large range in price exists.

5. A major emphasis throughout the prospectus on growth through increases in store numbers - an expensive way to grow and to be fueled by more company debt or perhaps additional capital raising from shareholders.

6. Omitting financing costs and essential financial data like historical NPAT.

I was skeptical of the Kathmandu IPO before perusing the prospectus but after reading it I have come to the conclusion that this IPO is a complete and utter stinker.

Too much emphasis is on the media grabbing sexy Kathmandu brand and not enough on what is important when an investor needs to make a wise decision - full, frank and accurate financial statements and not pro forma monopoly style accounts that are only fit to wipe your bum with.

I am appalled at the gall of the present owners, the accounting firm signing off on pro-forma accounts and the NZX for allowing this kind of bullshit and calling it sufficient disclosure pre-IPO.

I could be wrong and this IPO could be the best listing since Coca Cola but investors cannot tell that from reading disclosures in the prospectus with accuracy what sort of condition Kathmandu the company is in - why are the present owners playing shell games with investors one would have to ask?

If you sink your money into this one you deserve to lose it.

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Kathmandu @ Share Investor

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Kathmandu IPO: What is it worth?
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Kathmandu IPO: A tough mountain to climb
Kathmandu No.1 but IPO should get the Bullet
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Download Kathmandu IPO Prospectus

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c Share Investor 2009

Kathmandu IPO: Jan Cameron lands a blow to IPO

2009-10-30T17:05:00.000+13:00

I have been covering the Kathmandu IPO over the last few weeks and am working on the prospectus in between changing nappies and trying to get some sleep.

News out today that Jan Cameron, former owner of Kathmandu, will set up her own outdoor clothing chain in New Zealand and Australia is clearly bad news for the IPO:

Now she has revealed she is well advanced in plans to set up an outdoor clothing business of 60 stores - 30 in New Zealand and 30 in Australia - to compete with Kathmandu next year. She said she was earmarking A$27 million for the venture.

She was even dismissive of the Kathmandu model of regular 50 per cent off sales.

"I imagine that if we are offering a similar product at competitive prices, at everyday low prices, around 50 to 60 per cent lower than Kathmandu, I imagine that might be quite attractive," she said. "I really love the product and the industry and I see an opportunity with a different model.'' More at Stuff.co.nz

Cameron is an individual not to be underestimated when it comes to competition. She has made a career out of buying cheap assets and making money from them and her retail prowess when it comes to starting a business is almost unparalleled.

She recently bought up large stakes in Pumpkin Patch Ltd [PPL.NZ] Postie Plus Group [PPG.NZ] and purchased cheap retail sites in Australia abandoned by The Warehouse Group [WHS.NZ] a few years ago and set up a cut price chain.

Her move back into outdoor retailing will affect the value of the Kathmandu IPO to investors because of the direct competition with her old company.

All the figures contained in the prospectus, on which the value of the company is based, are now largely academic due to the new entrant and prospective investors will now have to reassess their position as they contemplate writing out their IPO cheques.

Disclosure: I own PPL and PPG shares.

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What is Jan Cameron up to?

Kathmandu @ Share Investor

Kathmandu IPO: What is it worth?
Kathmandu IPO: Retail Interest High
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Download Kathmandu IPO Prospectus

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c Share Investor 2009

Kathmandu IPO: What is it Worth?

2009-10-26T06:52:00.001+13:00

I have given you my opinion of the Kathmandu IPO on a number of occasions, based on my knowledge of the company from media circles and from the downturn in economy as a whole as it affects retailing.

It is however good to get other views from people with different opinions and ValueCruncher.com has done an analysis based on 3 different scenarios that is very interesting:

Valuecruncher has completed a base case valuation and three separate scenarios for Kathmandu. The first scenario (EBIT 8%) assumes EBIT margins of 8% against 10% in the base case. The second (Growth 5%) assumes 5% growth not the 10% of the base case. The third (CAPEX $40m) assumes CAPEX of NZ$40m compared to NZ$30m in the base case.

This base case and three scenarios give an enterprise value range of NZ$354 million to NZ$460 million (8.9 to 11.5x estimated 2009 EBIT). Valuecruncher gave a 25% weighting to each scenario which gives a NZ$411 million valuation (10.3x estimated 2009 EBIT). This NZ$411 million is our mid-point valuation of Kathmandu. See Valuecruncher for more

Valuecruncher have given this alot of thought but in my opinion their models, while giving 3 possibilities of value for the company, seem too positive given the global economic outlook.

Indications have been that sales at the company have been down, so a prospective investor needs to assume the worst in the current economic climate and that means no growth at all or indeed going backwards.

Debt levels are also largely discounted in the VC model, and as many have commented, debt levels were high over a year ago at more than $NZ180 million and the majority of IPO money is going to the former owners, not to be used within Kathmandu itself.

In addition more capital will be needed to fund the aggressive growth plans that management have.

To be fair Valuecruncher's estimates, as they point out, are based only on publicly known information, excluding the prospectus, so their estimate of value, like mine, is a bit of an educated punt.

We will look at the Kathmandu IPO prospectus - Requires free registration at Share Investor Forum to download

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c Share Investor 2009

Kathmandu IPO: Retail Interest High

2009-10-23T17:02:00.002+13:00

I have to say I am very surprised by the level of interest in the Kathmandu IPO.

This comes after confirmation of the IPO where Kathmandu will offer between 166.9 million and 197.4 million shares or 84-99% of the issued capital to investors. The IPO will be valued at between $A1.65 and $A1.90 ($NZ2.01 – $NZ2.32). This will raise a total of between $NZ338.6 and $NZ457.2 million.

Economic circumstances as they are at present would at first thought be indicative that there was no money around.

As I pointed out a few weeks ago Google searches that have reached this blog with "Kathmandu" as the search subject were gathering pace.

I can inform my readers that the level of interest in this subject has at least tippled since then with a record being set for readership for the Share Investor Blog.

As before the interest comes mainly from New Zealand and Australian readers.

This level of interest shows that at retail level investors are possibly ready to take some risk again after being burned in the sharemarket and that there is spare cash around to invest.

Having said that it could just be curiosity for a major recognized brand that will end in disappointment for the company as happened with the Burger Fuel IPO in 2007.

Kathmandu has aggressive expansion plans in Australasia with the possibility of 70 stores being opened over the next 3 years.

It looks like then a large part of the IPO funds will be spent on expansion rather than paying down their very large debt - disappointing in the current economic squeeze and folly considering that same store sales and overall company profit is down.

The IPO opens on October 27 and closes on November 6 and the shares will then begin trading on the NZX on November 18.

Investors interested in buying Kathmandu shares might be better advised to see what happens to the share price post IPO after company results are announced to the market.

Present Kathmndu owners will be hoping for a good Christmas shopping season to bolster the share price because current company fortunes do not make for pleasing reading.

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Kathmandu IPO: Retail Interest High
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c Share Investor 2009

Stock of Week: Restaurant Brands Ltd

2009-10-19T05:36:00.000+13:00

This weeks Stock of the Week, Restaurant Brands Ltd [RBD.NZ], as I pointed out last week, is a tale of two stocks.

It takes a bit of a leap of faith by current shareholders not to sell and for new shareholders wishing to buy - current fortunes of the company now being at a high and the share price starting to reflect that.

All is not lost though!

This company has rallied from penny dreadful status many times before and has managed to reward shareholders who got in at the early stages and there is probably more upside to come.

From a 52 week low of 58c to the current 52 week high of NZ$1.42 the share price looks likely to rally closer to the 2 dollar mark as it has done before so there is room for a good short term gain if you think the company profit is unsustainable or room for a good long term return if you think the company is on track for more of the same -this would defy company history however.

The dividend has just been raised for the latest results to 4.5 c to give this stock a gross return of slightly over 7.5%, not bad when term investments are getting 4%.

Good luck!

Stock of the Week Series

New Zealand Refining Ltd
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RBD saga continues: CEO leaves
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c Share Investor 2009

Restaurant Brands: Buy or Sell?

2009-10-18T05:54:00.000+13:00

My regular readers will know I have been critiquing Restaurant Brands [RBD.NZ] for many years and my comments have been far from complimentary at times.

I have been a shareholder in the past and have never lost interest in the mis/fortunes of the company or in the yummy food that KFC serves up.

With the latest half year result for 2009 out Friday I may have to reconsider my stance on what I think about the company and its future.

That result showed a half year better than any they have had in around 10 years and they indicate that this is likely to continue in the second half.

Sales and profit are up but a major indicator of business going well is that margins are up as well. This also hasn't been the case for many years but is on the back of cost savings rather than increased counter prices so clearly indicates good management of shareholder capital in tough times.

The major force behind the recent resurgence of RBD has to be Russel Creedy, the CEO/CFO, brought in during 2007 to revive the companies years of lagging fortunes. He has got to work quicklyand efficiently and most importantly his goals have been indicated to the market and to staff clearly and executed well.

Years of under-performance has largely been forgotten by new shareholders and market watchers who have more than doubled the company share price over the last several months with increased buying and a re-inclusion in the NZX 50.

I have not forgotten however and this is where my big but comes in.

Creedy has done a fine job in turning the fortunes of his company around, when nobody else has been able to do so since it listed but the one thing the company has lacked in terms of performance is consistent profit on a year to year basis or an indication that it has been able to grow profit significantly.

At post NZ$300 million in sales the company should be able to consistently return a minimum profit of $15 million per annum, based on the sectors margins and more if costs and service levels can me maintained.

The company has never been able to achieve this year to year under previous management and are just through their first year of good results under Russel so it remains to be seen whether he can sheppard KFC, Starbucks and Pizza Hut through 2-3 years of good results, a length of time one can expect to give a company such as RBD - whose past has been wracked with poor results, management and a dismal future - to prove to the market and establish itself as a serious business with a good long-term future.

The boost in company fortunes has also been bolstered by the recession, with sales artificially up because punters are heading to cheaper fare when buying ready prepared meals -beware then of a tail off when things look better economically.

So clearly current investors need to make a decision whether to sell at the currently high stock price this company is selling for or hope that the present turnaround will be a sustained one, and they can then reap a decent return as the years unfold.

I have seen the share price do this 3 or 4 times based on a "turnaround" only to head back down to the penny dreadful price it was attracting at the beginning of 2009.

The jury is still out.

Restaurant Brands @ Share Investor

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c Share Investor 2009

Trying to define an exit strategy

2009-10-16T17:02:00.000+13:00

I think I have developed a successful strategy for myself for buying good stocks - buy and hold for 10 years or more - but shouldn't I really decide in a similar way as to when exactly I should sell?

My first answer to that would be a definite yes but on the other hand if I have picked good stocks/companies to invest in in the first place then surely I should hold them "forever" and collect the returns along the life of the company ? - or at the very least my life.

Lets have a closer look at what I could do when, if and why I might want to sell off parts or all of the Share Investor Portfolio.

Lets have a look at some salient points one might look at when deciding when, why or if you should sell up. You will be able to tell from my many different tangents and questions to myself that an exit strategy to me is as foreign to me as soap is to a Green Party supporter.

Please keep in mind I am writing this as it comes into my head, clearly with no planning:

1. No company lasts "forever". Many of the 17 companies I have shares in will not be around in 10 years, either in whole or in part. Some will have been taken over, some will exist in different forms and others will simply be out of business.

2. Companies fortunes are never static. Depending on what sort of company one has invested in most have economic cycles where profit and performance ebbs and flow. Some that are managed better than others are able to get through these cycles unscathed and manage the extremes well - either because of management or design of the business.

The company value will vacillate between these two cycles and in the case of a listed vehicle a good opportunity exists for that shareholder to take the money and run just past the mid point of that economic cycle to get the maximum return for that asset - until the next cycle begins again of course where one may get an even better return if one has the patience.

3. Management plays a big part in deciding whether to get in or out of a company. If it changes and the fortunes change this could be a very valid reason for you to cash in your chips.

4. An individual who invests in a company, either listed on the stockmarket or private is unwise to invest money one cant afford to lose or will need to pull out in the future but sometimes circumstances change and you may have to reassess your position in the stockmarket - clearly not a good exit strategy and one that I am mindful of given my changing family demands and current economic conditions.

It can be very painful to your wallet if you have to sell any asset and I guess planning an exit strategy close to when you buy - along with the usual due diligence - is a good way of ameliorating any negative outcomes.

5. Setting a percentage return, either on an annual basis or over the term you think you might hold your stock might be a good way of exiting a stock - you cant really argue with hard concrete numbers right? After all you are investing to make money!

6. Look at the returns you might be getting from a comparable business and decide if your company can do better.

7. Consult a financial adviser - nah just kidding, do your own thinking. Only you know what is best for you financially and your exit point will be different to someone elses.

8. Related to the above, do some of your own research about exit strategies, talk to others with more experience in the stockmarket and take the points applicable to you and only you and jettison the rest.

For the life of me even after writing this I am still in more than two minds about when to decide just when to sell. There is so much to take into account when there is money involved and as I said above I am 99.9% sure of my entry strategy but probably 50/50 on when to head to the hills.

My head says I must hold indefinitely because I am pig headed about decisions, I think I made the right initial company choices so why wouldn't I hold until I curl up and die as long as the companies are making moola and then pass on the hopefully much bigger mantle to my little girl? That is very clear in my my head, so I think I will end where I began.

With the intention of holding "forever".

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Rob Fyfe's "Environmental Extremism"

2009-10-13T00:01:00.000+13:00

A reader of mine brought this subject up, of sorts, yesterday. That is, the folly of investing in companies that base their business on airy fairy ideas like "green technology" based on the man made global warming myth or in companies whose grip on their business is so tenuous they will sink to the depths of using this kind of bullshit on competitors in the hope they make them look bad.

In my not so humble opinion Air New Zealand [AIR.NZ] is one of those companies.

Rob Fyfe, Air New Zealand CEO has recently labeled Emirates Airline alleged running of "empty planes" across the Tasman as "Environmental Extremism"

"For this competitor, the Tasman sectors are an easy add-on to their long haul flying and an opportunity to earn revenue at only marginal cost and load factors down around 50 per cent seem to be of no consequence," Read more

Fyfe told a gab fest of Global Warming zealots at the Green Skies meeting in Hong Kong.

Now using junk science to attack a competitor is one thing but Rob and the boys and girls down at Air NZ head office have been busy over a number of years spending 10s of millions of shareholder dollars developing nonsense bio-aviation fuels and asking customers to pay extra for their "carbon credit" deficit because of the naughty way they pollute when they choose to fly with the largely Kiwi taxpayer owned airline.

So it is in Robs best interest to attack competitors who don't appear to "care" as much about how filthy flying is because he is spending shareholder money in the hope this will give our airline an edge over the competition and to justify the spending of shareholder dollars - I think the Green Party call it Greenwash.

So Mr Fyfe's stance on the evil of flying is simply a race to the bottom where the eventual winner will be the first to award themselves a gong for being green in the hope it is good for business.

Ultimately though the reckless use of Air New Zealand shareholder money to pursue the bogus notion that every time one flies it is an affront to the environment and by setting your company up as a bastion of virtue above competitors by using this to attack them is environmental extremism itself and will ultimately end in tears and lost shareholder dollars when the whole Global Warming myth unravels.

Stand by for the fallout.

Air New Zealand @ Share Investor

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c Share Investor 2009

Investment Property Taxes a boon for the Stockmarket

2009-10-11T12:42:00.006+13:00

There has been allot of talk about taxes in relation to investment property recently. There has been a government task force looking into the idea of capital gains taxes on investment property, principally a capital gains tax.

It appears our "business friendly" National Government are trying to shake down its citizens for even more taxes to fund the continued high spending of our Government.

I don't remember them in their pre-election campaigning that they were going to implement new taxes but be that as it may it looks likely some kind of tax on investment property is likely.

I don't agree with this at all, taxes kill economies and make Governments bigger and we know that aint good.

As I wrote last month the best thing to do to put investment property on an even keel with other classes of investments is to remove taxes from those other classes, not add another wallet numbing penalty to property investors.

Either way though if there are taxes applied to investment property, and I think there will be, this is going to be a minor boon for the New Zealand Stockmarket.

The withholding tax applied to dividends by Labour in 2007 further put stockmarket investors on the back foot and any move to even the score with property investment is a win for New Zealand.

The Nats probably wont raise taxes on investment property by a significant amount because of the obvious political ramifications, but any move that hamstrings the investment property market is going to be good for those of us investing in real productive companies that are either listed on the Stockmarket or indeed private ones.

About time us wise ones we got a break.

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Michael Hill Makeover kicks off

2009-10-09T17:02:00.000+13:00

The next step in the Michael Hill International story[MHI.NZ] has happened with the opening of their new format store in Auckland's Queen Street yesterday.

A move towards a more sophisticated look inside and out is designed to take the company towards the higher end of the jewelry market and then hopefully higher margins.

This particular outlet is what the boffins call a "flagship" store and its charcoal and grey colours, along with its new lighting design is designed specifically to get those higher end punters in the door -revamps of retail stores tend to get more punters through the door, not this shopper though.

From Michael Hill himself on the reasons for the change:

“As the original high-end retailer in this part of Queen St, we’re delighted to be delivering a contemporary shopping experience to our customers.

“It’s important to move with the retail environment. As our customers evolve so too must we. This new store design has become the benchmark for all stores going forward, Hill said.

On the purchase his company made last year of bankrupt jewelry retailer Whitehall Jewelers:

"When you're opening in a new market and opening in a place like Chicago that has been particularly depressed you can't just roll out the old thing and expect it to work. It's really when you have to do things that you come up with your best."

Hill has himself said that the Chicago purchase was a mistake (listen to Michael Hill interview - You need to register first ) because of the price paid for it so it is either a very positive move by him to spend millions on the 17 United States stores or throwing good shareholder money after bad - I tend to think he knows what he is doing but having said that the US is a particularly hard market for outsiders to crack. Pumpkin Patch Ltd [PPL.NZ] has also had recent difficulties with its US operations, incurring significant losses, so this is a very tough market, especially in the current economic conditions.

The revamp of the company image comes in a year where underlying 2009 profit has been down by more than 45% and its share price hit because of the overall retail downturn.

Michael Hill shares closed even at NZ 72c yesterday.

Disclosure I own Michael Hill International shares in the Share Investor Portfolio.

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c Share Investor 2009