• Home
• »
• Radar

• Home
• Executive Jobs
• Features
  • Focus
  • Career Couch
  • Radar
  • Water Cooler
  • Insight
  • Podcasts
• Place an executive ad

CBD

Forecaster in search of a wave

 

 

 

 Let's hope the ex-Merrilly Lynching financial forecaster Robert Prechter has lost his knack for calling the market.

His newsletter, the Elliott Wave Theorist, has ominously predicted the Dow Jones Industrial Average "is just a few points away from attaining our ideal target".

"Given the extent of the rise, there is no longer much reason to allow for a more complex corrective pattern to unfold," says Prechter, who is one of the best-known practitioners of the form of the technical analysis developed in the Great Depression by the bean counter Ralph Elliott.

On a positive note Prechter, based in Gainesville, Georgia, reckons the market still might "go to a higher level on a normal retracement range".

Aside from that, "when the market rolls over", we are apparently going to see "the strongest downward wave".

On a wing and a Lowy

The top gun of the property sector, Westfield's David "Maverick" Lowy, is preparing the wheel-chocks for what is expected to be the biggest flying weekend yet at the Temora Aviation Museum he set up in 1999.

The buzz around the Riverina town is over which plane Lowy could pilot and whether his fellow Crown director, James "Ice Man" Packer, could be his wingman.

"On the day they will announce who's flying what," said a spokeswoman for Lowy, who said it was still being worked out what jet the Westfield deputy chairman might pilot.

The air force will be sending two F-18 Hornets for the Father's Day weekend event. The museum will show off the Australian-built 52-year-old RAAF Sabre fighter jet it has just spent three years restoring.

Fortunately for Westfield shareholders, there are apparently only two pilots in Australia qualified to fly the Sabre and Lowy is not one of them.

The museum also has Australia's two remaining airworthy Spitfires, a Tigermoth, a Meteor fighter, a Vampire and a Cessna A37B Dragonfly previously flown by Lowy. Having a 2040-metre second runway, Temora arguably has the best airport infrastructure of any small town in NSW.

Savage approach

Leighton Holdings appears to have a novel approach to settling its workplace disputes in the Middle East.

The head of Leighton's part-owned Al Habtoor venture, David Savage, this week offered the olive branch to 2000 construction workers who walked off the job in Dubai. He told ArabianBusiness.com that he managed to get workers to return to work after offering them a sweet deal they could not refuse.

"The company earns value based on its output, so if a worker, including one of the labourers, is productive, then we are happy to share the proportion of revenue," he reasoned, after the local police reportedly moved in to arrest some of the protesting workers.

Workers told the local media they were paid between 500 dirhams ($164) and 700 dirhams ($229) a month. On this basis, it could take a Dubai construction worker 585 years to make the $1.14 million bonus Savage earned in the 2008 financial year.

Comic twist for JJ

Goldman Sachs director Jim Johnson appears to be on a stand-up comedy tour of Australia.

"I'm not in favour of over-regulating compensation," he told The Australian newspaper. Mr Johnson, who once ran the imploded investment bank, Lehman Brothers, and Fannie Mae, which was bailed out by taxpayers, said: "I'm not seeking to be controversial but this is a big topic and there has been a lot of focus on this in the US, Europe and Australia."

Maybe he is just seeking to be well paid.

Drinks will come later

The debt-laden winemaker Australian Vintage (aka McGuigan Wines) might have to delay the sale of its Loxton winery a little longer.

The Indian winemaker Indage, which last year never got around to paying the $60 million for the Deathstar-looking winery, appears to be having some issues on the home front.

According to the Indian financial website livemint.com, at least 250 employees at Indage Vintners have resigned in the past fortnight after the company, according to an unnamed source, had "failed to pay them salaries since at least November 2008".

Another company source told the website that Indage had paid 40 per cent of the unpaid wages on August 31. “I have deposited the cheque but will come to know whether the cheque will be honoured or not in a day or two," one happy former employee told the website.

The group's Australian Thachi winery in South Australia's Riverland, meanwhile, is quietly distancing itself from the Indian operations of its parent company. "We have nothing to do with India itself," Thachi's operations manager Tim Pearce assured CBD. He said Thachi was owned by the company listed by Indage in Britain.

Mr Pearce said his staff were still getting paid and everything was OK "at this stage".

The odd literacy issue

Goldman Sachs JBWere's institutional dealing desk, meanwhile, appears to have encountered some literacy problems.

In its afternoon note to clients yesterday, it warned that "finically literate" journalists could soon pressure the Federal Government to roll back its stimulus package and notes that it is "not necessary anymor".

Clarifying the note to CBD, the shark-watching institutional trader, Richard Coppleson,said the Government just needed to cut its proposed stimulus.

"The obvious thing is that if the RBA thinks they cannot wait until March next year to increase rates and instead hike in the next two months, then the Government must listen to what the RBA are [sic] saying to them," he said.

 

 

BUSINESS FOCUS

Nexus raises $31m

Nexus Energy has avoided asset sales by raising about $31 million in an institutional placement and will tap shareholders for $43 million in a heavily discounted rights issue. The raising (priced at 32c) and the rights (one-for-3.75 at 22c) will strengthen its balance sheet and provide financial flexibility to the end of 2010, the company said.

Gunns closes on ITC

Timber giant Gunns has raised the bulk of the $145 million equity it needs to buy ITC Timber from Elders, but its shares fell 9.6c, or 8.76 per cent, to close at $1.00 after coming out of a trading halt. Gunns raised $115 million from institutions, issuing 128m new shares at 90c a share, in a 1-for-4 non-renounceable entitlement offer.

Nufarm coy

Agricultural chemicals business Nufarm says talks about a potential takeover by China's largest chemicals trader, Sinochem Corp, are continuing but it cannot reveal details.

NAB, Cuscal join forces

National Australia Bank and credit union ATM administrator Cuscal have joined their ATM networks after receiving interim approval from the competition regulator. NAB and Cuscal said yesterday they had combined to create Australia's second-biggest ATM network. Rumour mill grinds $600 million from BBI trading halt

 

Xchange

Edited by Jamie Freed

Rumour mill grinds $600m from BBI trading halt

Now that reporting season is over, the market has been forced to look elsewhere for intrigue.

Babcock & Brown Infrastructure helped to fill the void yesterday when it entered a trading halt pending a possible recapitalisation plan with assistance from a cornerstone investor.

Gresham, Credit Suisse and Macquarie Capital are understood to be advising BBI on the deal, which involves a private equity group.

No names were mentioned, but it could be one of the groups that lost out on a deal with Asciano, such as TPG, Carlyle or Kaplan Funds Management.

As a guide, BBI has about $1.2 billion of debt at the corporate level, so the recapitalisation would presumably want to erase more than half of that. Warburg Pincus recently helped to recapitalise Transpacific Industries alongside a 1.77-for-1 rights issue to existing holders, but in this case the ratio of new shares to old shares will be higher.

Unless the shares are consolidated afterwards, there could be 10 billion or so on issue by the time the deal is completed, since BBI last traded at just 7.8c with 2.6 billion on issue, giving it a market value of $202 million.

It is worth noting that in the Transpacific case, Warburg Pincus injected $64 million in a placement, served as a sub-underwriter of the rights issue and also received warrants that will likely increase its future stake for its troubles. The private equity group now owns 34 per cent of Transpacific.

It appears that BBI's new investor will also take a direct stake at the asset level, likely in the Dalrymple Bay coal port that Macquarie had been trying to flog on behalf of BBI. Depending on the structure of the investment, presumably some of that could be put towards repaying the parent company's debt rather than the port's $1.7 billion of debt.

At present BBI's most pressing concern is the $169 million of corporate debt that needs to be repaid in February.

Four of a kind

It is no secret that the big four banks have outperformed almost all of their international peers since the onset of the global financial crisis.

Now that all of them have shored up their Tier 1 ratios through a recent round of equity and hybrid raisings – and that bad debts appear set to peak in the current half – some savvy investors are positioning themselves for the inevitable recovery in bank earnings.

UBS's equity strategist, David Cassidy, thinks the banks could start increasing dividends and launching share buybacks in the first few months of next year. The idea of conducting a buyback so soon may sound silly to investors who have recently pumped billions of dollars of fresh equity into the banks.

But ANZ's mammoth raising, which included an overflow of interest from retail investors, means its Tier 1 ratio now stands at 10.2 per cent. Macquarie Equities reckons that leaves it with $3 billion to $5 billion of surplus capital, based on a more normal Tier 1 range of 7.75 per cent to 8.5 per cent. Of course, some of those funds could be put towards acquisitions in fitting with ANZ's strategy of expanding in Asia and possibly in the mortgage market.
 
However, unless it decides to make a very big buy, by next year investors may think the recent addition of all that capital has made the return on equity look relatively unattractive.

And another thing

Elders remained suspended from trading yesterday as its advisers continued to iron out the final details of its circa-$500 million recapitalisation plan, but there was hope that it could be launched today.

Meanwhile, Gunns resumed trading after raising $115 million from institutions at 90c a share in a rights issue underwritten by Credit Suisse. The funds will be used to buy ITC Hardwood from Elders and will be followed by a $22 million retail offer and an underwritten dividend reinvestment plan. Gunns shares closed 14.5c lower at $1 yesterday but remained well above the offer price.

In petroleum, Nexus Energy shares closed 4.5c lower at 35c, but remained above the 32c price at which Nexus placed $31 million of shares with help from Southern Cross Equities and Azure Capital. It will now raise $43 million through a 22c-a-share rights issue, which is underwritten.

In other capital raising news, the Sydney mining identity Norm Seckold's Cockatoo Coal yesterday entered a trading halt while it sought to raise $35 million to further its coal exploration and development programs.

xchange@smh.com.au