Executive Summary: October 27, 2009
By Scott Rochfort | smh.com.au | 27 October
On the board ... Ahmed Fahour is keeping busy between surfing appearances. Illustration: John Shakespeare.
CBD
Brotherly love is sealed in a bonus
Village Roadshow goes to great lengths to ensure there is no sibling rivalry within its ranks.
After reporting a tidy 95 per cent plunge in full-year profit to $12.6 million, Village paid its executive chairman, John Kirby, and deputy chairman, Rob Kirby, a $1,414,153 short-term bonus each.
The managing director and the Kirby's older de facto brother, Graham Burke, was also paid $1,414,153.
However, questions have been raised about the payouts in the year that the group's profit plunged and share price halved. Robert Kirby, for one, received about $34,000 more in non-monetary benefits even though his older brother, John, got about $1530 more in base pay.
Tax cutback
It is good to see the former head of NAB's Australian operations, Ahmed Fahour, was not left in a lurch by his long-time mentor and former Qantas chief, James Strong.
Less than a year after taking over the chairman's role at Rip Curl from the Kathmandu adventure attired Strong, things appear to have held together at the surfwear group.
The company's accounts lodged last week show its profit more than doubled to $34 million in the year to June 30, all thanks to a huge cut in its tax bill.
Fahour has been keeping himself busy running Gulf Finance House, the Bahrain investment bank in which Macquarie recently bought some convertible "murabaha tickets".
This month Fahour hired the former Telstra and Macquarie Capital operative and skivvy-wearer Ted Pretty.
Pretty's crowning achievement at Telstra was its $US1.8 billion investment in the dotcom Pacific Century CyberWorks.
The deal was first agreed to in early 2000, in a memorandum of understanding, but sealed on better terms for PCCW later in the year, after the dotcom bubble had burst.
Wanted: ears
It helps to have military experience when you are personal assistant to the head of The Retailers Association.
The lobby group is again looking for an "aide-to-camp" who can be the " the right hand, eyes and ears" of its executive director, Scott Driscoll.
It is believed the latest in the role, an ex-command driver in the Australian Army, left after a only few days.
Driscoll declined to discuss the matter yesterday but explained he was always "looking to support ex-military personnel".
In the original job ad last month the job description included: diary management; "driving the national executive director to and from all appointments and/or the airport whenever required in his vehicle"; "waiting with the vehicle between appointments"; booking of appointments, air fares and lunches; co-ordination of functions; outbound calls; email or letter writing "as directed"; and general errands.
"Punctuality and reliability is essential, as is an understanding and appreciation that if you are accompanying the national executive director at a function or the like that you are to maintain a quiet, polite and appropriate demeanour, designed to not attract attention to your presence," the ad said.
No hints were provided on why the person who took up the job has already left.
Home of the pies
The Four'N Twenty pie maker Patties Foods has picked an appropriate location for its annual meeting – at the Melbourne Cricket Ground on November 24.
The pie maker's third chairman in less than a year seems enthused. "I am impressed with their enthusiasm and commitment and with the overall culture of the organisation ," said Chris Riordan, after touring the group's pie-making facilities and meeting staff.
The group's third managing director since its 2006 listing also appears excited. "When I joined Patties Foods less than a year ago, I discovered an unpolished diamond," said Greg Bourke in its annual report.
The company may face some heat over the $680,000 termination payment to its former chief executive Michele Allan, who headed the piemaker for only 11 months.
Not bad considering Allan was on a base salary of $450,000 a year. The payout would have been enough to feed a MCG AFL grand final two times over.
Marked down
One wonders if GPT and other property companies will again be preparing the red ink and write-down rulers for the coming year.
After already booking more than $1 billion in impairments in the first half of 2009, a chirpy GPT blurted yesterday it had flogged Sydney's Sheraton Four Points Hotel for $185 million, 10 per cent or $21 million below its June 30 valuation. Or 20 per cent below its valuation at the start of the year. "It has performed well for GPT, and the sale represents a good result in the current investment market," said GPT's chief executive, Michael Cameron.
Got a tip? email srochfort@smh.com.au.
Insider
Edited by Jamie Freed
Find another way to tap capital
The more than $50 billion of capital raisings this year has certainly created a debate in the market over the ideal way to fairly tap investors for cash.
In recent weeks, with some prodding from Lazard and others, the renounceable rights issue has returned to being in vogue.
That structure can allow investors that do not take up their entitlements to receive some compensation if a bookbuild covering the renounced rights ends up at a higher price than the initial offer price.
But in a typical structure for an accelerated renounceable entitlement offer, the bookbuild for the renounced institutional rights takes place about three weeks before the same is done for the renounced retail rights.
During that period, the company's share price often falls, which means retail shareholders that renounce their rights do not get as great a return as their institutional counterparts.
For example, in the recent case of Sigma Pharmaceuticals's $297 million capital raising, the retail shareholders that renounced their rights got no return after the bookbuild was completed at the issue price of $1.02.
A few weeks earlier, the institutional shareholders had received an extra 5c when the bookbuild was finalised at $1.07.
Other cases with large institutional/retail price discrepancies include FKP, Alumina, Leighton and ConnectEast.
Now UBS has figured out a way to rectify that discrepancy.
As part of CSR's $375 million rights issue launched yesterday, the broker is leading the first ever simultaneous accelerated renounceable entitlement offer.
That's investment banking talk for a renounceable rights issue in which the institutional and retail bookbuilds for renounced rights will occur simultaneously, after the retail entitlement offer closes on November 20.
Under this structure, the institutions only have until tonight to decide whether to take up their rights, whereas the retail shareholders have three weeks.
About 50 per cent of CSR's register is held by retail investors, and this new structure will place them on more equal footing with their institutional counterparts.
However, some critics say that institutions that would normally renounce their rights will take them up due to the new structure and then sell their stock on the market, depressing the price ahead of the eventual bookbuild.
That could also make it harder to find sub-underwriters for the issue.
Name game
Archer Capital-owned Ascendia Retail – the owner of Rebel Sport – has applied for an extension to allow it to reserve the name Rebel Group for an additional two months now that it has decided to hold off on a float until next year.
Unlike peers Myer and Kathmandu, Archer is believed to have no plans for an immediate float of Rebel Group.
However, it does not want anyone unrelated to the Rebel business to reserve the name Rebel Group in the meantime.
Archer has appointed Goldman Sachs JBWere, UBS and Merrill Lynch as the lead managers of the potential offering, but that is not expected to occur until February at the earliest in light of the traditional lack of market interest in public offerings during the summer holiday period.
Like Myer and Kathmandu, Rebel is expected to emphasise its strong growth prospects when it does finally release a prospectus.
It will be interesting to see a breakdown of its like-for-like sales growth, given that Myer's same-store sales have gone backwards in the last few years and Kathmandu's are fairly stagnant.
The Myer institutional bookbuild – set to take place tomorrow and Thursday – will serve as a barometer for all of the upcoming retail floats. In that context, it is interesting that a note by UBS's Ben Gilbert – an analyst at one of the few brokers not working on the Myer float – that has been doing the rounds among fund managers thinks a price/earnings valuation of up to 15.7 would be reasonable.
That is nearly the midpoint of the 14.3 to 17.3 range implied by the offer price of $3.90 to $4.90 a share and would reflect a discount to the David Jones valuation that Gilbert thinks is deserved.
Such sentiments are in line with feedback from mainstream institutional investors.
Gilbert thinks Myer's key challenges include regaining market share lost to discount department stores like Target and growing its higher-margin, private label brands, although presumably those initiatives could go hand in hand.
He also notes Myer's planned new stores – many in regional areas – will not rank within the top half of its portfolio and are therefore of lower quality than those planned by DJs.
Making hay
There were some raised eyebrows among AWB shareholders when the agribusiness group revealed it had allotted 106 million shares to the sub-underwriters of its $241 million retail component of its rights issue, underwritten by Deutsche Bank, Goldman Sachs JBWere and UBS.
The shares were issued at $1 each, which looks like a bargain when compared with AWB's closing price of $1.20 yesterday.
Some investors were surprised at the large amount handed to the sub-underwriters given that AWB scaled back some applications from retail investors.
The company allowed each retail holder up to $15,000 of shares, but after that it capped the number allowed to five times the entitlement.
Insider understands that some institutions that had not been part of AWB's initial accelerated institutional offer applied for huge amounts of new shares under the retail offer. In one example, an investor holding just a single share is said to have applied for a $500,000 allocation, which was not granted.
jfreed@smh.com.au
Briefs
Banks
Plea over ranking Bendigo and Adelaide Bank has called on the credit ratings agencies to upgrade its ranking, saying its funding risks are substantially lower than at the start of the global financial crisis. The bank's triple-B rating has marred its ability to secure funding at a reasonable price, investors were told.
Travel
Net profit tip Online travel booking company Wotif.com Holdings expects its first-half net profit to rise to about $26 million, compared with $20.6 million in the previous corresponding period, because of the economic recovery, the strong dollar and attractive deals on hotel rooms.
Mining
Stake approved The Foreign Investment Review Board has approved a Chinese state-owned mining company, Hebei Mining, taking a 14.9 per cent stake in unlisted Perth-based uranium explorer Raisama. Separately Raisama will launch its $12 million initial public offering within a fortnight.
Airlines
New aircraft Almost 30,000 new passenger aircraft will be needed in the next 20 years to meet worldwide demand and replace old aircraft, manufacturer Boeing says. It says the global downturn has ended and the economic recovery will be led by China and South-East Asian countries.
Retail
Clothing on the up Women's wear retailer Specialty Fashion Group whose brands include City Chic, Queenspark, Autograph, Crossroads, Katies and Millers told shareholders that the positive momentum of the second half of 2008-09 had continued into the first four months of its new financial year.
James Hardie
Check on funds The books of James Hardie should be thoroughly checked to ensure the company is not hiding any funds that should be going to asbestos victims, the independent senator Nick Xenophon says. The $1.8 billion fund set up by James Hardie has only $140 million left to fund claims of $100 million a year.
First published by Smh.com.au on October 27 2009
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