Forum Archive Index - March 2000

[Andrew Cooper <ACOOPS@xtra.co.nz>]

Frank

I appreciate your comments always, what was the second stock.  Its great to see
such good analysis beyond the tech hype.


regards

Andrew

frank fernandez wrote:

> Hi all,
>
> Just thought I'd share with everyone the research I have done on a
> couple of stocks that I believe will attract investor attention over the
> next couple of days. (I'll write about the first one here and the second
> one in another posting)
>
> The first stock is Auckland International Airport (AIA) which is
> announcing its half-year results tomorrow - an expected $23 million
> profit for the period, excellent by any standards. But a greater focus
> for investors will be the special meeting of the Auckland City Council
> tomorrow to discuss the selling of its 25.75% stakeholding in AIA. Most
> of the city councils in the greater Auckland area have already cashed up
> their stakeholdings at a much higher price than the current price of the
> stock.
>
> Councillor Gray Barlett (a firm advocate for selling) has been quoted
> publicly as saying that he's got the numbers to support selling
> "although it will be close". The Council's pro-sell faction wants to use
> the money for infrastructure funding and while City Vision (with eight
> of the 20 votes on the council) have indicated they would oppose the
> sale, it is expected that the "ayes" would carry the day and approve the
> sale.
>
> The most probable buyer of the Council's stakeholding (worth around $270
> million at the last sell price) would be Singapore's Changi Airport,
> world leaders in airport management.  Changi, not so long ago, paid $87
> million for the North Shore City Council's 7.14 per cent holding in AIA
> - a move seen at that time by market analysts as Changi's clear
> intention of being the major shareholder in AIA. This assumption proved
> right when Changi enlisted the services of a brokerage firm soon after
> to bid for Auckland City Council's 25.75 per cent stake.
>
> There are many compelling reasons why the Auckland City Council would
> vote to sell its shares. These are:
>
> 1. The AIA shareholder registry is wide open and Changi, with around $3
> billion spare cash on its balance sheet, could still take a controlling
> stake in AIA even if the Council decided not to sell.
>
> 2. Such a move by Changi would then negate the 'strategic' value of the
> Auckland City Council's AIA holding - and hence why councillors such as
> Gray Bartlett have been advocating a sell approach.
>
> 3. The bid by Changi has the support of Auckland International Airport's
> management whose MD John Goulter has said that it was a 'feather' in
> AIA's cap that Changi, one of the world's best run airports, had chosen
> Auckland as its first overseas investment.
>
> 4. When the Council consulted residents last May, more than 95%
> advocated selling.
>
> 5. The decision by other Councils such as North Shore City and Waitakere
> City to sell their stakeholdings has been putting a lot of pressure on
> the Auckland City Council to do likewise.
>
> 6. The Council at present only receives modest cash dividends from its
> stakeholding and unless it sells, cannot derive any capital gain.
>
> 7. The Council's stakeholding is exposed to financial risk, i.e.
> sharemarket fluctuations which could diminish the future value of its
> stakeholding.
>
> 8. The minority shareholding means the Council is not able to influence
> AIA decisions on future strategy.
>
> 9. Proceeds of the sale can be used for infrastructure, public
> transport, repayment of debt, reduction of rates or otherwise as Council
> sees fit.
>
> 10. $120 million of council debt can be paid off.
>
> 11. A 'nest egg' of  around $153 million (depending on final sale price)
> will be available for infrastructure spending.
>
> For the reasons listed above, I believe the Council will vote to sell
> tomorrow.  Many broking analysts have predicted that a sell decision
> will have an extremely positive impact on the AIA share price. The
> analysts have blamed the Council's past stubborn doggedness (in not
> selling) as the main factor in the AIA share price decline in recent
> months. The stock closed at $2.50 today but its movement over the next
> day or so will be extremely interesting as some brokers have put its
> true value at $3.50.
>
> As usual, I trust the above information will be useful in your
> investment deliberations over the next couple of days.
>
> Cheers,
>
> Frank Fernandez
>
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