Forum Archive Index - May 2000

[Brett & Leeanne Phillips <bret-lil@ihug.co.nz>]

Hi everyone,

The New Zealand equity market has been under performing in the past few
years for many different reasons and with this market having avoided some of
the hype and over valuation of the overseas markets, the tide could be about
to turn.

The next few months could prove the New Zealand market offers further
potential to overseas companies and investors as they look for stability and
the discount buying opportunities that are available. Of course it could
also be argued that new government policy may scare off these potential
investors.

However we have recently witnessed the Œdiscount buyout¹ scenario with
other NZ companies. The most recent example being the proposed sale of
Fletcher Paper. This in turn has led to Fletcher Forests being the new
target of market interest and speculation along with it¹s fellow Œletter
stocks¹.

Some Wall Street analysts' are currently recommending Fletcher Forests as a
firm buy, with a revenue rise of 225% expected in the 2001 year. Their
estimates suggest that the earnings at Fletcher Forests is expected to be
higher than the market rate of growth in the 2001 year. Some US. brokers,
forecasters, commentators are suggesting the share price will head towards
US$6.00 again.

Of course it is the 'take-over possibility' and not the Œforeseeable growth
in earnings¹, that is the real reason why the FFS share price has been
steadily lifting in recent weeks.  The continued speculation and media
attention will keep all the Fletcher stocks in the limelight for a while
yet, and may also drag the market to higher levels.

Most of us are  aware that due diligence is entering its second phase with
regards to Fletcher Forests. It has now been suggested that the number of
parties proceeding in the negotiations has been reduced. Boston based John
Hancock Life Insurance US owned forestry investor Weyerhaeuser and Seattle
based Plum Creek Timber Company have been reported as the likely bidders.
There has also been speculative reports that a hostile buyer, probably Asian
based, maybe buying shares ahead of the offers from the remaining suitors.

In some US. chat groups the question has been recently asked whether there
is the possibility of FFS being party to the recently announced alliance
under taken by AQCI. Aquatic Cellulose International Corp. has announced the
expansion of its international operations. In its announcement, the company
stated that it has entered into an agreement with a New Zealand forest
company for the harvesting of aquatic timber from waterways in the lower
North Island of New Zealand.  Could Fletcher Forests be the New Zealand
partner here?

Aquatic Cellulose International Corp. has just completed the initial round
of funding of a multi-million dollar investment for its global expansion.
The funding is being provided by New York investment funds. Aquatic
Cellulose International Corp. is a growth stage, technology based company,
which focuses on retrieving aquatic timber, utilising a patented robotic
system developed by it¹s President and CEO Gary Ackles. Maybe the
possibility of a strategic partnership should be considered by investors.

Existing FFS shareholders must be looking forward to the final outcome of
these numerous possibilities, and with just a little more patience required,
the long term investor may finally realise some substantial gains.

While the traders amongst us will be relishing the buying and selling
opportunities that have been presented as the share price fluctuates towards
the $1.00 mark. The long term investor will be smiling also, as the market
continues to predict a buyer will be entering at levels closer to the $1.50
-$1.60 mark. Only time will tell if these forecast levels can be obtained.

The tenders are rumoured to have been at a huge premium to the recent
trading prices. If Mr Deane's and the Fletcher board secure a buyer at
anywhere near these forecast prices, both traders and investors stand to
gain considerably if they manage to purchase around present levels.

The outright sale is said to be the preferred option of the Fletcher board,
and would be the likely option taken once matters such as the Citic court
case are overcome. Fletcher Forests' management dispute with its North
Island forestry partner Citic is not seen as a stumbling block to splitting
the division away from the rest of the group or attracting a new investor
according to company representatives

Fletcher Forests has now become both a trading and investment stock.
Investors should not be Œput off¹ by the actions of traders who may cause
the occasional fluctuation in the share price, in this instance patience
will reap reward. The longer term outlook is excellent in my opinion,
presenting  Fletcher Forests as one of the best buys of the moment.

Cheers Brett

PS. Hope all the Mums out there are having a great day!


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