Forum Archive Index - June 2000

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

> 
>  They had planned to list for
> around 2.00 a share but realised in the current climate that they
> were maybe over optimistic.   By listing at 1.50 im sure they were
> expecting the shares to be snapped up on listing.  When i heard the
> price was going to be 1.50 i was kicking myself for not
> participating in the float.
>
Yes if  $1.50 was promoted as the float price, I think  I would have 
been tempted myself.
>
>    The question is , is Frucor now at a bargain price?
>
No, I'd say it's fair value.
>
>     Many commentators were recommending the float when the expected
> price was around 2.00, including frank newman, author of "making
> money on the nz share market"
>
That shows how risky a 'follow the man' strategy can be.   Following 
someones recommendation doesn't absolve you from doing your own 
homework.
>
> Others felt the companys forecasts
> were rather optimistic.  
>
There is always a bit of uncertaintly when a company is so obviously 
driven by marketing people.   Remember the Restaurant Brands float?- 
prospects way over hyped on prospective market growth.   Ever heard 
of a marketing executive forecasting a decrease in sales?
>
> Even if this is true surely that has been
> more than = compensated for by the present low price.
>
The price is only low wrt directors pre-float published expectations.
>
>    So why is the share price so low?
>
You mean, why is the price at its current level?
>
>    1. General market malaise
>
Yes
>
>    2. Plenty of other undervalued stocks
>
Yes
>
>    3.  Wait and see approach
>
Yes.   The Frucor management said that they delayed their float until 
they had some runs on the board.    More conservative investors might 
like to see more runs on the board.
>
>    4. Small size of stock keeping big institutions away
>
Didn't I read that it was going to be in the NZSE top 10?
>
>    5. Stags are now selling as they realise that no initial profit
>        is possible
>
Could be.
> 
>         WHY SHOULD YOU BUY
> 1. Stock has huge potential, if they can break into british market
>     the sky is the limit.
>
Assuming any competitors just sit back and do nothing.
>
> 2.   Good product range
>
Yes and No.   The whole prospectus is based around growth of 'V'.  If 
'V' doesn't succeed they won't have the marketing budget to try 
again with one of their other products.
>
> 3.  Good management ,which have done wonders with the company
>
Yes
>
> 4. Anecdotal
>
Yes, they certainly seem to be on the right track in my observation 
too.
>
>   The competition doesn't seem up to much
>
Whoa be careful!   The competition includes 'Coca Cola Corporation', 
creator of the most recognized and arguably the most powerful brand 
on the planet!   I wouldn't dismiss them so lightly.

The other question that must be asked is in relation to Frucor's 
financial structure.    They are very highly leveraged and at the 
moment have a negative asset backing.
As far as I am aware this level of leverage is unprecedented on the 
NZ market.     This is outside my experience and if the unthinkable 
happened and they did go under there may even be a call on 
shareholders for more funds.     I could be wrong here, so perhaps 
someone with more legal/accounting knowledge than myself might like 
to comment
>
> Disclosure   I have put in a buy order at 1.45
> 
On balance probably a good entry price.    But I wouldn't bet the 
farm on it. SNOOPY
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