Forum Archive Index - October 2000

[richard hermans <r.m.hermans@xtra.co.nz>]

I think you ought to forward a copy of your ideas to the company for a
helping hand !!!By the wat what does rsquo stand for ??it seems to be
the latest share chat shortening : Margie 

> Mike Hudson wrote:
> 
> A bit more rambling on Fletchers on Fletchers and life in general.
> Interestingly there have been no complaints on Sharechat about FEG or
> FLB, presumably the FEG holders are happy and the FLB holders got what
> they expected.
> 
> As far as FFS is concerned I agree with those who take the view that
> the investor (or should it be punter) has only himself/herself to
> blame for the predicament they find themselves in. Rule number one of
> playing the stock market "Only put in what you are prepared to lose."
> 
> As we all know markets are driven by greed and fear. The greed phase
> saw small investors pile into a situation where they were hoping to
> make a quick buck, dazzled by an apparent NTA of $1.70 per share and
> assuming that the FLP lightning was going to strike twice in the same
> place. I am not being wise after the event re the valuation as I have
> said before that forests assets are notoriously difficult to value and
> at the end of the day they are only worth what someone is prepared to
> pay (look at the asset backing of meat processing companies back in
> the seventies and eighties)
> 
> As I have mentioned several times cash flow is what is critical to FFS
> not asset backing. FFS has been for sale for about two years so the
> chances of a buyer emerging now were never that great. New money had
> to came from somewhere and as borrowing was out of the question it had
> to come from either placement or a rights issue. Imagine the outcry if
> the board had decided to place 1.6m shares with institutions at
> 25cents (screams of favouritism to their mates, trampling on the small
> shareholders, etc. etc) at least by taking the rights path issue all
> shareholder have the opportunity to participate or to sell their
> rights.
> 
> Now we are in the fear phase. According to the brokers reports I have
> read the fair value of FFS is in the 75c to 85c range. They have the
> time and expertise to analyse the company and crunch the numbers which
> are not straightforward due to the complex detail around the CNIFP and
> in the absence of anything else I have to accept their judgement.
> Nothing has changed to the fundamentals of the company except that the
> rights issue will strengthen the balance sheet, although to be fair
> CITIC are playing harder ball than expected and log prices have
> softened a bit but this should be offset by currency movements. And
> yet small investors seen to be bailing out in droves; I assume it is
> the small investors who are selling as not more than 3 or 4% of the
> company has changed hands in the last two or three days.
> 
> I for one will be taking up the rights and putting the shares in the
> bottom drawer. I agree with Ian Andrews re transfer of value. I
> remember NZP as well, I think Eric Ian and myself were the only ones
> who took up the rights issue and we all made a killing.
> 
> For those hoping for CAH to ride up on a white charger will be
> disappointed, the Commerce Commission would never allow it. The only
> likely buyer is Weyerhauser but I am sure that if they are still
> interested they will wait until things settle down after the rights
> issue.
> 
> John Redgrave remarked that there was a correlation between his losses
> and the shares most frequently talked about on Sharechat and perhaps
> there was some ramping and hype on this board that if I understood him
> correctly influenced the share prices. It would be nice to think that
> the members collectively could move markets but I doubt it , we merely
> reflect the opinions of the many thousands of small investors out
> there who are generally interested more in the quick buck than in long
> term gradual growth
> 
> Whilst on the subject of ramping, I wish we could stop using the term.
> To me ramping is defined as the manipulation of share prices, usually
> in small companies, by insiders (including brokers). Whilst I am sure
> that it takes place in NZ nobody on Sharechat has the ability to ramp
> anything. I propose that anyone who uses the word in future should be
> condemned to spend three nights sleeping on Ril’s floor.
> 
> As far as the Board of Directors are concerned they have done what
> they see fit is best for the shareholders but as has been pointed out
> they have presided over the decline of this company over many years.
> They have rubber stamped too many shonky proposals from headstrong
> executives. Two of the problems as I see it are
> 
>   a. They have been very loyal to senior management, very few top men
>      have been fired. There is a saying in the company "the more you
>      lose, the higher you go" This seems to have encouraged a cavalier
>      attitude. This is illustrated with a conversation I had with Hugh
>      Fletcher (name dropping Hudson!) three or four years ago. I told
>      him that I was concerned about the steel investment in China but
>      he put my mind at rest by telling me that they were only putting
>      their toe in the water and the exposure was limited to $5m. And
>      yet it cost us at least $70m.The Board must have been approved
>      this but who carried the can?
>   b. They play continual musical chairs, no one ever seem to be in a
>      job for long enough to be responsible for his decisions before he
>      is moved to the next assignment. I hope that the transfer of
>      Terry McFadgeon to FFS does not come into the same category.
>      Alexander Todte will have a different style from Terry and there
>      is bound to be an unsettling period at FLB while Alexander gets
>      his feet under the table and brings in the changes he is sure to
>      make.
> 
> I have not seen anything about who is likely to be on the boards of
> the new companies but I would bet dollars to donuts that it will be
> the same old faces. IMO the board members should accept collective
> responsibility for the Fletcher fiasco and fall on their swords. I
> hope that the institutional holders of FLB and FFS make sure that this
> happens.
> 
> Whilst talking about FLB I note in the daily email I get from one of
> the brokers that they reckon that FLB is selling at 54% discount to
> fair value.
> 
> Just caught up with the Commerce Commission news re FEG/Shell. Oh
> dear! Now the FEG holders will be upset as well. I assumed that the
> company must have had a wink from the Commission before they made the
> restructuring announcement but obviously not. Now people are baying
> are baying for Deane’s blood for making the announcement too
> early, probably the same people who were moaning about the lack of
> information last week. Damned if you do, damned if you don’t My
> guess is that the announcement was made before it was planned to
> pre-empt leaks, too many people were in the know.
> 
> Where does it leave us? Unless the Commerce Commission can be made to
> change their mind in the "National Interest" is probably means three
> stand alone companies as the Forest recapitalisation appears to be set
> in concrete. At least the FEG management will be pleased. Seeing as
> Shell values FEG minus Capstone and Rubicon (they should have left out
> the Rubi) at $8.30 why should the shares drop? But they will. Greed
> turns into fear again.
> 
> Discuss
> 
> Cheers
> 
> Mike H

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