Forum Archive Index - July 2001

["nick" <helmett@xtra.co.nz>]

Enza warps GPG value
07 July 2001

Three of Guinness Peat Group's biggest investments have added about 5c a share to its value this week, while New Zealand investors have knocked 11c off the share price because of concern about one of its smallest holdings.

The asset gain outweighs potential damage of 2c to 3c a share if investments in Enza and Otter Gold Mines are taken into account.

The market had blown Enza's foreign exchange loss out of proportion, Rowan Johnston, an analyst at sharebrokers Forsyth Barr Frater Williams, in Auckland said.

GPG, along with F R Partners, took control of the apple exporter by buying combined stake equivalent to 36 percent of its shares. But they have since run into problems with grower objections to a clawback on foreign exchange losses in advance of deregulation of the industry in October.

The headlines attracted by the controversy appeared to have unsettled some GPG investors.

"They've taken the headline figure at Enza, about $50 million, and taken it right of GPG's market cap," Mr Johnston said.

If GPG wrote off all its Enza investment the impact on its asset backing would be about 1c a share, he said.

After a good run up to 177c last week, GPG has fallen to 166c.

The reason for the fall was the Enza apple business sentiment, plus some profit-taking, and selling of shares related to the conversion of convertible notes, Mr Johnston said. As nearly 90 percent of GPG's shareholders were in New Zealand, events here, both positive and negative, had too much influence on the share price.

More than 90 percent of GPG's funds are invested in Britain and Australia. Successful New Zealand investments are Wrightson, Turners and Growers and a small stake in Contact Energy.

Most New Zealand equities analysts estimate GPG's asset backing at about 220c a share, based on the market value of its investments.

Mr Johnston said his own valuation was 227c. He said this was based on large British investments, such as Inchcape, trading at record highs, Coats Viyella, and de Vere Group, and the successful foray into Australia's Brickworks, also trading at close to record highs.

Enza is not the group's only problem investment in this part of the world. It has lost about $10m on its 45 percent shareholding in Otter, whose Australian subsidiary, Allstate Explorations, was recently put in administration.