Of Bulls & Bears

Friday 26th January 2001

AGM to be a full contact event

Directors of Contact Energy will be bracing themselves for an onslaught of small-shareholder activism at the annual meeting on Tuesday. Unhappy individual shareholders have persuaded the company not to seek approval for an increase in directors' fees for the second successive year and, once a giant is proven vulnerable, minnows become much bolder. Contact's latest annual report shows directors' fees are modest by most standards at $20,000-29,000 and $58,458 for chairman Phil Pryke, although shareholders are arguing that directors deserve no more until the company's performance and share price improves. Fortunately, directors can look forward to a handsome payout when they retire. Two departing directors received retirement payments of $65,000 each last year in addition to what is described in the report as "a gift of crystalware."

Telecom mixes despair and hope

In the movie Clockwise, a compulsively punctual John Cleese has his travel schedule destroyed by a series of bizarre events. At one stage he moans, "The despair I can handle. It's the hope that's hard to bear." Investors in Telecom Corporation will understand what he means. From $9.80 in March, its shares slipped to $4.57 on January 3. Since then, a strong recovery has been under way, with the shares rising to $5.83 on Monday for a 28% gain. However, the shares have begun drifting again, hitting $5.40 by mid-morning yesterday. Investors must be wondering if this is merely the latest in a series of Telecom recoveries that have not been sustained. Others have included a 10% rebound from $7 in early July and a 15% recovery from about $5.20 in mid-October. Both of these were followed by further declines to new lows. Fingers crossed that investors don't have their hopes dashed again this time.

Forestry returns depend on courts

Investors who took up rights to Fletcher Forests shares at 25c in December will be congratulating themselves now on their acumen. The shares are trading at around 33c, offering a 32% gain in a few weeks. However, it might be wise to remember what they say about the relationship between risk and return. Nothing has changed in the interim in the dispute between Fletcher Forests and the Chinese government-owned Citic, partners in the Central North Island Forest Partnership. Both parties are heading for the courts with the stakes worth hundreds of millions of dollars, ensuring any battle will be long and hard fought. Fletcher Forests shares might not be so popular if a judgment goes against it. Considering the vagaries of the judicial system, it would be brave investors who buy or sell shares in the company based on their expectation of the outcome.

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