Daily ShareChat: New Zealand Windfarms

By Jenny Ruth

Tuesday 30th March 2010

New Zealand Windfarms' eight-for-three $31.4 million rights issue is so deeply discounted that shareholders should take up their rights, says Grant Swanepoel, an analyst at Craigs Investment Partners.

The issue is priced at 15 cents a share compared with the 39 cents the shares were trading at before the issue was announced.

"The value shifted into the rights is too large for existing shareholders to consider anything but following," Swanepoel says.

If investors can't afford to take up their rights or don't want to for any other reason "we would highly recommend selling before the ex-rights date," he says. That's 5pm on April 6. "While we believe that selling below 40 cents a share is value destructive, it would be better to sell at any price above 25.8 cents (his post-rights valuation) as this will still hold some rights option value."

While there's a chance 20% shareholder Vector could increase its shareholding above 25%, "thus giving it disproportional power to dictate the direction of the company going forward," he thinks the pricing should prevent this.

Shareholders are to vote on April 6 on whether to allow Vector to increase its stake beyond 20% by taking up any shortfall.

BROKER CALL: buy.

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