Buying opportunities, Computershare CEO meeting, Woolies and Centro tilts and Trevor Rowe's page one lecture
February 18, 2010
Dear Mayne Reporters,
The Australian stockmarket is down another 3% to a three year low today, but I still reckon it represents a great buying opportunity, especially on the fixed interest and hybrids side of things given that the credit crunch is leading to crazy yields all over the world. The following three purchases were added to the 738-strong portfolio this morning:
Suncorp-Metway: bought 8 float rating notes at $74.47 which will be taken out at $100 par if CBA launches a bid
Australand Assets Trust: bought 8 of these hybrids at $75.10, comfortable that the Singapore Government controls Australand
Timbercorp: bought 7 of these 2010 corporate bonds at $82.50. Yield is 19% until maturity in December 2010 and don't think this agri-business giant is going broke, even if the cost of water is a major issue.
Media focuses on AGM season
The AFR produced quite a good package on the forthcoming AGM this morning although it was bizarre to see Trevor Rowe quoted on page one talking about "the excesses we've seen in financial institutions in North America".
"Shareholders target boards in executive pay revolt", screamed the front page headline, but the spill on page 18 specifically identifed United Group as an offender given that CEO Richard Leupen saw his pay soar from $4.3 million $5.6 million in 2007-08. United Group is chaired by Trevor Rowe.
Rowe also chairs BrisConnections which will go down as the last example of infrastructure market excess after Macquarie Group ripped out more than $100 million in fees flipping this tollroad contract with the Queensland Government straight into the thoroughly underwhelmed public markets a few weeks back. Glenn Dyer produced this fascinating story in Crikey today pointing out that two of the Brisconnections banks in Europe have hit the skids. The $1 partly paid units closed at 3.6c today. Trevor Rowe, who spent a career working for US investment banks, is not the man to start lecturing anyone about financial markets excess.
Rowe is someone who sits on all sides of the fence, neatly demonstrating the structural problem with Australia's financial services industry. At the end of the day, it is the same small group of people who exert infuence over big company boards, the funds which invest equity, the banks which provide debt and the bodies which regulate the whole affair.
In Rowe's case, he is a director of ASX (rule maker), chairman of the QIC (investor), guardian of the Future Fund (investor), chairman of Rothschild (investment banker) and chairman of two listed companies through United Group and BrisConnect.
The World Today on ABC radio followed up The AFR's package and my contribution included another slap at Oz Minerals for giving Owen Hegarty an $8 million golden goodbye even after shareholders voted down an earlier $10.4 million payout which was based on assumptions the share price would be north of $5 in 2011. Oz Minerals shares tumbled another 10% to $1.39 today. Hegarty should hand back at least half of his $8 million.
Invoking the UN PRI against Woolworths
In the world of Australian shareholder activism, we're now locked in for "Super Thursday" when there will be contested board elections at Woolworths, BHP Billiton and Centro Retail at three separate AGMs on November 27 in Melbourne.
The censored BHP Billiton platform was explained in the September 29 edition and the Woolworths nomination was faxed, emailed and snail mailed today. It represents the first time we've run a straight corporate social responsibility campaign invoking the increasingly influential United Nations Principles for Responsible Investing. The global credit crunch is causing a big backlash against corporate greed and irresponsibility, which is exactly what the giant Woolworths pokies division represents. The requested platform reads as follows:
Mr Mayne believes Woolworths needs more directors in tune with the global focus on corporate social responsibility. In particular, Mr Mayne is concerned about potential damage to the Woolworths brand and franchise from its operation of more than 11,000 pokies at its pubs and clubs through the ALH joint venture with Bruce Mathieson. Based on comments by Woolworths CEO Michael Luscombe at the 2007 AGM, Mr Mayne is concerned the board is not fully informed on the nature and conduct of its gambling operation. Woolworths is the only major retailer in the world to have built such a large gambling business and Australians lose more per capita gambling than any other citizens. Mr Mayne believes Woolworths should exit the gambling business or, at the very least, offer its 11,000 pokies to Australians in a more sustainable and responsible manner. If not, it potentially risks being unfavourable screened by professional investors who are signatories to the United Nations Principles for Responsible Investment. Woolworths should also ban children from attending its pokies hotels.
Crikey subscribers should read this platform in conjunction with today's story about Woolies avoiding big media scrutiny because of the power that comes from its huge advertising budget.
The Norwegian sovereign fund recently sold out of Rio Tinto because of its environmental practices at the giant Freeport McMoran operation in Indonesia, so it will be interesting to see if any other global funds decide that the biggest pokies operation in the world's most gambling-addicted society is enough to warrant dumping Woolies shares.
Reworking the Centro Retail tilt
The Centro Retail tilt is completely different, focusing on conflicts, financial performance and the need for independent directors. Centro got in touch last week asking that the nomination be resubmitted with the relevent company described as "Centro Retail Ltd" rather than "Centro Retail Group". This provided an opportunity to rework the platform and we've now settled on the following:
Mr Mayne believes Centro Retail Ltd urgently needs directors who are independent of its manager and associate, Centro Properties Group. The two entities have different owners and interests, yet for the past few years have had so-called “mirror boards”, with no directors only representing Centro Retail Ltd's owners. This is contrary to good corporate governance and has also delivered dreadful performance for Centro Retail Ltd over the past year with the share price falling by more than 90%. Mr Mayne believe a more independent Centro Retail Ltd board would have provided more timely and comprehensive disclosure of the substantial debts incurred by Centro Retail Ltd, as arranged by its manager, on the ill-fated New Plan acquisition.
A meeting with the Computershare CEO
Meanwhile, last Friday's edition had a pretty interesting impact, especially this entry in our list of AGMs we're looking forward to in the coming weeks:
Computershare: November 11 in Melbourne
Keen to have a detailed exchange on the lack of an audit trail in corporate voting.
Within 90 minutes, Computershare CEO Stuart Crosby was emailing and we're getting together for a briefing on Thursday afternoon with the bloke who runs the world's biggest share registry business out of Melbourne. It will presumably be off the record but we'll certainly be back with more information on the Australian corporate voting system and how it compares with the rest of the world.
Colourful new entry for the Mayne Report Rich List
The Weekend Australian had a cracking front page story which generated the following new entry on our Rich List:
Natajle Iloski: owner and founder of the Glad Group which is one of the fastest-growing cleaning companies in Australia. Glad has risen to an $80 million turnover for 2007-08. A key to their success is the fact that they have secured large retail cleaning contracts in Sydney and then subcontract the work out to other individuals or cleaning companies. An ex-employee has been reported as saying how a majority of the cleaners contracted are foreign nationals who are not only vulnerable, but are also being exploited whilst Iloski's wife drives around in a new Maserati.
Go here for the full Mayne Report Rich List now with over 1200 names and read the original article - Cleaning industry's dirty secrets - by The Australian's Elisabeth Wynhausen.
That's all for now.
Do ya best, Stephen Mayne
The Australian stockmarket is down another 3% to a three year low today, but I still reckon it represents a great buying opportunity, especially on the fixed interest and hybrids side of things given that the credit crunch is leading to crazy yields all over the world. The following three purchases were added to the 738-strong portfolio this morning:
Suncorp-Metway: bought 8 float rating notes at $74.47 which will be taken out at $100 par if CBA launches a bid
Australand Assets Trust: bought 8 of these hybrids at $75.10, comfortable that the Singapore Government controls Australand
Timbercorp: bought 7 of these 2010 corporate bonds at $82.50. Yield is 19% until maturity in December 2010 and don't think this agri-business giant is going broke, even if the cost of water is a major issue.
Media focuses on AGM season
The AFR produced quite a good package on the forthcoming AGM this morning although it was bizarre to see Trevor Rowe quoted on page one talking about "the excesses we've seen in financial institutions in North America".
"Shareholders target boards in executive pay revolt", screamed the front page headline, but the spill on page 18 specifically identifed United Group as an offender given that CEO Richard Leupen saw his pay soar from $4.3 million $5.6 million in 2007-08. United Group is chaired by Trevor Rowe.
Rowe also chairs BrisConnections which will go down as the last example of infrastructure market excess after Macquarie Group ripped out more than $100 million in fees flipping this tollroad contract with the Queensland Government straight into the thoroughly underwhelmed public markets a few weeks back. Glenn Dyer produced this fascinating story in Crikey today pointing out that two of the Brisconnections banks in Europe have hit the skids. The $1 partly paid units closed at 3.6c today. Trevor Rowe, who spent a career working for US investment banks, is not the man to start lecturing anyone about financial markets excess.
Rowe is someone who sits on all sides of the fence, neatly demonstrating the structural problem with Australia's financial services industry. At the end of the day, it is the same small group of people who exert infuence over big company boards, the funds which invest equity, the banks which provide debt and the bodies which regulate the whole affair.
In Rowe's case, he is a director of ASX (rule maker), chairman of the QIC (investor), guardian of the Future Fund (investor), chairman of Rothschild (investment banker) and chairman of two listed companies through United Group and BrisConnect.
The World Today on ABC radio followed up The AFR's package and my contribution included another slap at Oz Minerals for giving Owen Hegarty an $8 million golden goodbye even after shareholders voted down an earlier $10.4 million payout which was based on assumptions the share price would be north of $5 in 2011. Oz Minerals shares tumbled another 10% to $1.39 today. Hegarty should hand back at least half of his $8 million.
Invoking the UN PRI against Woolworths
In the world of Australian shareholder activism, we're now locked in for "Super Thursday" when there will be contested board elections at Woolworths, BHP Billiton and Centro Retail at three separate AGMs on November 27 in Melbourne.
The censored BHP Billiton platform was explained in the September 29 edition and the Woolworths nomination was faxed, emailed and snail mailed today. It represents the first time we've run a straight corporate social responsibility campaign invoking the increasingly influential United Nations Principles for Responsible Investing. The global credit crunch is causing a big backlash against corporate greed and irresponsibility, which is exactly what the giant Woolworths pokies division represents. The requested platform reads as follows:
Mr Mayne believes Woolworths needs more directors in tune with the global focus on corporate social responsibility. In particular, Mr Mayne is concerned about potential damage to the Woolworths brand and franchise from its operation of more than 11,000 pokies at its pubs and clubs through the ALH joint venture with Bruce Mathieson. Based on comments by Woolworths CEO Michael Luscombe at the 2007 AGM, Mr Mayne is concerned the board is not fully informed on the nature and conduct of its gambling operation. Woolworths is the only major retailer in the world to have built such a large gambling business and Australians lose more per capita gambling than any other citizens. Mr Mayne believes Woolworths should exit the gambling business or, at the very least, offer its 11,000 pokies to Australians in a more sustainable and responsible manner. If not, it potentially risks being unfavourable screened by professional investors who are signatories to the United Nations Principles for Responsible Investment. Woolworths should also ban children from attending its pokies hotels.
Crikey subscribers should read this platform in conjunction with today's story about Woolies avoiding big media scrutiny because of the power that comes from its huge advertising budget.
The Norwegian sovereign fund recently sold out of Rio Tinto because of its environmental practices at the giant Freeport McMoran operation in Indonesia, so it will be interesting to see if any other global funds decide that the biggest pokies operation in the world's most gambling-addicted society is enough to warrant dumping Woolies shares.
Reworking the Centro Retail tilt
The Centro Retail tilt is completely different, focusing on conflicts, financial performance and the need for independent directors. Centro got in touch last week asking that the nomination be resubmitted with the relevent company described as "Centro Retail Ltd" rather than "Centro Retail Group". This provided an opportunity to rework the platform and we've now settled on the following:
Mr Mayne believes Centro Retail Ltd urgently needs directors who are independent of its manager and associate, Centro Properties Group. The two entities have different owners and interests, yet for the past few years have had so-called “mirror boards”, with no directors only representing Centro Retail Ltd's owners. This is contrary to good corporate governance and has also delivered dreadful performance for Centro Retail Ltd over the past year with the share price falling by more than 90%. Mr Mayne believe a more independent Centro Retail Ltd board would have provided more timely and comprehensive disclosure of the substantial debts incurred by Centro Retail Ltd, as arranged by its manager, on the ill-fated New Plan acquisition.
A meeting with the Computershare CEO
Meanwhile, last Friday's edition had a pretty interesting impact, especially this entry in our list of AGMs we're looking forward to in the coming weeks:
Computershare: November 11 in Melbourne
Keen to have a detailed exchange on the lack of an audit trail in corporate voting.
Within 90 minutes, Computershare CEO Stuart Crosby was emailing and we're getting together for a briefing on Thursday afternoon with the bloke who runs the world's biggest share registry business out of Melbourne. It will presumably be off the record but we'll certainly be back with more information on the Australian corporate voting system and how it compares with the rest of the world.
Colourful new entry for the Mayne Report Rich List
The Weekend Australian had a cracking front page story which generated the following new entry on our Rich List:
Natajle Iloski: owner and founder of the Glad Group which is one of the fastest-growing cleaning companies in Australia. Glad has risen to an $80 million turnover for 2007-08. A key to their success is the fact that they have secured large retail cleaning contracts in Sydney and then subcontract the work out to other individuals or cleaning companies. An ex-employee has been reported as saying how a majority of the cleaners contracted are foreign nationals who are not only vulnerable, but are also being exploited whilst Iloski's wife drives around in a new Maserati.
Go here for the full Mayne Report Rich List now with over 1200 names and read the original article - Cleaning industry's dirty secrets - by The Australian's Elisabeth Wynhausen.
That's all for now.
Do ya best, Stephen Mayne