Surviving the silly season, Babcock's hit, Macquarie Office, Frank Costa's pokies spin, 2009 AGM targets, SPP plays and more sell-downs
January 14, 2009
Dear Mayne Reporters,
We're back in the saddle after a few relaxing days with the family at Phillip Island where we celebrated New Year's Eve with the latest generation of Corey Worthingtons. It was just charming having foul-mouthed louts stripping off to reveal their Borat bathing costumes in front of our kids, aged 4, 5 and 7.
The Herald Sun reported that Cowes was over-run by drunken teenagers on New Year's Eve and there was also this report about drug dealers being arrested about 200 metres from where we were staying on The Esplanade.
The silly season bad news just seemed strangely to all be connected to Phillip Island and the City of Manningham.
A man's body was found washed up on French Island after he disappeared from Cowes on New Year's Eve. Turns out he was from East Doncaster and therefore was one of our council's constituents.
Two days later we had a body discovered in Park Orchards, also part of Manningham.
Whilst the car loads of louts were less prevalent at Cowes after January 3, nature got a bit wild as well. We took the kids for their first experience of wave boogie boarding at Phillip Island's famous Woolamai surf beach on Monday and were all set to return on Tuesday afternoon until, after the sunscreen had been applied, we discovered a school friend of Laura's had moved into the unit next door.
It seems a bullet was dodged courtesy of Laura's Persian friend as the Herald Sun splashed yesterday's paper with a story head-lined "Dozens cheat death in series of near tragedies in Victoria". The third dot point read as follows: "Dozens of swimmers were swept into rough seas, including 17 at Woolamai."
Given all of that, it's a huge relief to be safely back home putting out another edition of The Mayne Report, although we should stress it was probably the best family holiday we've had.
The only bad moment was when we discovered why Kylie Minogue is selling her French Island hideaway after swarms of mosquitoes inundated the bus and also set upon us when touring the old prison turned eco-farm. It's all very well hoping to escape the media on a remote island accessible only by boat with no made roads or utilities, but papparazzi are much nicer than swarms of mosquitoes.
Babcock & Brown starts the write-off avalanche
It was good to see Babcock & Brown come out yesterday, just seven days after books closed for its financial year, and foreshadow $3 billion-plus in write-downs and a balance sheet with negative assets. The key points of the statement read like this:
Asset impairment charges will be such that the Company will be in a substantial negative net asset position at 31 December 2008. This position encompasses the reclassification of ‘non-core' assets on the balance sheet as 'available for sale', in line with the Company's revised business strategy announced to the market on 19 November 2008. The impairment process is subject to finalisation and audit review which will not be completed until closer to the scheduled release of the Company's results currently expected on 26 February 2009.
The Company is in discussions with its banking syndicate regarding a debt for equity swap or equivalent restructuring to stabilise the long term capital structure of the Group. Any such capital restructure is expected to significantly dilute existing shareholders, negatively impacting the value of equity.
I'm only aware of one other major public company with negative book value and that is regional pay-TV outfit Austar, even though it is currently capitalised at $981 million. Whilst Austar's negative assets of $267 million is clearly ridiculous - as you can see from the debate at the 2008 AGM - at least the accounting policy at Austar is conservative compared with those companies we named and shamed in this recent edition revealing "Australia's most inaccurate balance sheets".
Thankfully, Babcock & Brown has now belatedly joined the reality club, although it would have been nice to see some of that from Phil Green at the 2008 AGM last May.
Assuming Babcock survives to report its $3 billion-plus loss - which will come in at number three on our biggest losses in history list - at least it won't find itself on this list which tracks the biggest claimed net asset values of companies at the time of their collapse.
For instance, the final set of published ABC Learning accounts claimed it was worth $2.23 billion. No wonder the Brisbane office of ABC Learning auditor Pitcher Partners is fast dissolving, although its Melbourne office happily explained the skin shedding structure in Crikey's letters section today.
Oz Minerals is well-placed to knock ABC Learning from the top of this list, given that its latest net assets claim in August was $3.2 billion. It will be very interesting to see what sort of write-off Oz Minerals delivers in its February results and auditor Alison Kitchen from KPMG should have a strong view too. Lots of shareholders are just champing at the bit for the April-May Oz Minerals AGM, if the company survives that long.
Whilst the likes of GPG and Leighton have also joined the write-down parade, Babcock is the biggest to date and we'll probably see more than 10 companies produced writedowns worth more than $1 billion in February.
Naturally, those companies with new CEOs or chairs - and Babcock has changed both - will be far more inclined to pull out the axe, as this list tracking writedowns by new CEOs attests.
Keeping the pressure on the pokies
It was good to hear Paul Bendat from www.pokiewatch.org interviewed by Waleed Aly on 774 ABC Melbourne this week after The Age reported the enormous growth of pokies losses in Melbourne's growth corridoors. Have a listen.
Paul suggest Waleed ask Geelong Football Club President Frank Costa a question about the club's use of pokies profits to prop up elite football expenditure when it is meant to demonstrate some sort of community benefit. Here is a transcript of Frank's longest statement.
"If I was a benevolent dictator, which I'm not, I would probably ban cigarettes, alcohol, and gambling off the face of Australia because I think those three do a lot of harm as I go through society and I see the aftermath. However, because its a free country and we're allowed to do those things, then the best way to operate them is to control them as well as you can. And I know we were invited by a particular shire to come in and put in our operation similar to Club Cats in Geelong because they would prefer to have a sort of poker type operation conducted by a well organised run football club than a hotel. And I can understand that. And they say we have to have one in our area, we don't want more than one, we have to have one, we'd rather have a football club run it than a hotel. That made sense to me and I think we have something the public want."
Apart from his immoral rationale - if its legal, let's do it - Frank never mentions that the Wyndham Council eventually opposed Geelong's application. The evidence at the VCGR hearing of the club's Point Cook venue application put forward by the Council was that "what was said to Mr Costa was not authorised and certainly not endorsed by the Council". See paragraph 83.
While there was some "to and fro" about this evidence Frank still raises the point and should have been more forthcoming about its true nature when speaking to the ABC audience.
The last word on Wyndham can be found in this recent story in The Age and check out Paul Bendat's excellent blog update on the radio exchange with Frank Costa.
Macquarie Office Trust embarrassment for Millionaires Factory
I sent off a cheque for $63 before Christmas to take up the desperate one-for-one Macquarie Office rights issue at the knock-down price of just 20c, but have now realised that investors are entitled to apply for additional units at the same price before the offer closes on Monday.
Whilst the paperwork was disposed of, I did manage to recover the form online and do a $5000 Bpay this afternoon. If the much-unloved units remain at 24.5c, this should deliver a quick $1100 gain, although prices do tend to dip after a major capital raising as many investors quickly sprint for the exit.
Macquarie Group has an interesting decision to make here, because they have underwritten $150 million of the $500 million Macquarie Office emergency capital raising, which comprised a $100 million placement already completed, a $243 million institutional entitlement offer and up to $165 million from the retail offer.
Macquarie has already signed up for its $28 million entitlement, but how much of the residual $122 million underwriting commitment will be shelled out?
Given that the offer is in the money, does Macquarie scale back retail investors such as The Mayne Report to further average down their book value, whilst increasing the existing 11% Macquarie Office stake in percentage terms?
Once the last round of write-downs are completed for the year to March 31, Macquarie will have probably written down its Macquarie Office investment by more than $150 million, although the yield has been handy over the years, not to mention the management fees.
Macquarie Office units were trading at $1.70 in May 2007 and given it owns 50% of the bank's head office at Number 1 Martin Place in Sydney, this situation is probably the biggest embarrassment yet for the Millionaire's Factory. Investors have literally lost more than $2 billion, but the bank has so far resisted repeating the Babcock & Brown Power situation by directly extending loans to a troubled fund.
If Macquarie had any sense of responsibility for appalling performance courtesy of excessive debt in its listed real estate trusts, it would resign as Macquarie Office manager. Alas, all we've had so far is the recent resignation of long-serving chairman Simon Jones, who remains within the mothership, having been paid tens of millions in bonuses over the years.
Not much of these millions finished up invested in Macquarie Office as Simon's farewell ASX declaration revealed he only owned 178,977 units, worth less than $50,000 at today's prices. I've emailed Simon today, asking whether he'll be taking up his entitlement or even applying for additional shares at the firesale price of 20c in the latest offer, but don't expect a response as Macquarie never provides more disclosure than it has to and Simon is no longer a director.
The Australian's Adele Ferguson produced this savage attack last week which basically implied the market had been misled over debt rollover issues and Macquarie Office was in severe trouble.
Then again, Adele's been pushing this scenario about trouble inside the broader Macquarie empire for a while, if you recall the big debate about responsible journalism from last September.
Meanwhile, Macquarie Group relased this profit warning today which has been adroitly analysed by Tony Boyd on Business Spectator. The stock finished only 3.85% lower today so the damage wasn't too bad.
Those Macquarie Office and other listed fund write-downs will hurt the full year result but Macquarie remains a very different story to the likes of Babcock, Bear Stearns, Lehman Brothers and friends.
However, when you total up all the losses in the various funds, Macquarie must be getting close to the stage of being a net destroyer of wealth across its entire spread of operations. Except, of course, for those lucky millionaire bankers who have pocketed billions.
As ANZ CEO Mike Smith recently told The Australian's Richard Gluyas: "I've always said that you should never buy shares in an investment bank; leave investment banking for those who are good at it. You work for one because that's how you're looked after. But they don't look after shareholders."
Indeed!
Playing the share purchase plan game
The avalanche of capital raisings over the past few months is expected to continue into 2009 and we're certainly seeing quite a bit of activity with share purchase plans (SPPs) for us retail investors. I've decided to pare back the world's biggest small share portfolio, but so far we've barely got it below 700 stocks, so the capital raising offers hvae been coming in thick and fast.
We had two good recent SPP plays in Sonic Healthcare and Bendigo Bank which together delivered about $1400 in profits and we're looking good for a $1000-plus profit on QBE Insurance once the $5000 worth of shares at $20.50 a pop are alloted on January 16, assuming the share price holds above $25.
The banks are certainly hungry for new capital as they cope with the triple hit of big demand caused by fleeing foreign banks, surging bad debts and difficult wholesale markets.
Bank of Queensland
After making a quick $800 out of Bendigo Bank last week, we're mulling taking up the $10,000 Bank of Queensland SPP because it comes at the lower of $10.08 a share or a 7.5% discount to the average market price over the five days leading up to the offer close on January 23.
With the stock closing this afternoon at $9.67, it will obviously be priced using the 7.5% discount to market mechanism. On these offers you hope to get a market downturn during the pricing period given us short-term investors will be carrying the market risk through until the new BoQ shares are allotted on February 2. As someone who believes bank shares are still over-priced, I won't be taking a punt on this one unless the pricing looks likely to be under $9.50. Check out the Bank of Queensland SPP details here.
Westpac
Whilst the Mayne Report balance sheet doesn't have a lot of spare capacity, there is also the potential to write out cheques for $20,000 to take up Westpac's $10,000 SPP at $16 a share, given that both the wife and I are on the register.
Westpac is offering an alternative market-based pricing option like Bank of Queensland, but without the discount, so the key thing to watch is whether this morning's share price of $16.50 can stay at least 5% above the $16 fixed price. The Westpac SPP closes on January 30 and the shares are allotted on February 11, so the full $20,000 exposure would run for a maximum of seven working days. Check out full details of the Westpac offer here.
Dexus Property Group
Today's mail also delivered a $10,000 SPP from Dexus Property Group which looks quite attractive with a fixed price version of 72.3c, compared with this afternoon's closing price of 82.5c. This offer closes on February 3 and the shares are alloted on February 6. With Bpay you can delay investing until the last minute so if the current price holds this looks like an easy $1,200-plus profit. Check out the Dexus offer details here.
Selling more shares into the 2009 rally
Our December 31 edition listed some solid selling we had been doing during the silly season rally and it has continued with the following sales which were thankfully completed before today's 95 point decline in the All Ords from last night's two month high of 3728.2
January 2:
Reckon: sold 333 shares at $1.09, losing about $100
UBI: sold 500 shares at 62c, losing almost $200
Penrice Soda: sold 334 shares at $1.25, losing about $100
January 5
Viridis: sold 758 at 66c to almost break even
Mine Makers: sold 515 at 52c, losing about $250.
Campbell Brothers: sold 17 at $18.99, losing about $200
Data#3: sold 71 at $5.09, losing about $150
January 6
Blackmores: sold 25 at $14, losing about $150
January 7
Tox Free: sold 230 at $1.29, losing about $200
AMP China: sold 400 at 86c, losing about $150
MEO: sold 1335 at 18.5c, losing about $250
As you can see, I've suffered plenty of pain in the smaller end of the market but here's hoping the overall losses have stabilised at around $100,000.
AGMs, radio, Manningham and Mayne Report: balancing the workload in 2009
If you'd like a reminder of our work for Mayne Report subscribers during 2008, we've packaged up all 175 editions here. Future 2009 editions won't be so readily available on the web.
With extra commitments such as serving on the City of Manningham council, we also won't be producing quite so regularly in 2009, but the base case will be at least one bumper edition a week, plus specials on AGMs and board tilts as events unfold.
The council workload is pretty hectic. Try this for size over the next few days:
Tomorrow: tour of the wonderful Aquarena aquatic facility with CEO of Manningham YMCA.
Monday: separate meetings about sporting pavillions and shade cloth in a local park.
Tuesday: five hour briefing on Doncaster Hill development, where Westfield has just invested more than $400 million, then separate meeting with councillors.
Wednesday: Monthly Aquarena performance meeting.
Given that council meets most Tuesday nights, we've had to change the regular 774 ABC Melbourne radio spot to Wednesday at 5.40pm, although it will be on Thursday during January. And with the overall commitments being just too great, it is probably time to let the 702 ABC Sydney gig go after nine years, although there will be occasional fill-in spots when the likes of The Australian's Andrew Main can't make it.
Doing two weekly 90-minute round trips into the city for unpaid ABC radio spots is hard to justify when the margin calls are bearing down on you.
AGM attendances in 2009 will also be lower than the record 64 in 2008, but the idea will be to focus on better researched engagements with less companies.
For instance, the first encounter for 2009 will probably be the Orica AGM on January 30, where largest shareholder Perpetual is expected to vote against at least one of the three directors up for re-election.
After that, we'll be down for another round with AWB on February 10 and then have Timbercorp in our sites on March 27. The mini-AGM season in April and May for companies with December 31 balance dates will include the likes of Oz Minerals, Alumina, Axa, Rio Tinto, Westfield, Babcock & Brown, Macquarie Airports and Austar.
However, we'll just have to see how the finances are travelling when it comes to visiting Sydney this year. The wonderful wife is taking a much closer look at the finances these days, so every expenditure requires solid justification.
That's all for now.
Do ya best, Stephen Mayne
* If you're reading this without being a subscriber, why not sign up for a free trial or take up our special $99 subscription offer which lasts until June 30, 2009. Alternatively, if you've had enough, click here to unsubscribe from this email list.
We're back in the saddle after a few relaxing days with the family at Phillip Island where we celebrated New Year's Eve with the latest generation of Corey Worthingtons. It was just charming having foul-mouthed louts stripping off to reveal their Borat bathing costumes in front of our kids, aged 4, 5 and 7.
The Herald Sun reported that Cowes was over-run by drunken teenagers on New Year's Eve and there was also this report about drug dealers being arrested about 200 metres from where we were staying on The Esplanade.
The silly season bad news just seemed strangely to all be connected to Phillip Island and the City of Manningham.
A man's body was found washed up on French Island after he disappeared from Cowes on New Year's Eve. Turns out he was from East Doncaster and therefore was one of our council's constituents.
Two days later we had a body discovered in Park Orchards, also part of Manningham.
Whilst the car loads of louts were less prevalent at Cowes after January 3, nature got a bit wild as well. We took the kids for their first experience of wave boogie boarding at Phillip Island's famous Woolamai surf beach on Monday and were all set to return on Tuesday afternoon until, after the sunscreen had been applied, we discovered a school friend of Laura's had moved into the unit next door.
It seems a bullet was dodged courtesy of Laura's Persian friend as the Herald Sun splashed yesterday's paper with a story head-lined "Dozens cheat death in series of near tragedies in Victoria". The third dot point read as follows: "Dozens of swimmers were swept into rough seas, including 17 at Woolamai."
Given all of that, it's a huge relief to be safely back home putting out another edition of The Mayne Report, although we should stress it was probably the best family holiday we've had.
The only bad moment was when we discovered why Kylie Minogue is selling her French Island hideaway after swarms of mosquitoes inundated the bus and also set upon us when touring the old prison turned eco-farm. It's all very well hoping to escape the media on a remote island accessible only by boat with no made roads or utilities, but papparazzi are much nicer than swarms of mosquitoes.
Babcock & Brown starts the write-off avalanche
It was good to see Babcock & Brown come out yesterday, just seven days after books closed for its financial year, and foreshadow $3 billion-plus in write-downs and a balance sheet with negative assets. The key points of the statement read like this:
Asset impairment charges will be such that the Company will be in a substantial negative net asset position at 31 December 2008. This position encompasses the reclassification of ‘non-core' assets on the balance sheet as 'available for sale', in line with the Company's revised business strategy announced to the market on 19 November 2008. The impairment process is subject to finalisation and audit review which will not be completed until closer to the scheduled release of the Company's results currently expected on 26 February 2009.
The Company is in discussions with its banking syndicate regarding a debt for equity swap or equivalent restructuring to stabilise the long term capital structure of the Group. Any such capital restructure is expected to significantly dilute existing shareholders, negatively impacting the value of equity.
I'm only aware of one other major public company with negative book value and that is regional pay-TV outfit Austar, even though it is currently capitalised at $981 million. Whilst Austar's negative assets of $267 million is clearly ridiculous - as you can see from the debate at the 2008 AGM - at least the accounting policy at Austar is conservative compared with those companies we named and shamed in this recent edition revealing "Australia's most inaccurate balance sheets".
Thankfully, Babcock & Brown has now belatedly joined the reality club, although it would have been nice to see some of that from Phil Green at the 2008 AGM last May.
Assuming Babcock survives to report its $3 billion-plus loss - which will come in at number three on our biggest losses in history list - at least it won't find itself on this list which tracks the biggest claimed net asset values of companies at the time of their collapse.
For instance, the final set of published ABC Learning accounts claimed it was worth $2.23 billion. No wonder the Brisbane office of ABC Learning auditor Pitcher Partners is fast dissolving, although its Melbourne office happily explained the skin shedding structure in Crikey's letters section today.
Oz Minerals is well-placed to knock ABC Learning from the top of this list, given that its latest net assets claim in August was $3.2 billion. It will be very interesting to see what sort of write-off Oz Minerals delivers in its February results and auditor Alison Kitchen from KPMG should have a strong view too. Lots of shareholders are just champing at the bit for the April-May Oz Minerals AGM, if the company survives that long.
Whilst the likes of GPG and Leighton have also joined the write-down parade, Babcock is the biggest to date and we'll probably see more than 10 companies produced writedowns worth more than $1 billion in February.
Naturally, those companies with new CEOs or chairs - and Babcock has changed both - will be far more inclined to pull out the axe, as this list tracking writedowns by new CEOs attests.
Keeping the pressure on the pokies
It was good to hear Paul Bendat from www.pokiewatch.org interviewed by Waleed Aly on 774 ABC Melbourne this week after The Age reported the enormous growth of pokies losses in Melbourne's growth corridoors. Have a listen.
Paul suggest Waleed ask Geelong Football Club President Frank Costa a question about the club's use of pokies profits to prop up elite football expenditure when it is meant to demonstrate some sort of community benefit. Here is a transcript of Frank's longest statement.
"If I was a benevolent dictator, which I'm not, I would probably ban cigarettes, alcohol, and gambling off the face of Australia because I think those three do a lot of harm as I go through society and I see the aftermath. However, because its a free country and we're allowed to do those things, then the best way to operate them is to control them as well as you can. And I know we were invited by a particular shire to come in and put in our operation similar to Club Cats in Geelong because they would prefer to have a sort of poker type operation conducted by a well organised run football club than a hotel. And I can understand that. And they say we have to have one in our area, we don't want more than one, we have to have one, we'd rather have a football club run it than a hotel. That made sense to me and I think we have something the public want."
Apart from his immoral rationale - if its legal, let's do it - Frank never mentions that the Wyndham Council eventually opposed Geelong's application. The evidence at the VCGR hearing of the club's Point Cook venue application put forward by the Council was that "what was said to Mr Costa was not authorised and certainly not endorsed by the Council". See paragraph 83.
While there was some "to and fro" about this evidence Frank still raises the point and should have been more forthcoming about its true nature when speaking to the ABC audience.
The last word on Wyndham can be found in this recent story in The Age and check out Paul Bendat's excellent blog update on the radio exchange with Frank Costa.
Macquarie Office Trust embarrassment for Millionaires Factory
I sent off a cheque for $63 before Christmas to take up the desperate one-for-one Macquarie Office rights issue at the knock-down price of just 20c, but have now realised that investors are entitled to apply for additional units at the same price before the offer closes on Monday.
Whilst the paperwork was disposed of, I did manage to recover the form online and do a $5000 Bpay this afternoon. If the much-unloved units remain at 24.5c, this should deliver a quick $1100 gain, although prices do tend to dip after a major capital raising as many investors quickly sprint for the exit.
Macquarie Group has an interesting decision to make here, because they have underwritten $150 million of the $500 million Macquarie Office emergency capital raising, which comprised a $100 million placement already completed, a $243 million institutional entitlement offer and up to $165 million from the retail offer.
Macquarie has already signed up for its $28 million entitlement, but how much of the residual $122 million underwriting commitment will be shelled out?
Given that the offer is in the money, does Macquarie scale back retail investors such as The Mayne Report to further average down their book value, whilst increasing the existing 11% Macquarie Office stake in percentage terms?
Once the last round of write-downs are completed for the year to March 31, Macquarie will have probably written down its Macquarie Office investment by more than $150 million, although the yield has been handy over the years, not to mention the management fees.
Macquarie Office units were trading at $1.70 in May 2007 and given it owns 50% of the bank's head office at Number 1 Martin Place in Sydney, this situation is probably the biggest embarrassment yet for the Millionaire's Factory. Investors have literally lost more than $2 billion, but the bank has so far resisted repeating the Babcock & Brown Power situation by directly extending loans to a troubled fund.
If Macquarie had any sense of responsibility for appalling performance courtesy of excessive debt in its listed real estate trusts, it would resign as Macquarie Office manager. Alas, all we've had so far is the recent resignation of long-serving chairman Simon Jones, who remains within the mothership, having been paid tens of millions in bonuses over the years.
Not much of these millions finished up invested in Macquarie Office as Simon's farewell ASX declaration revealed he only owned 178,977 units, worth less than $50,000 at today's prices. I've emailed Simon today, asking whether he'll be taking up his entitlement or even applying for additional shares at the firesale price of 20c in the latest offer, but don't expect a response as Macquarie never provides more disclosure than it has to and Simon is no longer a director.
The Australian's Adele Ferguson produced this savage attack last week which basically implied the market had been misled over debt rollover issues and Macquarie Office was in severe trouble.
Then again, Adele's been pushing this scenario about trouble inside the broader Macquarie empire for a while, if you recall the big debate about responsible journalism from last September.
Meanwhile, Macquarie Group relased this profit warning today which has been adroitly analysed by Tony Boyd on Business Spectator. The stock finished only 3.85% lower today so the damage wasn't too bad.
Those Macquarie Office and other listed fund write-downs will hurt the full year result but Macquarie remains a very different story to the likes of Babcock, Bear Stearns, Lehman Brothers and friends.
However, when you total up all the losses in the various funds, Macquarie must be getting close to the stage of being a net destroyer of wealth across its entire spread of operations. Except, of course, for those lucky millionaire bankers who have pocketed billions.
As ANZ CEO Mike Smith recently told The Australian's Richard Gluyas: "I've always said that you should never buy shares in an investment bank; leave investment banking for those who are good at it. You work for one because that's how you're looked after. But they don't look after shareholders."
Indeed!
Playing the share purchase plan game
The avalanche of capital raisings over the past few months is expected to continue into 2009 and we're certainly seeing quite a bit of activity with share purchase plans (SPPs) for us retail investors. I've decided to pare back the world's biggest small share portfolio, but so far we've barely got it below 700 stocks, so the capital raising offers hvae been coming in thick and fast.
We had two good recent SPP plays in Sonic Healthcare and Bendigo Bank which together delivered about $1400 in profits and we're looking good for a $1000-plus profit on QBE Insurance once the $5000 worth of shares at $20.50 a pop are alloted on January 16, assuming the share price holds above $25.
The banks are certainly hungry for new capital as they cope with the triple hit of big demand caused by fleeing foreign banks, surging bad debts and difficult wholesale markets.
Bank of Queensland
After making a quick $800 out of Bendigo Bank last week, we're mulling taking up the $10,000 Bank of Queensland SPP because it comes at the lower of $10.08 a share or a 7.5% discount to the average market price over the five days leading up to the offer close on January 23.
With the stock closing this afternoon at $9.67, it will obviously be priced using the 7.5% discount to market mechanism. On these offers you hope to get a market downturn during the pricing period given us short-term investors will be carrying the market risk through until the new BoQ shares are allotted on February 2. As someone who believes bank shares are still over-priced, I won't be taking a punt on this one unless the pricing looks likely to be under $9.50. Check out the Bank of Queensland SPP details here.
Westpac
Whilst the Mayne Report balance sheet doesn't have a lot of spare capacity, there is also the potential to write out cheques for $20,000 to take up Westpac's $10,000 SPP at $16 a share, given that both the wife and I are on the register.
Westpac is offering an alternative market-based pricing option like Bank of Queensland, but without the discount, so the key thing to watch is whether this morning's share price of $16.50 can stay at least 5% above the $16 fixed price. The Westpac SPP closes on January 30 and the shares are allotted on February 11, so the full $20,000 exposure would run for a maximum of seven working days. Check out full details of the Westpac offer here.
Dexus Property Group
Today's mail also delivered a $10,000 SPP from Dexus Property Group which looks quite attractive with a fixed price version of 72.3c, compared with this afternoon's closing price of 82.5c. This offer closes on February 3 and the shares are alloted on February 6. With Bpay you can delay investing until the last minute so if the current price holds this looks like an easy $1,200-plus profit. Check out the Dexus offer details here.
Selling more shares into the 2009 rally
Our December 31 edition listed some solid selling we had been doing during the silly season rally and it has continued with the following sales which were thankfully completed before today's 95 point decline in the All Ords from last night's two month high of 3728.2
January 2:
Reckon: sold 333 shares at $1.09, losing about $100
UBI: sold 500 shares at 62c, losing almost $200
Penrice Soda: sold 334 shares at $1.25, losing about $100
January 5
Viridis: sold 758 at 66c to almost break even
Mine Makers: sold 515 at 52c, losing about $250.
Campbell Brothers: sold 17 at $18.99, losing about $200
Data#3: sold 71 at $5.09, losing about $150
January 6
Blackmores: sold 25 at $14, losing about $150
January 7
Tox Free: sold 230 at $1.29, losing about $200
AMP China: sold 400 at 86c, losing about $150
MEO: sold 1335 at 18.5c, losing about $250
As you can see, I've suffered plenty of pain in the smaller end of the market but here's hoping the overall losses have stabilised at around $100,000.
AGMs, radio, Manningham and Mayne Report: balancing the workload in 2009
If you'd like a reminder of our work for Mayne Report subscribers during 2008, we've packaged up all 175 editions here. Future 2009 editions won't be so readily available on the web.
With extra commitments such as serving on the City of Manningham council, we also won't be producing quite so regularly in 2009, but the base case will be at least one bumper edition a week, plus specials on AGMs and board tilts as events unfold.
The council workload is pretty hectic. Try this for size over the next few days:
Tomorrow: tour of the wonderful Aquarena aquatic facility with CEO of Manningham YMCA.
Monday: separate meetings about sporting pavillions and shade cloth in a local park.
Tuesday: five hour briefing on Doncaster Hill development, where Westfield has just invested more than $400 million, then separate meeting with councillors.
Wednesday: Monthly Aquarena performance meeting.
Given that council meets most Tuesday nights, we've had to change the regular 774 ABC Melbourne radio spot to Wednesday at 5.40pm, although it will be on Thursday during January. And with the overall commitments being just too great, it is probably time to let the 702 ABC Sydney gig go after nine years, although there will be occasional fill-in spots when the likes of The Australian's Andrew Main can't make it.
Doing two weekly 90-minute round trips into the city for unpaid ABC radio spots is hard to justify when the margin calls are bearing down on you.
AGM attendances in 2009 will also be lower than the record 64 in 2008, but the idea will be to focus on better researched engagements with less companies.
For instance, the first encounter for 2009 will probably be the Orica AGM on January 30, where largest shareholder Perpetual is expected to vote against at least one of the three directors up for re-election.
After that, we'll be down for another round with AWB on February 10 and then have Timbercorp in our sites on March 27. The mini-AGM season in April and May for companies with December 31 balance dates will include the likes of Oz Minerals, Alumina, Axa, Rio Tinto, Westfield, Babcock & Brown, Macquarie Airports and Austar.
However, we'll just have to see how the finances are travelling when it comes to visiting Sydney this year. The wonderful wife is taking a much closer look at the finances these days, so every expenditure requires solid justification.
That's all for now.
Do ya best, Stephen Mayne
* If you're reading this without being a subscriber, why not sign up for a free trial or take up our special $99 subscription offer which lasts until June 30, 2009. Alternatively, if you've had enough, click here to unsubscribe from this email list.