Speculative situations attract interest

Press, 26 June 1978, Page 12

Speculative situations attract interest

Bv

ADRIAN BROKKING,

G, commercial editor

The New’ Zealand share-1 market kept chugging along i last week in much the same i gear as the previous week: most market leaders were < steady, or slightly easier, ] but the undertone remained t firm. The sharemarket may be : expected to remain firm in the coming weeks; liquidity t is good, interest rates are falling, and shares are com- ' ing in for more attention — not the least because of a|! number of interesting speculative situations. J That the Government’s flexible interest rate policy is working was confirmed; by the action of General[i Finance, Ltd, in cutting its] debenture rates quite sharp-; ly. | U.D.C. Finance, Ltd, also!; expects short-term interest! rates to fall further, al-h though its chairman (Sir; Clifford Plimmer) said in the | cnmpanv’s annual renort! that he thinks that longer h term rates may remain at h present levels. h Broadlands Dominion!’ Group, Ltd, which also pub-,< lished its report last week,!! is of the same persuasion: 11 “Strong competition for < good loan business was ex-: pected, and this would cause!, interest rates to fall far- ( ther,” the chairman (Mr A. . C. Montgomery) said. [< Speculative situations pro-:; vided most of the interest on the market last week.:: Whenever the price of a i share makes a sudden jump, < take-over rumours abound. It is true, of course, that the present state of the econo- < my, and the general level of share prices, create a readymade take-over climate. The statement by the 1 directors of Andrews and ■

Beaven, Ltd, that they did not know’ of any reason for the sharp rise in the company’s shares, did nothing to dispel speculation about a possible take-over bid for the company. However, most of the possible potential bidders — there are not many, as A. and B. are rather a large hunk to swallow — have disclaimed interest. They in- ; elude Brierley Investments, !New Zealand Motor Corporation, M.S.I. Corporation, ■and Motor Traders (N.Z.), Ltd, all firms who might want to diversify and complement their automotive interests. It is a measure of the : dominance which Brierley | Investments has acquired as I a take-over specialist, that I these days everyone who says “take-over” usually Isays “Brierley” in the same break. And Brierley’s were certainly in the news again last week when it was disclosed :to the annual meeting of the Christchurch Gas, Coal and ;Coke Company, Ltd, that Brierley’s hold 20 per cent iof the capital of Christchurch Gas. : But Bri .leys were not responsible for all of the increase in Christchurch Gas : shares to 135 c: they had .stopped buying at 105 c, and : considered 135 c too much to pay. Needless to say, this iannouncement was enough to set the share price on a downward path — the closing price on Friday was 110 c, for a fall on the week of 25c. One may assume that Brierley’s did their homework, the current price is probably right, no matter what happens to the com-

pany. It will probably leaves ■ i profit on break-up value on the one hand, and on the potential value of the shares as a going concern if and when suitable feed stocks: are procured. It seems likely, for social and environmental, if not economic, reasons, that the! ; Government would not allow; : the Christchurch Gas Com- < pany to break up. It is a: . service industry which has served Christchurch well; .the modest dividends paid . out over the years are : sufficient proof that the ■ company has not “ripped! t off” the community — rather the contrary. ; The Christchurch Gas! . Company finds itself in an I ; unenviable situation, which : is not of its own making, ) but imposed upon it by the ’ oil-price crisis and sub- > sequent Government policy. Historically, many companies have fallen by the wayside because they were' 11 slow to react to changing! [circumstance, but the Christ-1 ! church Gas Company has! i never been one of these. ! About six years ago I ionce wrote in these columns [ that the way in which the i (directors looked forward, J and were aware of changes) lin technology and markets, [[and more so the way in! Jwhich' they kept share-! holders informed of their . . thinking, impressed me. [ They are just as much on the ball now. ! It must not be forgotten ' that, before they acquired a ! cheap feed stock in Kapuni ■ gas, the Auckland and Wellington gas companies fared I worse than their Christ- ! [ church counterparts. ![ No doubt the directors [want the company to con-1 tinue, and to be successful. However, the shareholders can hardly be expected to continue to bear losses, however much in local or the national interest. I The ball is squarely in the [court of the Minister for Energy (Mr Gair). :;