SHAREMARKET Roller-coaster ride but slightly firmer

Press, 12 September 1987, Page 29

SHAREMARKET Roller-coaster ride but slightly firmer

By ADRIAN BROKKING The New Zealand sharemarket had a rollercoaster ride this week, being either up or down dependent on the interest shown in just two stocks: the two sharemarket giants Fletcher Challenge and Brierley Investments. Both have been in strong demand, especially from overseas buyers. The Barclays industrials index rose almost 54 points in the first two days of the week, but gave up half of those on Wednesday and Thursday, only to recover 15 points yesterday. The close of 3883.61 was 1.1 per cent up on the week, and within 30 points, or three quarters of one per cent below its all-time high of 10 months ago. The NZSE capital index performed in similar fashion: up 16.5 points on Monday and Tuesday, a dip during the next two days and a recovery yesterday. This index closed at its high for the week, up 1.4 per cent to 1339.24, but this is still some 9 per cent below its record high. This, of course, reflects the influence of the blue chip stocks in Barclays index, which have

been bid up by investors this year. During the week 92.7 million shares changed hands — an exceptionally high volume. Even without the corporate activity, especially in NZ Forest Products, the figure would have been a near record.

Apart from the market battle between Fletchers and Rada, the week’s big news was the purchase by Smiths City Group, the successful national chain headquartered in Christchurch, of another national chain, Smith and Brown. Smith and Brown, taken over in 1973 by Feltex when listed as Smith and Brown Maple Furnishings, Ltd, is a specialist retailer of furniture, floorcoverings, and appliances, a field where Smiths City Group was already the biggest retailer. However, the combined sales of these commodities will still be less than 20 per cent (about 18?) of the total New Zealand market for these products. Obviously, there is plenty of scope for further growth, when Smiths City Group brings its top management and enthusiasm to the new acquisition.

At the same time, there should be quite a bit of synergy — “the combined activity of separate agencies such that the total effect is greater than the sum of effects of each agency alone — as well as some savings down the line.

This is a genuine merger between two major retailers, and not another retail take-over by a property or investment group after cash flow, as has been the case in several instances recently. It is also worthy of note that Smiths City Group owns its own properties, but is subjugating property ownership to retailing, as Mr Kevin Smith, the executive chairman, made clear in his statement. He obviously sees property trading — and one could not agree more — as a “short-term objective,” and a secondary consideration.

Smiths City shares rose 25c to 170 after the “don’t sell” warning. Even before that jump the shares ranked ninth on gross returns performance for the last five years, a list prepared regularly by Jarden and Company, the Wellington sharebroker.