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Message subject : SHAREMARKET POINTERS

This message was posted by JR on December 12, 2000 :

THE GRIP OF THE GRAPE ... It seems we just can't keep away from those wines
stocks, particularly after one of our better selections BRL Hardy is hot to trot again with a 53c jump to a record $8.60 at one stage last week. That's $2.20 ahead of when we first spotted it more than a year ago and $1 ahead of the price in our update in March following a a wave of speculation sparked by comments from chief executive Mr Stephen Millar that the company had been wooed by potential takeover suitors. The latest run has again been sparked by those persistent takeover rumours.

Hardy shares are not cheap with dividend yield at 1.9 per cent and price/earnings ratio up to 23 times. But should there be a takeover (and there's always the chance the Hardy may be planning a takeover itself) then the bidder, of course, would have to offer a substantial premium on latest prices. In the meantime, Hardy, which has never failed to lift profit, is off to a flying start this year with June half year net profit up 18 per cent to a record $24.9 million after after strong double-digit international sales growth in the UK, Canada, US and Japan boosted total sales 14 per cent to $259 million.

Earnings per share rose 11 per cent to 17.2c and interim dividend was raised from 7c to a fully franked 8c. At this rate of improvement Hardy seems headed for a prospective dividend yield and p/e of 2.1 per cent and 19 times respectively. Domestic sales in July and August have been very strong and the company says
opportunities for the Australian wine industry and BRL Hardy had never been brighter.

MAKING ITS MARK ... Elsewhere in wine, we went awfully close to writing up Cabonne last week (honest!) but backed off because it was a bit hard to follow, earnings-wise. We should not have been so reticent because Cabonne has since risen from 75c to 83c (year high/low is 93c/65c). It shows no wine stock is safe from speculation. Although Cabonne's operating profit of $10.15 million and net profit $6.55 million were both slightly higher than the $10.1 million and $6.47 million forecast in the prospectus, when compared with the comparable profit for the previous year of $33.46 million, the result was lower by $23.31 million. This lower profit was highlighted in the prospectus. There was a planned shift in the company's focus from being predominantly a vineyard project developer, generating higher initial management fees which reflected the company's obligations and commercial risks at that time, to that of both a wine producer and a vineyard manager.

Cabonne paid a dividend for the year of 4c (making the stock's yield 4.8 per cent) and operates a dividend reinvestment plan at a 5 per cent discount. The company says that with the acquisition of existing RWC labels and the development of Cabonne's own labels, the further enhancement of the required product to bottle and the establishment of an appropriate marketing and sales/distribution capability will provide a sound platform for the further development of the company's expansion plans, both domestically and in specific international markets.

TOWER OF STRENGTH ... NZ-based insurer and funds manager Tower is on the move, as regards both its share price and headquarters - to Australia, continuing a strong trend among leading NZ companies. Tower has bounced up to $3.88 which brings it nearer the mid-point between the year's high of $4.75 and the low of $3.20.

That should please the company. Chairman Colin Beyer said that tower had continued to perform well across the group in the areas of superannuation, investment, insurance and trustee operations, and with recent strategic acquisitions including IOOF Trustees and Bridges in Australia and AXA Health in New Zealand, "our focus remains on building a strong foundation for future growth of the business, thus delivering sustainable shareholder value". Directors believed it was simply a matter of time before the market recognised its "quality performance". This was the September 30 year after-tax profit of NZ$99.7 million, which was well up on the prospectus figure of NZ$74.4 million, and last year's NZ$73.1 million.

Tower's assets under management rose from NZ$15.7 billion to NZ$22.1 billion, following the acquisition of Bridges Financial Services and IOOF Trustees. Tower claims it is making increasing inroads into the Australian market, while retaining its leading position in New Zealand. The company is 10 times larger in terms of assets under management than it was 10 years ago and since 1990 has consistently been one of the fastest growing Australasian financial groups (an average 25 per cent a year). Tower will pay a final dividend of NZ14c making NZ28c for the year and putting the shares on a dividend yield of almost 6 per cent.

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