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Re: [sharechat] CITIC and Forests

From: "allan potts" <>
Date: Fri, 16 Aug 2002 09:38:59 -0700

Hate to be   picky here, but in the interest of correct math a share price 
that goes from $2.50 to .22 falls 91.2% not 500%  or 88%.  Any math   
professors out there disagree???

Have a great weekend, we're still ploughing through Friday over here.


>From: "Ian Andrews" <>
>To: <>
>Subject: Re: [sharechat] CITIC and Forests
>Date: Fri, 16 Aug 2002 19:28:24 +1200
>B.Bourke is demonstrating the flawed thinking which characterises the more 
>vocal segment of FFS's  critics.
>They have faulty calculators or haven't mastered simple arithmetic. 22 
>cents is an 88% difference from $2.50; a considerable difference from 500%; 
>& B. Bourke, despite your protestation, when comparing 88% with 500%, the 
>difference DOES matter. i.e. It is a material difference ( or one shouldn't 
>be investing )
>They can't distinguish an old Board Of Directors from a new one. Of the 7- 
>member FFS board, only 1 ( Michael Andrews) came from the old Fletcher 
>Forests Board pre-1999, which was the Board which made the
>major mistakes. The poor directors have long since gone, but B.Bourke 
>imagines they are still there.
>This may sound trite,but if the current directors were replaced, B.Bourke & 
>company in all likelihood would also be unable to distinguish them from the 
>pre-1999 Board  & Board cleanouts would become an annual event. Where would 
>it end?
>They are shortsighted & are hard of  hearing. They accuse FFS of having 
>poor management even after having been told the company had an operating 
>surplus of $79 million in the past year & because this surplus was 
>represented by cash  & not  book entries, FFS was able to reduce debt by a 
>similar sum. This Surplus amounted to 3.2 cents per share ( 14.5% of the 
>current share price ), but this fact went right over the heads of B.Bourke 
>& company.
>They have an out-of-date mental image of the Chinese. Very dangerous. New 
>Zealand is a lovely ( economist Gareth Morgan calls it a "lifestyle blockl" 
>) but isolated country. This leads to smugness, which has us cling to 
>paradigms of  countries such as Singapore, Hong Kong, Greece , Italy & 
>Portugal being  having "inferior" economies to our own , when they passed 
>us several years ago. Likewise with China. A commitment to economic growth 
>has seen China  rapidly joining the developed world. It is no longer a 
>country based on subsistence farming, whose businessmen are oout to secure 
>maximum short-term advantage from their relations with Western 
>Businesspeople. I have had business contacts with mainland China for years. 
>  China has learnt how to do business with the west since taking over Hong 
>Kong ( actually, it is more like Hong Kong taking over China ). I accept 
>developments during the 1990's have not been readily apparent to the man in 
>the street ( although they have to international businesspeople) & that 
>CITIC could  have tried harder to sell itself, but then so could the 
>critics have done some homework to bring themselves up to date.
>They think all debt is bad debt.. Debt is just an alternative form of  
>funding to equity ( do we want another rights issue ? ).The proposal would 
>have had debt increase several times, but off an extremely low base. 
>Ironically, had the Board been poorer managers & not managed to clear $80 
>million of debt in the past year, the " % increase" figures quoted by Bruce 
>Sheppard would have looked better for them. The company would have ended up 
>with a 1:1 debt:equity ration, which really isn't all that startling in the 
>context of either the international forest industry or other NZ listed 

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