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Tenon shares surge as it seeks US equities market exposure, flags cash returns

Wednesday 4th December 2013

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NZX-listed high value timber products exporter Tenon is to explore ways of enticing US investors to back the stock as the American housing market starts to lift the company's earnings after a seven year slog through the sub-prime mortgage and global financial crises.

Chairman Luke Moriarty told shareholders at the company's annual meeting in Auckland the company would also start a capital return programme for shareholders in the latter half of 2014 and would seek to improve liquidity in the short term by offering small shareholders a chance either to top up or quit their Tenon holdings.

Shareholders with fewer than 2000 shares will be offered a brokerage-free opportunity to take their holdings to that level, while holders of fewer than 500 shares will be given the chance to quit their holdings without incurring broking fees.

He also forecast operating earnings for the first half of the current financial year "should equal that which we reported for the entire 12 months of our previous financial year."

Earnings before interest, tax, depreciation and amortisation in the year to June 30 came in at US$5 million, from a US$3 million EBITDA basis loss the previous year. However, it still made a net loss of US$3 million in the last year, and Moriarty gave no guidance on the likely half-year out-turn on a net basis.

Nonetheless, he attributed a doubling in the Tenon share price in the last year to "the positive impetus of a recovering US housing market."

"The company still believes its current share price of NZ$1.30 to be well below fair value, based on comparable company equity market trading multiples, which imply a Tenon trading price well in excess of NS$2 a share and the positive earnings outlook made today," Moriarty said in a statement.

The Tenon share price jumped 8.5 percent to $1.41 in the first half hour of trading on the NZX.

Moriarty said the share price performance was partly because three shareholders hold 80 percent of the Tenon register, creating a relatively illiquid stock, and because New Zealand investors had little information on the company's key US market, where 90 percent of its revenue is derived.

"In 2014, we will be looking closely at increasing the company's equity exposure to the US where news flow on our sector is much greater, where comparable company multiples are more favourable, and where we should be able to generate new interest in the stock as a result.

"There are many ways this can be achieved," said Moriarty. "While a dual NZ-US listing is one obvious part that we will be looking at closely, we will also be undertaking a complete company review as to how Tenon can best position itself to create value for shareholders as the current US cyclical recovery progresses. Enhancing share price momentum is top of our minds."

The company makes a range of indoor and outdoor wood products and mouldings, which it sells through major US home renovation and building outlets, including Lowes and Home Depot.

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