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Stocks to watch: ALF, DPC, MVN, PEB, PGC, RAK, RBD, TEL

Tuesday 1st June 2010

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Allied Farmers shares dropped 14% yesterday after lifting the impairment charge on its Hanover acquisition, while Dorchester announced another yearly loss and a decline in sales of 31%. Pyne Gould is currently looking to merge with two South Island building societies, Rakon's outlook is "pleasing" and Restaurant Brands shows first quarter sales growth.

Allied Farmers (ALF): The finance company sank 14% to 5.1 cents yesterday after its announcement last week that it had lifted the impairment charge on the Hanover Finance loan books it acquired in a debt-for-equity swap last year to $51.5 million, and still has a third of the book to revalue.

Dorchester Pacific (DPC): The financial services company seeking to raise $10 million to exit its moratorium, reported a full-year loss of $19.1 million yesterday. The loss narrowed from the previous year’s loss of $25.4 million. Sales fell 31% to $17 million. The shares, which trade infrequently, were last at 13 cents on May 28.

Methven (MVN): The bathroom fittings and tap manufacturer yesterday posted a 22% decline in full-year earnings, missing its guidance, after taking an impairment charge in the UK, where it lost DIY chain Wickes as a major customer. The stock was unchanged at $1.58 yesterday.

Pacific Edge (PEB): The biotech company on Friday announced the successful completion of the clinical trial for its bladder cancer detection test and said the test is now ready for clinical application. The stock rose 6.7% to 32 cents yesterday, adding to Friday’s 7% jump.

Pyne Gould Corp. (PGC): The finance company has agreed to discuss a merger with Canterbury Building Society and South Canterbury Building Society, creating an entity with about $2.2 billion of assets that would seek a banking licence. The shares were unchanged at 44 cents yesterday.

Rakon (RAK): The maker of GPS components has significant upside in most of its fledgling markets, and it was pleasing the company specifically alluded to recent success with tier one phone markers, said Tristan Joll, an analyst at Goldman Sachs JB Were in ShareChat. Last week Rakon announced an EBITDA of $4.3m, down from $18.5m the year before. “We remain supporters of Rakon’s strategic initiatives and see potential upside in several of the end markets highlighted by management,” Joll said. Yesterday its shares dropped 1 cent to 95 cents.

Restaurant Brands NZ (RBD): The fast food operator has announced a 4.2% increase in year first quarter sales to $75.9m on the back of continued growth in its KFC sales. The chicken outlet experienced an 8.5% increase on sales a year before, and a 10.7% increase on same store sales. Total sales for Pizza Hut during the quarter year were down 5.6% on the previous year to $14.6m, and Starbucks Coffee’s quarterly sales were down 4.7% on the previous year to $6.9m. The company has 86 KFC outlets, 91 Pizza Huts and 40 Starbucks stores. Its shares remained steady yesterday at $2.25.

Telecom Corp. (TEL): The phone company rose from near its lowest in two decades yesterday. At its current price, the stock is offering a dividend yield of 19%, based on its payments over the past 12 months. On the same basis, Australia’s Telstra Corp. is yielding 13.5%.

“Even if they reduce their dividend it is still an amazingly high yield,” said Alan Moore, who helps manage $600 million at Milford Asset Management. “At the end of the day you have got to ask, has Telecom got a future or is it going down the tubes,” he said. “I don’t think the latter is remotely likely.”

Themes of the day: Markets were closed in London and the US as traders, giving the domestic market little overnight direction. Germany's DAX gained 0.3% while France's CAC 40 slipped 0.2%. The New Zealand dollar fell to 67.96 US cents from 68.21 cents. The Reserve Bank of Australia is expected to hold its target cash rate at 4.5% when it meets to assess monetary policy today.

Businesswire.co.nz



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