Listed investment firms rate well among best-performed equities

By Peter V O'Brien

Friday 14th June 2002

INVESTMENT COMPANIES' SHARE PRICES

Company	Price 7.6.02	Price 25.5.01	% change	2002 high	2002 low

BIL Int	$0.59	$0.70	-15.7	$0.69	$0.30
Dorchester	$1.43	$1.05	+36.2	$1.50	$1.19
GPG	$1.67	$1.05	36.2	$1.50	$1.19
Hellaby	$2.72	$2.04	+33.3	$2.80	$1.63
Infratil	$1.93	$1.41	+36.9	$1.93	$1.63
IT Capital	$0.5	$0.19	-74.7	$0.13	$0.5
NZSE40 capital index (rounded)	2118	2053	+3.2	2144	2042

Some of the listed investment companies were among the best-performed equities over the past 12 months.

The table shows share prices at the end of last week and in last May 2001, the last time The National Business Review examined the sector.

"Investment company" in this context means a group acting as a holding company for operating entities involved in the provision of goods and services.

It excludes listed companies and/or funds dealing in equities as such, without involvement in the underlying businesses.

Dorchester Pacific was included, as in the past, although it might be better described as a financial services group, having subsidiaries in finance, investment advisory and share broking, insurance and similar activities. The company's preliminary report for the year ended March said it was "a New Zealand-owned and operated financial services group."

Several of Dorchester's businesses are unrelated, although broadly contained within financial services.

Managing director Brent King said the group had now reached the stage where it had significant diversification of operations. It is also convenient to include Dorchester in this survey, because there are few financial services companies on the Stock Exchange, apart from registered banks and diversified insurance companies. Their activities differ markedly in both nature and size from Dorchester's and do not allow meaningful comparisons.

The current discussion differs from those in the past, in that IT Capital, a company specialising in investment in technology companies, was included.

IT Capital's preliminary report for the year ended March 31 contained the company's usual grandiose description of itself and its activities. It was described as "Listed Venture Catalyst," a title carrying a trademark note.

The company says it "focuses on investing in innovative technology companies in New Zealand and Australia with the intention of assisting them grow and move into larger overseas markets.

"Addressing the funding gap that inhibits most innovative Australasian firms, IT Capital provides both early-stage funding and management expertise that are not readily available in local markets.

"Applying a portfolio approach, the company allows investors to diversify risk and participate in innovative technology opportunities, thereby giving public market investors access to successful businesses at private market prices.

"IT Capital's international network of venture partners and technology companies accelerates the global transfer of technology."

The company could do with some of that management expertise itself. IT Capital's interim report, issued in December, referred to cutting costs and restructuring when announcing a loss of $5.92 million.

The restructuring was supposed to be completed by March 31. Comments accompanying the preliminary results said nothing about trading nor restructuring nor anything else, apart from stating a loss of $21.49 million, including investment write downs of $9.95 million.

IT Capital had shareholders' equity of $1.01 million at balance date, down from $16.55 million in December and $22.51 million last March. While the company had no debt its cash was only $928,000 ($3.41 million in December and $13.04 million in March 2001).

The interim report said the company intended to raise more capital when the restructuring was completed.

It either gets more capital, sees a substantial improvement in the book value of its investments, now written down to $84,000 from December's $8 million or fades away as another good idea that failed in practice.

Dorchester Pacific was an idea that succeeded in practice. The company earned $3.72 million for the year ended March, 23.9% higher than the previous year's $3 million.

The share price did well over the past 12 months, after recording a 15.4% decline in the year ended May 25, 2001.

GPG is an offshore company but it has a significant number of New Zealand shareholders and investments here.

A 15.2% share price improvement in the year ended last Friday followed a 23% gain in the preceding 12 months.

Many GPG shareholders are "keeping the faith" with Sir Ron Brierley, whose statements continue to offer sardonic comment on matters that attract his attention (see Report Card on this page).

Infratil's continuing gains from investment in utilities can also be contrasted with IT Capital's experience. The former reported a $22.57 million profit for the year ended March, compared with $16.47 million in the previous year.

Its share price gain of 36.9% over the past 12 months came after an 18.3% improvement in the previous year to May 25, 2001.

Hellaby's 33.3% gain in the period to May this year followed a 23.6% lift in the previous year.

The company is an industrial investment holding company, a breed, which, with the exception of GPG and an earlier BIL, became unfashionable during the excesses of the 1980s and the debacle of 1987.

There seems no reason the four companies that massively outperformed the index should not continue to enjoy good share-price growth in future.

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