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Ghost of Brierley Investments stalks Southern Capital

Friday 7th March 2003

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Southern Capital's annual reports trumpet a philosophy of "seeking long-term capital growth and translating this into share price growth." Three-and-a-half years may not be a long time but the company hasn't made a good start.

SCL, founded by former Brierleyite Graeme Wong, was backed into listed property company CBD New Zealand in July 1999 when the share price was 70c. Total assets at that time were around $24 million.

Since then SCL has sold some office buildings and received cash from the liquidation of Tasman Agriculture.

It has acquired development properties and stakes in biotech companies launched by director Howard Paterson and has spent $17.3 million buying a half stake in Hirequip, the country's largest equipment hire business.

Total assets last year stood at $38.1 million. There is no debt on the parent company balance sheet, although some projects have finance arrangements of their own.

None of this activity has yet produced much progress. Boosted by development completions and the Tasman liquidation, turnover in the first half of last year was $12.2 million and profit $6.1 million but this year's first half produced revenue of only $2 million and an $847,000 gain.

The latest move is a Commerce Commission application to buy Hirepool, the second largest equipment hirer, from Owens Group. Although there are many small players in the market the application will have a high hurdle to jump.

If SCL is successful in buying Hirepool it will have to either raise equity or take on debt and it will have the majority of its assets in the hire business.

It will then at least have some sustainable cashflows but the sharp discount of the share price to net tangible asset backing suggests investors see its modus operandi as a touch too BIL.

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