Sharemarket minnow investors trudge toward promised land

Prices in the table were taken at last Friday and compared with the individual highs this year and the variation from the high recorded as a percentage.

A similar exercise (NBR, July 27, 2001), identified 14 share prices under 20c, excluding miners, so the market's tail lengthened in the ensuing 12 months.

The substantial falls from 2002 highs for several companies followed large price erosions for the same companies when July 20, 2001, prices were compared with the then highs for that year.

Nobody should be surprised to see technology-based (loosely or totally) dominated both lists.

Others, such as Submarines Australasia, whose share price rose comparatively highly last year, suffered from unpredictable events. The company planned to offer submarine dives in Milford Sound to well-heeled tourists, particularly, but not exclusively from the US.

September 11 disposed of a large part of the potential market. Submarines Australasia examined prospects for dives in Queenstown's Lake Wakatipu and the introduction of a new partner. The latter was unsuccessful and the company is organising itself for an orderly disposal of assets.

The state of the 22 companies in the table has to be considered in the context of the overall market, as expressed in company market capitalisation.

Their capitalisations last week were $270 million but that was only 0.5% of the market's total capitalisation. The assessment has to be discounted for the fact that low-priced stocks will, by definition, have low capitalisations.

The total capitalisation of 14 companies last July was $120.08 million but the 2001 list did not include meat processor Affco, Force Corporation or Kingsgate, the last's investments now confined to Australia. The market capitalisation of those companies was $176.09 million last week.

The 22 companies had widely different operating interests, from Affco's meat processing to BeautyDirect's e-commerce cosmetics activities. Company statements had a common element, which could be indicative of an entrenched attitude among sections of New Zealand.

Problems were acknowledged and often put down to over-optimism about trading prospects, reorganisations were announced and shareholders assured things would get better when reorganisation solved the problems.

The market awaits evidence that the promised land is in sight and not still hidden over the horizon, assuming it is a reality rather than a mirage.

Companies such as IT Capital took unusual steps to rectify performance. IT Capital held its annual meeting on Tuesday, after this column was written, and considered a proposal to acquire three technology companies.

Assuming the proposal was approved, the company could be on the way to glory but it could equally be making a last attempt to keep its head above water, not a bad analogy given one of the proposed acquisitions was a boat with retractable wheels designed to ease the labour involved in getting boats into the water.

Cadmus Technology, described as a "payments solutions and data management services provider" released a three- and-a-half-page "sharechart questions and answers" document on May 8.

The sharechart explained the company's activities, prospects and relatively low rating on the market.

It was optimistic but had no positive effect on the share price.

It followed an interim report for the six months ended December and issued in March.

The company had a deficit of $894,000 for the period, although earnings before
interest, tax, depreciation, amortisation and share of associate companies' losses was $414,000. There was no argument with the latter but companies unfortunately have to provide for interests, depreciation, amortisation and share of associate companies' performances.

Managing director Ian Bailey said the company's intention was to "cautiously expand the group's operations and acquire profitable payment technology and data-management companies in the medium term."

That would be a sensible approach, when coupled with the company's current operations, but the shares were 6.1c last week and seemed unlikely to enjoy a run for some time.

A similar comment could be applied to several other groups in the table.

The number of companies whose shares were priced at 20c or less was a reasonable proportion of the Stock Exchange list.

Their weak price performance was possibly hidden in support for major companies, which allowed the New Zealand sharemarket to be one of the world's best performers so far this year.

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