Salvus reveals some of its holdings

Tuesday 22nd February 2005

Investment company Salvus has for the first time revealed some of the companies it has invested in.

Until now the company has been reticent to disclose its holdings. It says 72% of the $20.1 million raised in an IPO six months ago has been invested and the balance is in cash.

The portfolio is currently made up of 19 holdings of which two are NZAX-listed and one unlisted company.

Major holdings include: CDL Hotels, Methven, NZX, Provenco and 42 Below. Together these make up 35% of the investment portfolio Salvus says net asset value has grown by 4.5%.

�At the time of writing, the NAV of the company has increased further to $1.0824 or an increase of 11.8% since listing on 8 July 2004.�

Salvus says the combined package of one Salvus share and warrant was quoted at $1.10 compared to an issue price of $1.00, an increase of 10%.

The fund�s manager says it is difficult for a value manager like Salvus to invest at the moment as the market is fully priced.

�The current buoyant conditions in the New Zealand equity market have meant many stocks are currently trading at levels which, in the manager�s opinion, are at or above their intrinsic value.

It defends its decision not to disclose holdings by saying; �We will give further updates on other holdings in the future when the manager believes that this disclosure will not interfere with its investment operations."

However it has provided the investment rationale for its major holdings:

CDL Hotels - should benefit from increased levels of activity in NZ tourism and the economy in general. It trades at a low valuation which reflects a poor level of disclosure in its financial statements but the company is beginning to show some signs of change in this regard.
NZX - a beneficiary of the long-term growth in New Zealand equity and bond markets that generates attractive profit margins and has a conservative balance sheet.
Provenco - poised to grow strongly because of the imminent introduction of EMV compliant payment terminals. Provenco has achieved market dominance in New Zealand and has had some success internationally in supplying EMV compliant payment solutions to multinational oil companies.
Methven - has a high New Zealand market share in tapware and showerware and generates high returns for a manufacturer. It is successfully expanding into Australia and has developed new products that should spur additional growth in European markets.
42 Below - the strong revenue growth achieved to date indicates that 42 Below�s products are gaining traction. The business model is generating high gross margins and the company is moving closer to a break even position as sales continue to grow. Long-term value lies in the distribution agreements struck in Australasia and improving market penetration in the United States.

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