February 1, 2008

What does Marko Bogoievski joining Infratil mean for their investment strategy ? Lance points out they might be looking to unlock some value from Telecom. With Telecom looking to separate its retail business from the infrastructure, there looks to be an opportunity for Infratil.

Another opportunity could be Kordia (formally BCL) which is currently owned by the Government. Kordia operates a national communications network and provides network feeds and broadcast services for the major television and radio networks. The company recorded $264m in revenue and $12m in net surplus for the year ended June 2007. This would look to be a good fit for Infratil with Makro Bogoeivski on board.


Cameron Partners

December 4, 2007

Just came across the Cameron Partners website . The part that caught my attention was the news section with a series of presentations. The most recent is Food Industry Acquisitions Set to Continue, by Hugh Cotterill – November 2007 (pdf).

While Premia in New Zealand Takeover & Offer Proposals, by Paul Dougherty and Stephen Kaiser – October 2007 (pdf) states the median premium for control (think take over premium, or the extra price paid when someone looks to acquire a listed company) in New Zealand (whether successful or unsuccessful) is 23.6%.

Which leads nicely to another article titled Boards Should Act on Control Premiums, NBR 28 April 2006 , by Paul Dougherty (pdf). This explains the premium for control exists if someone thinks they can extract more value from the set of assets owned by the company with the current business plan and/or management team .

The two main sources of this extra value are stand-alone improvements (cost cutting, growing existing revenue, new products, asset sales or new technology) or synergies (typically cost savings from combining the business with another entity).

The business can have a different value to the purchaser with access to these gains than the existing shareholders with the current management team and business plan.

The article goes on to say a number of advisers suggest there is only one true or “fair” value for a company. While value is in fact different for different owners, depending on the improvements or synergies they can achieve.

Smart Orthotics

September 21, 2007

No 8 Ventures has invested in Smart Orthotics, a company developing a robotic exoskeleton for disabled users.  

I picked up the news from the No 8 Ventures blog, with the most recent post about Smart Orthotics.

Key points from the post. 

  • The new capital will be used to support further product development, production engineering and enable a release to market of their Robotic Mobility Aid for disabled persons.
  • Smart Orthotics’ robotic exoskeleton is worn on the lower limbs by a disabled person providing the user with a normal range of mobility functions including standing, sitting, walking, ascending and descending stairs and navigating sloping surfaces.
  • Their vision for a robotic exoskeleton that restores mobility was prompted by the limitations of the wheelchair.

A quick search at Companies Office revels Smart Orthotics Limited was registered on 19 March 2007. The shareholders include: 

  • Richard Little (Director of Smart Orthotics): 600,000 shares
  • Robert Irving: 550,000 shares
  • No 8 Ventures: 200,000 shares
  • Total: 1,350,000 shares

Companies Office also links to Smart Orthotics new Constitution (pdf).

McKinsey – Delivering Software As A Service

September 11, 2007

Just came across this article (free registration required or use bugmenot’s login) from McKinsey Quarterly about delivering software as a service. Thought it is relavent to the high profile Xero, who provide accounting software as a service.

Main points in the article:

  • An IDC report projects that 10% of the market for enterprise software will migrate to a pure software as a service model by 2009.
  • Software as a service vendors are less profitable than some traditional software vendors today, this gap is primarily caused by a lack of scale.
    • A few service vendors already have much higher margins (WebEx, at 26%, and Digital Insight, at 19%) because they’ve been able to achieve scale and a leading position in their niches.
    • Other leaders, such as (which provides on-demand CRM and sales force automation tools) and ADP (the world’s largest automated check processor) have also gained mainstream uptake among midsize and large companies.
  • Software as a service offers several advantages to IT buyers:
    • More frequent (and potentially less painful) upgrades.
    • Lower cost of ownership.
    • Higher level of service from vendors that must become more responsive to customer needs or risk losing subscription revenues.
    • Countering these benefits are the acknowledged risks of reliability and security.
  • The article has a great graph showing the migration of software applications, broken down software catergory, large enterprises, SMEs, if the speed of migration is different for each customer segment).
    • The conclusion was for core financial applications that SMEs are already migrating (pace depends on customer segment) while it may be unlikey for for large enterprises to migrate at all.

Playing In The Currency Markets With A Peashooter

June 18, 2007

Here are some links about the RBNZ’s intervention in the currency markets. I especially like the comparison of RBNZ’s efforts and that of a peashooter made by The Economist.

Economist – A warning shot

CONFRONTED by a growing army of speculators, on June 11th the Reserve Bank of New Zealand decided enough was enough—and let rip with the peashooter.


Most nations with strong currencies should refrain from following its lead. After all, peashooters are of little use against a determined foe.

But The Lex Column (subscription required) in the Financial Times makes the point that currency intervention is meant to work in one of three ways.

  1. Directly affecting the supply and demand of the currency.
  2. Hinting at future monetary policy.
  3. Signaling that the currency is out of whack.

The column rightly points out that only the last two have any real chance of working. If the RBNZ is determined to defend the currency at a specific level then there are “players” in the foreign exchange market with far deeper pocket than the RBNZ. But this YahooXtra article states the RBNZ will not attempt to defend a particular level for the kiwi.

If the “exchange rate is exceptional and unjustified in terms of the economic fundamentals” to borrow the words of Allan Bollard then as the Lex Column says, it may turn out to be a good punt by the RBNZ.

Other coverage:

Tom Scott - Currency Intervention

Market Cap vs Intrinsic Value (SKC, SKT, TRH, TTK, WHS)

June 14, 2007

Below are high level valuations for SKC, SKT, TRH, TTK and WHS. They compare the current market cap to my estimate of each companies’ intrinsic value. The list below also shows the growth expectation of the market.

For example I have assumed Teamtalk’s revenue continues to decline by 1% year, while the current market has priced in a revenue decline of 5% a year.

Company: Market cap / intrinsic value

  • Sky City: 1.15
  • Sky TV: 1.00
  • Toll: 4.70
  • Teamtalk: 0.63
  • Warehouse: 1.88

Company: Revenue growth rate implied by current market cap

  • Sky City: 14% to 3% over the next 10 years
  • Sky TV: 12% to 3% over the next 10 years
  • Toll: 14% each year till 2016
  • Teamtalk: -5% each year till 2016
  • Warehouse: 11% each year till 2016


  • Valuation based on a 10 year DCF model.
  • Historical revenue growth assumed to move toward long term growth rate assumption over ten years.
  • Forecast EBTIDA margins historical rates.
  • Deprecation and capital expenditure based on historical levels, but forecast to grow with revenue.
  • Discount rate and asset betas from PwC Cost of Capital report (pdf).
  • Long term growth rate of 3%.

Above the fold – Economist

June 7, 2007

Quick note about the increase in New Zealand’s interest rate from The Economist’s blog free exchange.

The Reserve Bank of New Zealand on Thursday raised interest rates for the third time since March. The central bank based the increase to 8% on inflationary pressures due to housing demand, consumer spending and increased world prices of dairy products. The New Zealand dollar rose to 75.67 US cents, the highest since March 1985, and further attracting investors.