Tower Starts To Look A Little Taller

Sydney Morning Herald

Friday February 1, 2002

Edited by Carolyn Cummins

Punters are seeing more than a little Kiwi insurance group.

Tower's shares are starting to kick along on the prospect of some big changes afoot at the Australasian life insurance and funds management group.

Since December, the shares have risen from around $4 to $4.40 as investors get a whiff of what direction the group is planning to take after a strategic review aided by Boston Consulting.

This week, Tower announced a hybrid capital raising: $NZ100 million ($82 million) to $NZ125 million in retail capital bonds that will allow it some flexibility as it looks to beef up its wealth management operations.

Deutsche Bank has a buy on the shares, saying that while the raising does not indicate an imminent acquisition, it does provide for longer term opportunities.

Apart from moving his residence to Sydney, managing director James Boonzaier has a lot on his plate. There is the possibility of outsourcing its investment management business as an outcome of the review and a windfall to shareholders from a possible wind-up of a trust containing shares owned by shareholders who could not be found when the company demutualised. Tower is also examining a shift of primary listing to Australia, where it will be earning most of its money.

The outcome of the Boston review is expected sometime in the first quarter.

Watch the smaller oilies

The oil and gas sector continues to bubble along on expectations of further rationalisation following the $1.5 billion tie-up between Orogen Minerals and Oil Search.

However, while Santos is the logical driver of any corporate plays given its urgent need for extra gas, further acquisitions are not necessarily a foregone conclusion, some analysts say.

Very few Australian targets would give Santos the additional gas it requires in one hit so the company is more likely to look offshore to areas like the Gulf of Mexico for big acquisitions.

Papua New Guinea is another option, although not considered a priority at the moment, given Santos's prickly relationship with the PNG Government thanks to Santos's blocking tactics impeding the PNG-Queensland pipeline.

Santos has given pipeline partner Oil Search the once-over many times and is known to have even seriously considered a three-way deal with Orogen but came unstuck on the pricing.

Novus Petroleum is also feeling nervous with its share price sitting under $2.00 its Padre Island assets could appeal to Santos.

But, individual personalities and egos can often stand in the way of business and many observers say they wouldn't be surprised if there was actually more corporate activity among the more junior explorers.

Norwest Energy, West Oil, Tap Oil, Roc Oil, Australian Worldwide Exploration and Mosaic Oil are just some of the juniors that could come under the microscope.

Seven in the slot

Macquarie Bank analyst Alex Pollak has revealed himself as the Seven Network's number one fan, calling the company his ``best pick" of the media sector and upgrading his earnings forecasts.

Kerry Stokes's TV network has secured better than expected ad rates for this year and is expected to maintain the audience it gained in 2001. Seven will use its telecast of the Winter Olympics (which starts Saturday week) to heavily promote its strong 2002 programming line-up.

The ratings outlook for number one network Nine is much cloudier because of the number of new programs it is showing this year. The station owned by the other Kerry will be crossing its fingers that Australia makes it into the cricket final, so it can go to town plugging its new line-up. If Steve Waugh's boys let Nine down, the network will be relying on its telecast of the AFL to cross-promote its shows.

Although Ten was the only commercial network to increase ratings across all demographics last year, the 2002 ratings tussle will be strictly a Nine/Seven affair. And even without the AFL for the first time in 45 years Seven is expected to prosper.

Macquarie has upgraded its net profit forecasts for Seven to reflect the expected shift in advertising revenue from Nine to Seven. It has lifted its 2002 forecast by 7 per cent to $61 million and 2003 forecast by 5 per cent to $87.1 million. Macquarie has also boosted its valuation for the stock from $7.65 to $7.80. Seven shares rose 4c to $7 yesterday.

Australand looks good

Australand Holdings is one of the credible indicators for the residential sector and judging by its full-year results on Wednesday, all seems well in the market. Despite concerns of an oversupply in the apartment sector, Australand seems less concerned than most, saying quality will always be snapped up. At present the group is developing the King Street Wharf complex in conjunction with Multiplex, a big site on Broadway, Ultimo, and the new Freshwater site opposite Southbank on the Yarra River. Brokers said after the results, which showed a rise in profit of 4.2 per cent to $81.4 million, that the group was well positioned for growth. Deutsche Bank's property team has maintained its buy rating on the stock.

``It continues to deliver a strong development pipeline in its land and housing division, whilst ensuring it has significant risk mitigation measures in place," Deutsche Bank said.

One dark spot remains the GST, which cost Australand about $50.1 million in 2000-01 on its apartment sales and is absorbed by the group. Deutsche Bank has forecast a 12 month price range for Australand of $2; it closed yesterday unchanged at $1.73.

SLICK PICKINGS

            SHARE PRICE   % GAIN THIS YEAR
AWE             71c             22.6
Novus           $1.99           10.5
Tap Oil         $1.44           3.5
Mosaic          22c             0.04

© 2002 Sydney Morning Herald

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