Corrigan Zooms Up Advance Register
Sydney Morning Herald
Sunday August 9, 1992
It seems the more things change the more they stay the same.
Not for the first time, some of Australia's savviest investors are queing up on the Advance Bank share register. Some, such as FAI Insurances, have made a nice turn in a couple of months. Others, such as Chris Corrigan's Jamison Equity, which bought about 8 per cent of the bank on Thursday, may have to wait a little longer.
The latest reshuffle has put Jamison at the top of the register, with about 9 per cent of Advance ahead of Robert Whyte's Audant Investments with 8 per cent and FAI Insurances with about 4 per cent.
Corrigan's charge up the register is curious given Jamison's brief and given that he bought the bulk of his shareholding from AMP Society, one of his own shareholders.To be fair, it is not the first time he has targeted a listed company; more than 18 months ago Jamison tried to ginger up the Howard Smith board when Adsteam was pulling out of the conglomerate.
More to the point, Jamison is not a portfolio investor - its charter was to buy underperforming assets at the bottom of the cycle (the Advance stake will sit alongside investments in Freedom Furniture, Strang Patrick and Australian Hospitals Care) suggesting Corrigan is more than a passive investor.
The catch for any potential predator is Advance's restrictive 10 per cent shareholding limit.
Although two years ago, shortly after buying 9.9 per cent of Advance from the Bank of New Zealand, Sir Ron Brierley made light of suggestions that the limit would deter potential suitors."The 10 per cent restriction is there, but I don't think anyone seriously believes there's a problem in the long run," he said.
The question for Sir Ron, now an Advance director, and for a potential bidder, is whether he still believes it. The question for investors is who would be interested in buying the bank?
Corrigan's purchase is also interesting given the timing of Whyte's plans to privatise Audant.
With all this activity happening at once, you might be forgiven for thinking something was up.
At Friday's $5.76 close the stock is trading at 10.6 times 1992 earnings and 9.6 times next year's expected earnings of about 60c a share. Compared with the other small listed banks it was probably relatively cheap before its stunning final result. Now it is probably fairly priced, although its prospective 7.4 per cent yield is still relatively good buying against the rest of the market.
If the shareholding rules happened to change, Advance could be worth another $1 a share more even without a takeover.
MAYBE it was the Honolulu sun, but all of a sudden laconic Southern Cross Airlines deputy chairman Doug Reid has got bullish about the fledgling airline's prospects.
Perhaps a little too bullish for Southern Cross chairman Sir Leo Hielscher, who quickly hosed down suggestions by Reid that the airline would at least break even in its first year of operation.
This compares with a forecast loss of $7.75 million in the float prospectus.
As Sir Leo said, Reid's remarks were very much personal ones and in no way reflected any new information received by the directors since the prospectus.
Reid also reportedly predicted Southern Cross could get 10 per cent of the market next year instead of the 5.7 per cent forecast (since corrected by chief executive Sam Coats). Clearly that is an objective and not as price-sensitive as profit predictions but the aggressiveness of the comments are in stark contrast to Reid's low-key, folksy style during the float marketing.
The issue, which is underwritten by JB Were & Son, closed barely 50 per cent subscribed, leaving Were and the sub-underwriters with about $25 million worth of stock.
The shares briefly touched the 50c issue price on Friday before closing off 3c at 47c.
Given the amount of stock overhanging the market, shareholders could be waiting quite a while until they get their heads above water.
Shareholders will be hoping Southern Cross gets up and running in a hurry so it can finally be judged on its merits and not the bullish hopes of Reid.
While his comments seem to have been made in the best possible spirit, for the benefit of shareholders Reid should be encouraged to either tone down his enthusiasm or get the story right. The memories of an over-hyped Compass Airlines flight are not too distant.
© 1992 Sydney Morning Herald
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