mikescott
05-06-2004, 06:34 PM
This be most bad reading I be seeing of companies they try to take monies off investors for themselves. This Jenny Ruth she be saying that this issue be costing $2.31 millions to raise $25 millions. This be meaning investors in fund they be left with 91 cents when they put $1.00!!!!!!!!!!!!!! If only $20 millions be raised which be underwriting amounts by ASB, then investors they be left with 88 cents when they put in $1.00. How this type of things be permission from government to be happening?
Jenny Ruth: In at the deep end for spa pool investors
04.06.2004
COMMENT
The BBQ Factory chain of stores doesn't look like too bad as a business, although profitability is a bit of an up and down affair.
Continuation of its growth is heavily dependent on sales of spa pools continuing to grow as fast as they have in the past few years.
Even with these qualifiers investors could be forgiven for wishing they could invest directly in BBQ Factory, rather than in the management company acquiring it, StoreFund.
This fund is offering investors extremely high issue costs and high continuing management fees coupled with the prospect of continuing demand for fresh capital or of being heavily diluted while at the same time the company pays out all its earnings in dividends.
StoreFund is aiming to raise $25 million plus another $5 million in over-subscriptions. If it manages to raise the full amount, the issue is estimated to cost $2.31 million, or 7.7 cents out of every $1 investors put in.
You only have to look at the issue costs of other recent floats to think this is excessive.
Take Just Water International, which estimated its $8.25 million capital raising would cost up to $500,000. Or Colville Equities whose up to $75 million issue is expected to cost $1.5 million. Or Pumpkin Patch which is aiming to raise between $97.2 million and $133.4 million at a cost to the company of $1.335 million (other float beneficiaries will pay the balance of costs expected to total $2.7 million).
The StoreFund prospectus breaks the costs down into $775,000 to its lead manager, ASB Securities, and brokerage costs, a further $325,000 to ASB in exchange for underwriting the issue to $20 million and $290,000 in accounting, auditing and legal fees.
On top of these costs, the future manager, North Head Management, is claiming $150,000 as a "consultancy fee", and a further $770,000 is to go on "NZX fees, prospectus printing and sundry costs".
StoreFund is paying $21.188 million for the BBQ Factory, $16.188 million from the float proceeds and $5 million in borrowings. $13.65 million of the purchase price will be goodwill and other intangibles.
That will mean that on June 30, when the BBQ purchase is completed, StoreFund's net tangible assets per share will be only 47 cents.
Assuming the float is successful, investors will then be up for fees of 1.75 per cent of the funds market value less any cash and, if the fund earns more than 12 per cent a year before tax, North Head will take 20 per cent of the excess.
In the year ending June 2005, this adds up to the fact that while the BBQ Factory is projected to post $3.685 million in earnings before interest, tax and amortisation (Ebita), StoreFund's Ebita over the same period will be just $2.755. In other words, $930,000 before interest, amortisation and tax disappears into the North Head structure.
While the management company has one large concrete investment prospect, as with any managed fund proposition, it is very much a case of asking investors to trust the manager.
The trio behind North Head are Wayne Walden, former managing director of the Farmers Deka retail business and present chairman of Maori Television among other directorships; Garry Bluett, who was Farmers' chief financial officer; and Leigh Davis of Jump Capital, previously with Fay Richwhite.
The BBQ Factory is owned by Roger Richwhite, brother of Fay Richwhite principal David Richwhite.
Walden says the family connection didn't play any part in StoreFund deciding to buy the BBQ Fa
Jenny Ruth: In at the deep end for spa pool investors
04.06.2004
COMMENT
The BBQ Factory chain of stores doesn't look like too bad as a business, although profitability is a bit of an up and down affair.
Continuation of its growth is heavily dependent on sales of spa pools continuing to grow as fast as they have in the past few years.
Even with these qualifiers investors could be forgiven for wishing they could invest directly in BBQ Factory, rather than in the management company acquiring it, StoreFund.
This fund is offering investors extremely high issue costs and high continuing management fees coupled with the prospect of continuing demand for fresh capital or of being heavily diluted while at the same time the company pays out all its earnings in dividends.
StoreFund is aiming to raise $25 million plus another $5 million in over-subscriptions. If it manages to raise the full amount, the issue is estimated to cost $2.31 million, or 7.7 cents out of every $1 investors put in.
You only have to look at the issue costs of other recent floats to think this is excessive.
Take Just Water International, which estimated its $8.25 million capital raising would cost up to $500,000. Or Colville Equities whose up to $75 million issue is expected to cost $1.5 million. Or Pumpkin Patch which is aiming to raise between $97.2 million and $133.4 million at a cost to the company of $1.335 million (other float beneficiaries will pay the balance of costs expected to total $2.7 million).
The StoreFund prospectus breaks the costs down into $775,000 to its lead manager, ASB Securities, and brokerage costs, a further $325,000 to ASB in exchange for underwriting the issue to $20 million and $290,000 in accounting, auditing and legal fees.
On top of these costs, the future manager, North Head Management, is claiming $150,000 as a "consultancy fee", and a further $770,000 is to go on "NZX fees, prospectus printing and sundry costs".
StoreFund is paying $21.188 million for the BBQ Factory, $16.188 million from the float proceeds and $5 million in borrowings. $13.65 million of the purchase price will be goodwill and other intangibles.
That will mean that on June 30, when the BBQ purchase is completed, StoreFund's net tangible assets per share will be only 47 cents.
Assuming the float is successful, investors will then be up for fees of 1.75 per cent of the funds market value less any cash and, if the fund earns more than 12 per cent a year before tax, North Head will take 20 per cent of the excess.
In the year ending June 2005, this adds up to the fact that while the BBQ Factory is projected to post $3.685 million in earnings before interest, tax and amortisation (Ebita), StoreFund's Ebita over the same period will be just $2.755. In other words, $930,000 before interest, amortisation and tax disappears into the North Head structure.
While the management company has one large concrete investment prospect, as with any managed fund proposition, it is very much a case of asking investors to trust the manager.
The trio behind North Head are Wayne Walden, former managing director of the Farmers Deka retail business and present chairman of Maori Television among other directorships; Garry Bluett, who was Farmers' chief financial officer; and Leigh Davis of Jump Capital, previously with Fay Richwhite.
The BBQ Factory is owned by Roger Richwhite, brother of Fay Richwhite principal David Richwhite.
Walden says the family connection didn't play any part in StoreFund deciding to buy the BBQ Fa