Fonterra Shareholders Fund

[Silverlight]

Fund size expected to be $1 bn, with a minimum of $500m.

Units in the fund will may be held by non-farmers and farmers, but the fund may not exceed 25% of Fonterra. Units will have all exactly the same economic rights as Fonterra Shares, but not voting rights.

Farmers will be allowed to swap their shares for units and vice versa, making the units fungible with shares but only for Farmers.

Fonterra has $15b in revenues currently, gross profit of around $1.5b, ebit around $500m, it's a stable growth buisness so valuation around $10b, expected yield is circa 7%,

The no voting thing may see it discounted slightly and maybe farmers will buy more units beacuse of the discount and transfer them back to shares? However if it works, it will probably disappear. The capital they are raising also seems to be earmarked for growth via acquistions, so maybe a little more risk than people would expect.

[macduffy]

I'll be leaving this one to others. As long as full control rests with the voting shares of dairy farmers, the milk payout price will always be the #1 priority. A bit like the position of non-voting ordinary shareholders in News Ltd, I reckon.

[Under Surveillance]

I'm comforted that farmers will be the ones to only have voting rights. Given the generally poor quality of New Zealand business acumen, the last thing you would need is for every Tom, Dick or Doris shareholder voting to flog the company off just because some multinational came along and offered a buck more for the stock.
Well said.

[CJ]

I am not too concerned re not having voting rights as my small SH will have no influence. The concern as noted above is the return on the shares is determined in part by the price paid for milk so farmers will have an incentive to maximize milk price rather than 'profits'.

Will be interesting to see how this issue is addressed. My guess is Directors will target a return, say 7% mentioned above, and adjust milk price to hit that target.

[Vtrader]

Few capitalists within.
A socialised company.
V.

[craic]

Not for me, as stated elsewhere, farmers are in control and as long as they are getting their milkfat price, they will be happy to use your moneyas loan funds and pay you the four or five percent thet you deserve. Telecom is running at around 12.5% return according to the business news and I am happy to live, in part, off their superior return. China is happy to buy all at present but they are developing a huge dairy industry of their own at the same time as their inflation is getting out of hand.

[craic]

Better still. Send the Greens to Australia and start shovelling for minerals here. By all accounts,we have more than enough. Latest health flash - men who eat the equivalent of three slices of cheese in dairy fat have a greatly reduced sperm count against those who dont. Disc. I was raised on dairy fat, straight from the cow and I only drink full cream milk and eat real butter and I stopped counting my sperm years ago when macular degeneration made them difficult to see.

[BIRMANBOY]

Sparky I wasnt aware that you were aware of the upcoming IPO..supposed to have been hush hush. However since you have let the cow out of the bag so to speak probably best to release the press announcement early.
Reuters news flash..0600 27th oct 2012
Previous Greens politician Nandor Tanscos start-up Company (MerdeMAll) has developed a dairy based cigarette and is expecting high consumer and Govt. interest. The newly formulated cigarette is based on a secret combination of full fat cream and the fibrous byproduct of a cows digestive tract. The resultant product has been tested extensively by consumers in blind test situations and has been praised for its "earthy "" aroma and sweet taste. Fonterra is expecting this to add at least 3.5% to its annual sales.
Craic, I am better informed for that post, thank you. :-)

Yes, if we could export the Greens that would be preferable. Don't think the Aussies would want them. Maybe the Swedes or Finns might be impressed to take them under a generous refugee policy.

Back to the real world. Protein is in demand, and so are milk/dairy products, even if the effects of milk fats are harmful to some. Fonterra is in a magnificent position to supply such proteins. C'mon, it's not like dairy is tobacco.

[Major von Tempsky]

Buy a 100 so you can read the glossy reports.
Even a very small holding does wonders for ensuring you keep very well informed about a particular company.
My father had about 100 shares in every company on the NZX by the time he kicked the bucket.

[FarmerGeorge]

Don't think this one's for me - the 'dividend' will be less certain than interest payments but the units are going to price for a yield less than bonds. Why buy these over bonds? They're not shares in the business so where the growth coming from? Higher commodity prices will flow to farmers in the form of milk payments right? So the upside, I suppose, is in growing the consumer branded business, or the specialised product side of the business? Fonterra management have not shown they can do this on a scale that's going to shift the needle for investors. Don't think this one's for me. But I'm just a farmer.

[CJ]

This probably means a listing unit price of around $5.50 rather than $4.60.Which means the yeild will be at the lower end.

Cant see myself buying in. Wonder if I should have a small punt in case I get it wrong like I did with TME (now up 50%)

[CJ]

Expect lots of offshore interest ... Japanese housewives especially.If they limit each shareholder to $25k each, it could be a good one to stag.

[percy]

Expect lots of offshore interest ... Japanese housewives especially.
Any idea of the strength of demand from Belgium dentists?

[percy]

Not far removed from the Belgian dentists are the Belgian psychiatrists who came to New Zealand around 10 years ago for a conference, and were stunned at the high level of openly flaunted prostitution. Everywhere they looked they saw prostitutes congregating in parks, outside the front of office towers etc.

A Flemish shrink raised the courage to ask a NZer about the widespread prostitute issue. Much mirth ensued when the Belgians were told that in New Zealand, it was illegal to smoke inside your business premises, and so if you wanted a puff, you had to exit the building. Thus the young women dressed in nice skirts smoking outside buildings and in nearby parks were not on the game, but merely indulging in their filthy habit without breaking the anti-smoking laws.

Good to know the dentists are not alone getting things wrong.!!!

[CJ]

ASB have just sent an email advising that $10,000 is their maximum. Are other brokers doing the same.

Disc: wont be investing. With large interest, it should be crap for yeild but great for stagging which doesn't fit my tax profile.

[Anonymous]

ASB have just sent an email advising that $10,000 is their maximum. Are other brokers doing the same.

And ASB have now sent an email advising that they are fully subscribed and no longer accepting applications. That was a very quick uptake!

[BIRMANBOY]

Nothing from DB and I asked for information package.

[sharer]

Nothing from DB and I asked for information package.

Same here. I guess that means we've missed out on the IPO.
Possibly the market might interest us when the splash settles. Possibly not.

[Silverlight]

The issue is going to be very interesting.

With retail scaled to circa $150m of the float, there is high interest coming in from Australia ($2b) and Asian based investment funds ($1b), all looking to get some of the final $350m institutional segment, the upper range to $5.50 maybe breached.

However, if the price goes to $6 many "would be" stags may pull their bids. The other consideration is an out of left field event from the global stage, Greece kicked from the Euro, poor US economic figures after Obama's win tonight, or even a sudden shock out of China. If one of these events occur in the next 3 weeks, or some other global event, international interest could evaporate.

Long term, this issue is good for the country and investors.

[Grimy]

ASB have just sent an email advising that $10,000 is their maximum. Are other brokers doing the same.

Disc: wont be investing. With large interest, it should be crap for yeild but great for stagging which doesn't fit my tax profile. Yes, same $10K limit from my broker.

[BIRMANBOY]

Well if everybody else wants a piece I'm sort of thinking stay away! Herd them lemmings up.!
Same here. I guess that means we've missed out on the IPO.
Possibly the market might interest us when the splash settles. Possibly not.

[tim23]

Gee if they listed at a 5% premioum that would be a nice little earn not much bother I would have thought?!

[troyvdh]

...some say that foot and mouth is inevitable......just thinkin.....gee some joker overseas could just post it here......sorry......

[Snoopy]

Well if everybody else wants a piece I'm sort of thinking stay away! Herd them lemmings up.!


I am with you Birmanboy on this. A projected yield of some 5% in what promises to be a manipulated market between milk price and added value to assure the survival of some overleveraged farmers does not sound attractive to me. I guess stick a credible brand name -Fonterra - on a proposal and some people will invest whatever the underlying fundamentals of the business proposition. It is a pity that more non-farmers did not get behind NZS which looks like it might be taken out by overleveraged farmer shareholders facing an uncertain milk payout in NZ having to sell down to ensure their own survival.

In just two years, and while acknowledging some development risk that has mostly been dealt with, the projected yield from dairy farmer NZS was going to be nearly double that of this Fonterra proposal.

There will be a time that these Fonterra quasi-shares will be worth looking at. But amidst the IPO hype is not that time.

SNOOPY

discl: Offered some Fonterra shares and declined the offer.

[tim23]

If you can get $10,000 worth of units, then you might make $500, then deduct commission, and then watch out for IRD wanting to take 30% of your stag.

Exactly my point $350 net for 1/2 hours paper work and thats if you only got $10000 worth!

[macduffy]

If you can get $10,000 worth of units, then you might make $500, then deduct commission, and then watch out for IRD wanting to take 30% of your stag.

Exactly my point $350 net for 1/2 hours paper work and thats if you only got $10000 worth!

The counter argument would take account of the risk involved - not completely risk-free however "certain" it may appear that the units will trade at a premium - plus the opportunity cost of not investing the $10,000 elsewhere for whatever period is involved.

I'm with Birmanboy and Snoopy on this one.

[janner]

the counter argument would take account of the risk involved - not completely risk-free however "certain" it may appear that the units will trade at a premium - plus the opportunity cost of not investing the $10,000 elsewhere for whatever period is involved.

I'm with birmanboy and snoopy on this one.

ditto !!..

[tim23]

Well my point is if you flicked them you've held for minimal time with a fair chance of a premium on listing what else can you invest in that compares with that?

[robbo24]

I got my prospectus in the mail today and it said to call about getting a "firm offer".

I called up, got my firm offer and then posted away the acceptance form.

Now... what possible economic factors outside of the control of NZ exporters could make exporting substantially more profitable... I guess we'll just have to wait and see :)

[Silverlight]

Welcome to the forum Robbo!

Which broker did you get the offer from, and how many did you subscribe for, if you don't mind discussing?

[robbo24]

Hi Silverlight,

I used the online application form under "New Issues" on the Direct Broking website a few weeks ago. The form just asks whether you want to be mailed a prospectus and how much NZ$ you wish to spend. I wouldn't want to disclose the amount but it does not exceed the notional "$10,000 threshold" discussed in earlier posts.

Then I called Direct Broking and they told me I had a "firm offer" as per the prospectus. Direct Broking told me that I couldn't apply for an amount of units (I suppose because the price has not yet been determined) but rather had to specify an amount to invest.

I like the idea of investing in this large exporter because they seem to perform well even with a strong NZ$.

I'm interested to see how it all pans out. I'm also keeping an eye on my XRO shares ;)

EDIT: I did notice that the part at the back of the prospectus does not have images of the relevant persons signatures (where it appears there should be signatures) - made me think of ss 39 & 41 of the Securities Act 1978...

[Baaarney]

I too registered interest through the Direct Broking website and received a copy of the application in today's mail as part of their Brokers Firm Offer

still undecided about applying - some helpful comments here which I am still digesting

[noodles]

I got 10K through asb securities. This was scaled back substantially.

[BIRMANBOY]

I finally received prospectus . nice quality..I'd hate to think how many they had to ship out..must have cost an arm and a hoof. Still out...I think too many buying into the "iconic" factor here.. Can see better dividends in other places would be my feeling.

[BIRMANBOY]

Well Baaaaarney..with a name that that I would have though participation would be frowned on.
I too registered interest through the Direct Broking website and received a copy of the application in today's mail as part of their Brokers Firm Offer

still undecided about applying - some helpful comments here which I am still digesting

[Baaarney]

Well Baaaaarney..with a name that that I would have though participation would be frowned on.

It appears that Direct Broking agree - their allocation is fully distributed and my (relatively small) application is on a waiting list, and I suspect unlikely to be filled.

[POSSUM THE CAT]

I got the small amount I wanted from Direct Broking last Thursday.

[lowrolling]

Price has been announced at $5.50 per unit

[ananda77]

Price has been announced at $5.50 per unit

...waiting for an entry below NZD 5.00

Kind Regards

[Balance]

...waiting for an entry below NZD 5.00

Kind Regards

Brokers expect units to list at over $6.00 on Friday as offshore investors could have taken the issue at least 5 times over. They stopped marketing after Singapore and Hong Kong because it was getting embarrassing.

[Balance]

Especially when more farmers (and friends of Fonterra) are buyers than seller.

So guess the listing price.

[Silverlight]

This is such a disappointing result for New Zealanders!

42% as gone to offshore institutions! 42%! They will just stag their holding and take their 10%, half of the NZ institutions that applied for stock did not get it!

Where are the media articles or journalists harassing Fonterra about this!

Everyone was up in arms about the Govt selling stakes in the power companies that may go to offshore holders, yet NZ's biggest company does it without one negative article, bypassing all the NZ investors, kiwisaver funds and long term NZ funds that actually care about supporting NZ companies.

Such a disappointing outcome.

[CJ]

I think I read (in NBR?) that they deliberately sold to overseas funds expected to stag to ensure there is liquidity.

Once they saw the demand from NZ, they should have pulled the overseas offering and saved some costs. Bad advice from their brokers as many IPO/Bond placements are explicitly limited to home country only due to disclosure rules so that wouldn't have been seen as anti foreigners.

Cant imagine this would win the Board any more friends with the Farmers.

[gv1]

Brokers have a part to play as well. ASB securites sent me docs late oneday and by next day sent me an e-mail advising that all was taken up and I could not get any...but they said unless I have posted it. Guess what i did...I did post one that day and got $10k but havent heard from Direct broking yet. They did not even offer one yet to me.

[J R Ewing]

This is such a disappointing result for New Zealanders!

42% as gone to offshore institutions! 42%! They will just stag their holding and take their 10%, half of the NZ institutions that applied for stock did not get it!

Where are the media articles or journalists harassing Fonterra about this!

Everyone was up in arms about the Govt selling stakes in the power companies that may go to offshore holders, yet NZ's biggest company does it without one negative article, bypassing all the NZ investors, kiwisaver funds and long term NZ funds that actually care about supporting NZ companies.

Such a disappointing outcome.

I think I share your sentiment, that a greater proportion could have been sold internally. But I doubt that the overseas institutions will be stagging, I think it is more likely they will be buying not selling after Friday. The locals on the other hand might be waiting for a lower entry point as suggested by some of the earlier posts.

[winner69]

Ensuring liquidity was an imperative .... the last thing Fonterra wanted was thousands of small NZ holders putting the them in the bottom draw ... except the likes of Silverlight who probably only wanted to make a quick bob anyway

Instos turn their investments over (more than they should) quite regulary .... and bear in mind that going forward a successful Fonterra will need heaps more capital in future year and broad base of global moneymen is better bet for them

[J R Ewing]

I think I read (in NBR?) that they deliberately sold to overseas funds expected to stag to ensure there is liquidity.

Once they saw the demand from NZ, they should have pulled the overseas offering and saved some costs. Bad advice from their brokers as many IPO/Bond placements are explicitly limited to home country only due to disclosure rules so that wouldn't have been seen as anti foreigners.

Cant imagine this would win the Board any more friends with the Farmers.

It does seem odd that Fonterra would go out of their way to ensure they sold to institutions intent on stagging rather than investing. And why would Fonterra be concerned with liquidity? Is that so that there is a guaranteed pool of shares ready to be sold into the market slightly above the list price so that the Farmers don't think the units have been sold off too cheap? If so, i would have thought it would have been easier just to sell the units at a higher price, given that there was supposed to be so much excess demand.

[Silverlight]

Ensuring liquidity was an imperative .... the last thing Fonterra wanted was thousands of small NZ holders putting the them in the bottom draw ... except the likes of Silverlight who probably only wanted to make a quick bob anyway

This is the sharetrader forums and that is the name of the game, however come Friday, I will be looking to buy a small holding if I can below $6. Above this level the risk/ yield becomes less attractive.


Instos turn their investments over (more than they should) quite regularly .... and bear in mind that going forward a successful Fonterra will need heaps more capital in future year and broad base of global moneymen is better bet for them

While institutions do buy and sell regularly many have core positions that they do not alter. If you read the ACC annual reports for their top holdings over the past 5 years, Telecom, Fletchers, BHP, Contact, Auckland Airport, ANZ bank, will always be there, going forward Fonterra will probably be there too. You will find a similar pattern across most NZ fund managers.

There is plenty of capital in NZ looking for a home to invest, now and in the future, kiwisaver providers alone have $15b under management now, and they alone could have taken up the issue, on behalf of many NZ investors who did not get a look in. I just think overall, while there may have been benefits to scratch the back of overseas investors, I doubt long term they care about Fonterra, and are just looking to make a "quick bob".

[macduffy]

We'll have to wait and see who sells and who buys but should remember that Fonterra sells the bulk of its products overseas so will be mindfull of the need for publicity and promotion in those markets, hence the overseas placements.

Having been less than lukewarm about this issue I've become keen enough to take a small holding, largely based on the expressed demand for the units. " When the facts change, I change my position!" It just might be the one NZ farming-related security to come up trumps!

:)

[POSSUM THE CAT]

Silverlight would you sell for less than someone else offered. If you were willing to take the risk of going at the final price you could have bought some.

[RTM]

Unbelievably disappointing to see these shares of Fonterra placed overseas. Should only have done this if they could not have satisfied the demand within New Zealand. Talk about shooting ourselves in the foot. What were they thinking ?

[BIRMANBOY]

HuHHH? So how is that going to be marketed....Well we cant sell these here in own country...so we thought we 'd try and sell em to you...since you're ..well...foreign so dont know what you're doing.
Unbelievably disappointing to see these shares of Fonterra placed overseas. Should only have done this if they could not have satisfied the demand within New Zealand. Talk about shooting ourselves in the foot. What were they thinking ?

[Balance]

HuHHH? So how is that going to be marketed....Well we cant sell these here in own country...so we thought we 'd try and sell em to you...since you're ..well...foreign so dont know what you're doing.

haha ...then why the hue and cry from local fund mangers and investors they did not get enough stock?

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10850648

[CJ]

HuHHH? So how is that going to be marketed....Well we cant sell these here in own country...so we thought we 'd try and sell em to you...since you're ..well...foreign so dont know what you're doing.Rumour is it was oversubscribed several times by the NZ market alone. Their broker should have know this and said 'We dont need foreigners'. Of course their fees were higher because of this so the Directors should have asked that question and should now be angry at their broker for getting it drastically wrong!

I personally seem even more going overseas, not less, as foreigners are currently willing to accept much lower yeilds on their investments. Amazon, just did a $3B bond issue, with most of it in the 1 - 2% range!!!

[BIRMANBOY]

Why indeed...Obviously Fonterra trying to establish some global interest and increase exposure to the units....all good. Locals are peeved .. (missing their commissions)so what..get over it and buy back in if you want some. My point originally was that RTM was being naive in expecting Fonterra to hold them for Kiwi investors because they owe us....? And then being naive again in somehow believing the gratefull globals would be buying a product we could'nt even sell to ourselves (if that had happened).. Clear?
haha ...then why the hue and cry from local fund mangers and investors they did not get enough stock?

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10850648

[BIRMANBOY]

Yes agree ...when (if they ever do) the global equity markets start to recognise the value available in NZ bonds and shares...I forsee some strong growth.
Rumour is it was oversubscribed several times by the NZ market alone. Their broker should have know this and said 'We dont need foreigners'. Of course their fees were higher because of this so the Directors should have asked that question and should now be angry at their broker for getting it drastically wrong!

I personally seem even more going overseas, not less, as foreigners are currently willing to accept much lower yeilds on their investments. Amazon, just did a $3B bond issue, with most of it in the 1 - 2% range!!!

[RTM]

"And then being naive again in somehow believing the gratefull globals would be buying a product we could'nt even sell to ourselves (if that had happened).. Clear?"

Nah....don't care at all where Fonterra sells their product. But I do care about New Zealand and I do care about ownership of Fonterra and I do care where the profits / dividends from Fonterra go. And I would rather they went to New Zealand shareholders.

Just can't see how overseas ownership helps. Immediately, day one, profits from our best industry are leaving our country. We could have sold all to Kiwi's, superfunds etc...and the let the overseas folk buy on the market if the they chose to. Tried to create a little more wealth for Kiwi's.

Maybe I am seeing this to simplistically.

[POSSUM THE CAT]

RTM In an Auction you sell first to the highest Bidder & a Book Build is an Auction. So tell the NZ institutions to bid Higher. They got the right to pick up the remainder at the book build price. They could have bid the maximum book bid price. Just like others did.

[BIRMANBOY]

Good on you for being idealistic. Problem is of course,assuming you are a non-owner, what you want is unfortunately probably just immaterial to Fonterra. They want what they perceive as being in the best interests of the shareholders. Theoretically that would be getting as wide a spread and as international as possible to the shareholder base. Selling solely into the NZ market would in effect "bury" it into a small ,incestuous pool. Overseas capital investment should raise the value and visibility of the product for everybody. Creating wealth sometimes means you have to give up a bit. Hopefully the results mean a greater gain for everbody...even if a few are overseas.
"And then being naive again in somehow believing the gratefull globals would be buying a product we could'nt even sell to ourselves (if that had happened).. Clear?"

Nah....don't care at all where Fonterra sells their product. But I do care about New Zealand and I do care about ownership of Fonterra and I do care where the profits / dividends from Fonterra go. And I would rather they went to New Zealand shareholders.

Just can't see how overseas ownership helps. Immediately, day one, profits from our best industry are leaving our country. We could have sold all to Kiwi's, superfunds etc...and the let the overseas folk buy on the market if the they chose to. Tried to create a little more wealth for Kiwi's.

Maybe I am seeing this to simplistically.

[J R Ewing]

Good on you for being idealistic. Problem is of course,assuming you are a non-owner, what you want is unfortunately probably just immaterial to Fonterra. They want what they perceive as being in the best interests of the shareholders. Theoretically that would be getting as wide a spread and as international as possible to the shareholder base. Selling solely into the NZ market would in effect "bury" it into a small ,incestuous pool. Overseas capital investment should raise the value and visibility of the product for everybody. Creating wealth sometimes means you have to give up a bit. Hopefully the results mean a greater gain for everbody...even if a few are overseas.

42% is "a few"?
Kiwis are "a small incestuous pool"?

And if it is correct that these overseas instos are likely to dump at a profit on day one, just how will that either "raise the value and visibility of the product" or create wealth for anyone other than the overseas inst and the broker?

[BIRMANBOY]

How can it be correct? ...pardon me but it hasn't happened...pure speculation that they will dump for a profit. In the vacuum of knowledge....inventive ideas flourish.
42% is "a few"?
Kiwis are "a small incestuous pool"?

And if it is correct that these overseas instos are likely to dump at a profit on day one, just how will that either "raise the value and visibility of the product" or create wealth for anyone other than the overseas inst and the broker?

[Silverlight]

RTM In an Auction you sell first to the highest Bidder & a Book Build is an Auction. So tell the NZ institutions to bid Higher. They got the right to pick up the remainder at the book build price. They could have bid the maximum book bid price. Just like others did.

Possum, word in the broking community is that there were a number of local institutions who bid for over a million units above the $5.50 price, noting that the investment statement said Fonterra has the ability to price the issue above the indicative range, and these institutions got nought.

[J R Ewing]

How can it be correct? ...pardon me but it hasn't happened...pure speculation that they will dump for a profit. In the vacuum of knowledge....inventive ideas flourish.

I did say IF it is correct. Earlier in the thread I was assuming that these overseas interests would be buying not selling tomorrow, but some seem to think otherwise - time will tell I guess.

Anyway, mine are getting buried in that small incestuous pool, at least for the meantime :)

[The BOWMAN]

Why list at midday? Is this to suit overseas investors better so that they don't have to get up at midnight to have all the action?

[777]

Opening time may take the drama of a new listing away.it happens with most initial listings with TV cameras present. No big deal in my opinion.

[Silverlight]

Why list at midday? Is this to suit overseas investors better so that they don't have to get up at midnight to have all the action?

As 777 stated, IPO's are always delayed 1 to 2 hours, so the market can give undivided attention to the IPO when it starts trading. (i.e. Summerset/ Trade Me/ Moa etc all started trading at 12).

[Xerof]

20%+ stag comin up

[CJ]

20%+ stag comin upShort lived or do you expect it to hold.

Looks line the ticker is FCG

[Xerof]

FSF is the ticker

[robbo24]

I sure wish I knew how to sell shares that aren't listed on my DirectBroking portfolio...

[The BOWMAN]

Man, it is going to be $6.80+. People don't care how much it is.

[CJ]

Did it just start trading at 6.66 - an Omen?

[CJ]

opened at $6.66, Asian investors wont be happy, but hey, they got a 20% pop so maybe they will be.

[The BOWMAN]

Asian investors wont be happy, but hey, they got a 20% pop so maybe they will be.

Why, 6 is a good number in Asia, 4 is not. Many 6s means it is going to be pretty smooth.

[Joshuatree]

Yeehaa Off to a great start.We got re $12,000 worth . May sell if it goes over $7.

[Joshuatree]

David B ,i got allocated $5000 and our Estate $7000.Craigs in Tauranga Too small for me so put them together for Estate.I agree and as some else said fonterra will want plenty of Liquidity so instos etc will provide that? As for farmers myopia, don't start me.:)

[lou]

Bets for a closing price?

[777]

I sure wish I knew how to sell shares that aren't listed on my DirectBroking portfolio...

The portfolio listing has nothing to do with it. Never look at mine.

Just sell them by making a sell order for the number you want. Your CSN will be the same and so will your FIN.

[digger]

In the 50 years i have been in NZ all but 3 have been with dairy farming or in the last 7 years owning dairy heifers for the industry. I applied for the maxium of 50,000 and got done. I received a letter saying i did not qualify and if i had objections to let them know by 5.00 pm on the 21/nov/2012. The letter was dated the 23/nov/2012 and i received that letter on the 27/nov/2012. Have been in contact with Fonterra but got the we do not handle this it is all done by Computershare. Have rang the Waikato Times but as yet the reporter and I are always at different places and times.
I do not understand the thinking in this country. All these units could have been sold to NZ investers but there just seems to be an unholly need to flog off our top company to the Chinese and Indians,where there is certainly no return feeling toward us when they sell theire top stocks.

[robbo24]

Does the closing price on the first day of trading mean that Morningstar Research were wrong?


As a result of this uncertainty, we would advocate investors wait for the units to list on the market and consider buying at a price below $4.95 per unit. (http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10848779)


Or is the view that they advocated to investors an open-ended prediction that can be vindicated at any time in the future?

[Balance]

In the 50 years i have been in NZ all but 3 have been with dairy farming or in the last 7 years owning dairy heifers for the industry. I applied for the maxium of 50,000 and got done. I received a letter saying i did not qualify and if i had objections to let them know by 5.00 pm on the 21/nov/2012. The letter was dated the 23/nov/2012 and i received that letter on the 27/nov/2012. Have been in contact with Fonterra but got the we do not handle this it is all done by Computershare. Have rang the Waikato Times but as yet the reporter and I are always at different places and times.
I do not understand the thinking in this country. All these units could have been sold to NZ investers but there just seems to be an unholly need to flog off our top company to the Chinese and Indians,where there is certainly no return feeling toward us when they sell theire top stocks.

Indians and Chinese? How the heck in Middle Earth, Land of Hobbits and fair dinkum kiwi sheep green droppings, did they sneak in?

Hot Scottish Cream Buns! Smokey Irish Whisky! Cry us her Majesty's tears!

We cannot have that, can we, Digger?

They work too hard for their money. They don't do financial engineering like the Americans who do CDOs and Ponzi schemes so well, and caused the GFC.

We must only allow the British, Americans, Europeans and Australians who rely on borrowings just as NZ does. And who can be trusted to give us hot IPO shares like Google etc when they are listing.

And if they offer us their top stocks, we can certainly buy in using yet more borrowings.

Remind us again why many NZ stocks and companies are owned by overseas investors, Digger.

Powerco,

Turners & Growers,

Montana,

St Lukes,

Diligent,

Fletcher Energy,

Fletcher Paper,

Sky,

INL,

Wilson & Horton,

BNZ,

Trust Bank,

ASB,

Goodman Fielder,

Vertex,

NZ Farming Systems,

Contact,

Lion Nathan,

NZI,

NZ Steel,

Tranz Rail,

Opus,


etc


Oh dear, I think I am emotionally drained from listing any more.

But of the list above, I cannot find one Indian or one Chinese buyer?

Strange that.

[digger]

Impressive list Balance. You forget to add the important ones. Gave us the chicken feed and left unmentioned the big and far more significant stocks. The Crafar farms and the general world wide land grab on the part of these two countries is surely of note. But the biggest of all is the uptake in the energy sector. My point here is that we can expect nothing back in return,unlike in the western countries you mentioned.And by the way one could have always bought into Googles,Apple or Mirosoft.
Back to the Fonterra units I like David B answer the best. They could have and should have been offered to NZ's first and if that fails turn to Wall Street.

[Balance]

In the 50 years i have been in NZ all but 3 have been with dairy farming or in the last 7 years owning dairy heifers for the industry. I applied for the maxium of 50,000 and got done. I received a letter saying i did not qualify and if i had objections to let them know by 5.00 pm on the 21/nov/2012. The letter was dated the 23/nov/2012 and i received that letter on the 27/nov/2012. Have been in contact with Fonterra but got the we do not handle this it is all done by Computershare. Have rang the Waikato Times but as yet the reporter and I are always at different places and times.
I do not understand the thinking in this country. All these units could have been sold to NZ investers but there just seems to be an unholly need to flog off our top company to the Chinese and Indians,where there is certainly no return feeling toward us when they sell theire top stocks.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10851106

My eyes deceive me - Digger cannot be wrong!

Most of the shares went to Australians?

Australians who hardly ever consider NZ when allocating hot IPO shares?

[Balance]

Impressive list Balance. You forget to add the important ones. Gave us the chicken feed and left unmentioned the big and far more significant stocks. The Crafar farms and the general world wide land grab on the part of these two countries is surely of note. But the biggest of all is the uptake in the energy sector. My point here is that we can expect nothing back in return,unlike in the western countries you mentioned.And by the way one could have always bought into Googles,Apple or Mirosoft.
Back to the Fonterra units I like David B answer the best. They could have and should have been offered to NZ's first and if that fails turn to Wall Street.

Dug yourself a very deep methane gas filled hole there, Digger.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10851106

"However, there was considerable anger that 42 per cent of the total offering was allocated to offshore institutions, mainly Australians.

New Zealand investors usually receive nothing when an Australian issue is oversubscribed yet we give 42 per cent - and a 21 per cent opening price capital gain - to offshore investors when more of this could have been kept in New Zealand.

The Fonterra allocation was particularly frustrating because domestic investors have little opportunity to invest in the country's burgeoning dairy sector and the newly created units offered the first major opportunity in this regard.

With this in mind it is extremely annoying Australian superannuation and pension funds got large allocations when many of our KiwiSaver, superannuation and pension funds got only 10 per cent of the Fonterra units they were after."

Ps. When in hole, stop digging, Digger! You are almost past the point of no return.

[Balance]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10851106

Bal, I think Brian Gaynor sums up why NZ'ers should have had a bigger allocation. Even if many did stag the issue then at least more of Kiwi Inc would have remained in NZ's hands.

Don't forget the Kiwi taxpayer has helped develop Fronterra over the last 40 years with tax breaks (remember the queen street farmers? South island roads?) and continues to subsidise their operations by paying for the infrastrcuture (e.g. roads and ports! home consumer subsidised electricity? huge costs paid for by rates in ensuring the diary farmers don't pollute NZ's waterways? Carbon tax?).

Would love to see a real "pay for what you use" policy applied to some of our big corps rather than expecting the taxpayer to fund it and then have the corporate mandarins give it away to their mates.

Frankly, this sort of behaviour sucks big time! No wonder the americans claim our diary industry is heavily subsidised. They're right! Subsidised by the kiwi taxpayer who gets right royally screwed at every turn!

PS. Stagged this. If I got my full allocation and the first days trade price had been below issue then Belgie would have been right royally screwed by a massive cash crunch and a small loss like he's never seen before! Very nervous few weeks and that's an understatement!

Cold hard reality is that if there was no overseas demand, Fonterra would have to sell the shares for $4.50 - $100m less for the company.

Do the sums and I think you will find it was the right thing for Fonterra to build up overseas demand for the shares.

Look at FPA under issue price - who bought?

[flyingfox]

used up all the names in family to get $10000 for each, seems like the smartest choice made this year.
i dont believe it will go back to 5.5, sold half on hand on open day, will start to buy back below 6
The reason some ppl above said they dont like the 5.8- 7% return so didnt join IPO is they haven't consider Fonterra is so much different from other NZ companies, too much interest from all over the world, in many countries even 4% return is a good share, for Chinese , they dont even care about returns. so many friends ask me how to buy but only one asked me whats the expect return.....

[Jaa]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10851106

Don't forget the Kiwi taxpayer has helped develop Fronterra over the last 40 years with tax breaks (remember the queen street farmers? South island roads?) and continues to subsidise their operations by paying for the infrastrcuture (e.g. roads and ports! home consumer subsidised electricity? huge costs paid for by rates in ensuring the diary farmers don't pollute NZ's waterways? Carbon tax?).

This is barely the tip of the iceburg of what NZ inc has done for Fonterra and its predecessors over the years. Fonterra has special legislation and exemption from normal competition law in NZ. Farmers glamoured (rightly IMO) to maintain ownership of Fonterra in NZ hands and thus they were legislated a 95% supply monopoly.

Go back a bit further and the Ministry of Foreign Affairs was effectively the overseas market development office for the Dairy Board. Wellington's Soviet era Czech trains were a contra deal for Anchor butter negotiated by the government! Even now dairy is front and center of NZ's trade deal negotiations. In many ways NZ has staked almost everything on the success of NZ Dairy over the last 50 years.

For them to turn round and abandon NZ like this effectively shafting NZ institutions and investors is simply incredible and a disgrace. As Gaynor said why not 15-20%?

[Balance]

There was outstanding, probably unprecedented demand by New Zealand investors (both retail and institution) for this relatively small issue. It's supply and demand that sets the price of an IPO, and there was plenty of NZ demand for this and far too little supply. There was never a secret about it either. This should have been New Zealanders first and overseas investors second, or failing that, everybody was treated the same and scaled to the same extent.

Precisely my point. If Fonterra did not build up overseas demand, local investors and institutions would have laughed at the issue.

That was what happened to Dairy Equities - same concept and same structure but no demand from NZ investors.

[Balance]

This is barely the tip of the iceburg of what NZ inc has done for Fonterra and its predecessors over the years. Fonterra has special legislation and exemption from normal competition law in NZ. Farmers glamoured (rightly IMO) to maintain ownership of Fonterra in NZ hands and thus they were legislated a 95% supply monopoly.

Go back a bit further and the Ministry of Foreign Affairs was effectively the overseas market development office for the Dairy Board. Wellington's Soviet era Czech trains were a contra deal for Anchor butter negotiated by the government! Even now dairy is front and center of NZ's trade deal negotiations. In many ways NZ has staked almost everything on the success of NZ Dairy over the last 50 years.

For them to turn round and abandon NZ like this effectively shafting NZ institutions and investors is simply incredible and a disgrace. As Gaynor said why not 15-20%?

What about the Chinese? They were allocated bugger all compared to the fact that they are now Fonterra's biggest growing market.

And the Indians? They represent the biggest future potential.

What have the Australians ever done for NZ?

Looking forward to Digger's reply.

Not that I am am holding my breath.

[blobbles]

I agree David B, I wanted a hell of a lot but was told there was none left to allocate. And I know (and can see from a whole lot of people on here) that it was the same for many others.

NZer's know what fonterra's worth and we want a piece of the action. We also want a return for the years of subsidies we have given them in the form of roads, environment etc etc. Even without overseas interest I suspect it would have been oversubscribed and the price would have gone above $6.

I would have got 10000 if possible and a couple of my friends wanted me to do the same for them. Eventual allocation: 0.

[Balance]

Utter rubbish.

Then, please explain total lack of interest from NZ investors with Dairy Equities.

[kizame]

I agree David B, I wanted a hell of a lot but was told there was none left to allocate. And I know (and can see from a whole lot of people on here) that it was the same for many others.

NZer's know what fonterra's worth and we want a piece of the action. We also want a return for the years of subsidies we have given them in the form of roads, environment etc etc. Even without overseas interest I suspect it would have been oversubscribed and the price would have gone above $6.

I would have got 10000 if possible and a couple of my friends wanted me to do the same for them. Eventual allocation: 0.

So presumably you wanted to stag the issue? Otherwise if it is such a good investment you can still purchase your $60,000 worth,when the price settles back,and it will. Patience.

[POSSUM THE CAT]

Blobles I will sell you what I got & it was what I asked for for $7.50 per share

[Jaa]

What about the Chinese? They were allocated bugger all compared to the fact that they are now Fonterra's biggest growing market.

And the Indians? They represent the biggest future potential.

What have the Australians ever done for NZ?

Looking forward to Digger's reply.

Not that I am am holding my breath.

Balance your comments have no relevance to my post?

[digger]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10851106

Bal, I think Brian Gaynor sums up why NZ'ers should have had a bigger allocation. Even if many did stag the issue then at least more of Kiwi Inc would have remained in NZ's hands.

Don't forget the Kiwi taxpayer has helped develop Fronterra over the last 40 years with tax breaks (remember the queen street farmers? South island roads?) and continues to subsidise their operations by paying for the infrastrcuture (e.g. roads and ports! home consumer subsidised electricity? huge costs paid for by rates in ensuring the diary farmers don't pollute NZ's waterways? Carbon tax?).

Would love to see a real "pay for what you use" policy applied to some of our big corps rather than expecting the taxpayer to fund it and then have the corporate mandarins give it away to their mates.

Frankly, this sort of behaviour sucks big time! No wonder the americans claim our diary industry is heavily subsidised. They're right! Subsidised by the kiwi taxpayer who gets right royally screwed at every turn!

PS. Stagged this. If I got my full allocation and the first days trade price had been below issue then Belgie would have been right royally screwed by a massive cash crunch and a small loss like he's never seen before! Very nervous few weeks and that's an understatement!

Dug yourself in a very big hole there Balance. A full 42 % goes mostly to Aus on route to China and India as the Australians can not sell fast enought to China.None should have gone off shore until the nZ market is taken up.

What crap you talk Balance by saying the company would have got more money as we all had to pay the same price.

[blobbles]

Blobles I will sell you what I got & it was what I asked for for $7.50 per share


Well, that's just the problem isn't it. I would have valued the shares at around $6 based on dairy return (past and potential future, particularly if the NZ $ drops as the US economy picks up again) and could have had a stake in the company at $5.50. But I never got the chance. Yet people overseas got an option even though they don't support the industry directly or indirectly through subsidies. And now people will offer me the same shares at a price well above what I think they are worth. Seems really fair right?

Instead I just have to sit around and hope they will do a facebook, which is probably unlikely.

[Balance]

Dug yourself in a very big hole there Balance. A full 42 % goes mostly to Aus on route to China and India as the Australians can not sell fast enought to China.None should have gone off shore until the nZ market is taken up.

What crap you talk Balance by saying the company would have got more money as we all had to pay the same price.

Hehe ...Still digging, Digger.

That methane from the hole must be making you 'heady'?

Like the way you are twisting and turning to try and hide the monumental booboo about Fonterra allocating shares to the Indian and Chinese. Good show of agility at your age!

I can help you there - Ozzie Ozzie Oink Oink Oink.

Your xenophobia has clouded your mind - Ozzies are not Indians or Chinese.

[ratkin]

At the end of the day who really cares?

There are plenty of other investment opportunities around , and a few thousand fonterra shares not going to be a life changer
Its a simple case of wanting what you cant have

[macduffy]

Isn't it about time that this thread got back to discussing the investment merits of these units?

[digger]

Hehe ...Still digging, Digger.

That methane from the hole must be making you 'heady'?

Like the way you are twisting and turning to try and hide the monumental booboo about Fonterra allocating shares to the Indian and Chinese. Good show of agility at your age!

I can help you there - Ozzie Ozzie Oink Oink Oink.

Your xenophobia has clouded your mind - Ozzies are not Indians or Chinese.


Still digging your hole by avoiding the central issue. First 42% went offshore when many founders and long owners and nz supports of this company got nil or next to nil. Forgot to comment on the crap that the company would get more money selling to the Aus on rount to the chinese when we all had to pay the same price.
But look thanks for all the comments here as tomorrow i get interviewed by the reporters on this matter. Some ideas here will help. I will use my own name and ask that similiar comments also have to use their names. The name hiders can go on letters to the editor.

[Balance]

Still digging your hole by avoiding the central issue. First 42% went offshore when many founders and long owners and nz supports of this company got nil or next to nil. Forgot to comment on the crap that the company would get more money selling to the Aus on rount to the chinese when we all had to pay the same price.
But look thanks for all the comments here as tomorrow i get interviewed by the reporters on this matter. Some ideas here will help. I will use my own name and ask that similiar comments also have to use their names. The name hiders can go on letters to the editor.

Bad enough, Digger, that you made the mis-informed and ill-informed comments in the first place about Fonterra allocating the shares to the Indians and Chinese, rather than to New Zealanders.

Instead of owning up that you were fed bad information, you then attempted to switch the argument to Crafar farms. There has been enough xenophobic racist emotional claptrap spoken about and written about Crafar farms than any reasonable and fair New Zealander will want to ever hear or read again.

You then assert that Fonterra allocated the shares to the Australians so that the Indians and Chinese will buy off them!

Please provide us with the proof - 1. That the Australians are selling and the Indians & Chinese are buying, and 2. Fonterra deliberately sold to the Australians under that pretext.

Xenophobic emotional race based comments have no place in any decent society.

As New Zealanders, we are better than that.

Your thread of comments remind me so much of a real life Digger at a pub in Sydney years ago. He was abusing a Japanese gentleman about WW2 and how he would never share a room with any Japanese as they killed his mates etc etc. Fair enough as he must still be so cut up about what happened during the war. Unfortunately, the 'Japanese' told him that he was actually a Korean. Instead of apologizing, the Digger muttered "you Asians are all the same and you killed my mates." Interesting thing is that no-one in the pub said anything (myself included) but there was a deep sense of embarrassment that 40+ years after WW2, there were still individuals around who could not unburden themselves from the past, and are prepared to apologize and admit their mistakes.

[Balance]

Isn't it about time that this thread got back to discussing the investment merits of these units?

Fair enough, MacDuffy.

Shoeshine of NBR has an excellent piece on the issue and makes many similar points as to the allocation of the shares - without the emotional and xenophobic undertones.

There is grudging acceptance though that Fonterra has done the right thing - as an international company, it has attempted to spread its shareholding as globally wide as possible.

In my view, NZ investors will never pay the kind of price that international investors are prepared and will pay - just a fact of life. Morningstar could not get its head around the issue and Tower decided not to invest.

So where does that take the stock to?

The international investors see Fonterra as a fantastic food play - in a world which will face potential food crises in the future. So they are buying growth potential and they are getting an excellent yield.

Yield wise, I suspect the international players will be prepared to accept in the longer term, 3.5% to 4.0% - so share price could potentially settle at $7.55 to $8.65.

[winner69]

Bad enough, Digger, that you made the mis-informed and ill-informed comments in the first place about Fonterra allocating the shares to the Indians and Chinese, rather than to New Zealanders.

Instead of owning up that you were fed bad information, you then attempted to switch the argument to Crafar farms. There has been enough xenophobic racist emotional claptrap spoken about and written about Crafar farms than any reasonable and fair New Zealander will want to ever hear or read again.

You then assert that Fonterra allocated the shares to the Australians so that the Indians and Chinese will buy off them!

Please provide us with the proof - 1. That the Australians are selling and the Indians & Chinese are buying, and 2. Fonterra deliberately sold to the Australians under that pretext.

Xenophobic emotional race based comments have no place in any decent society.

As New Zealanders, we are better than that.

Your thread of comments remind me so much of a real life Digger at a pub in Sydney years ago. He was abusing a Japanese gentleman about WW2 and how he would never share a room with any Japanese as they killed his mates etc etc. Fair enough as he must still be so cut up about what happened during the war. Unfortunately, the 'Japanese' told him that he was actually a Korean. Instead of apologizing, the Digger muttered "you Asians are all the same and you killed my mates." Interesting thing is that no-one in the pub said anything (myself included) but there was a deep sense of embarrassment that 40+ years after WW2, there were still individuals around who could not unburden themselves from the past, and are prepared to apologize and admit their mistakes.

Prob the same RSL joker who wanted Nokia phones banned .....can't have Jap phones in Aussie can we

[macduffy]

Good points, Balance. (Post 3.26)

I'm still a bit nervous about the risk of unduly favouring the milk price over the dividend-producing earnings - accepting that there is a mechanism designed to prevent this - but can see the appeal to a wide range of international investors. As NZ's leading exporter - and only truly "big" business - it deserves our support despite the controversy surrounding the issue of theses units. Which doesn't mean that we should refrain from criticism of management when/if appropriate.

[digger]

Balance this is my last comments as the hole you are digging for yourself is now beyond a joke. Xenophpbia by my dictionary means a morbid dislike of foreigners with some racial element thrown in. Lets see if i apply.Firstly I am 1/16 north american Indian [Black Foot}.I came to NZ in 1962 and have been a foreigner ever since,as i have been often been told. So I must have a morbid dislike for myself by your reasoning. I have been called many things as I am sure you have and everyone else,but you are the first to tell me i dislike myself. Many thanks from my heart as it does go a millionth of the way to balancing out what other say about how i feel towards me
Now for the racial bit.I have only one son and he is married to a Chinese women and they have given us two great grand kids.The youngest of 1.5 years rang us up the other day from Hong Kong by pressing the redial button.So great I am a xenophpbia. I qualify.

Now for why in particular Fonterra should have limited its units to NZ'S. Peak Oil, World falling food stocks, and rare earth metals will increasingly dominate the world economy and he who has it will control the globe. Already China has the lions share of rare elements and are prepared to exercise that control as the Japanese have just recently found out when the two countries went head to head in a island dispute.China is buying up good agriculture land as fast as possible. When it comes to Peak Oil the Chinese have claimed water right up to the shores of some of its neighbours.Note here that PPPV has premission to keep 15% of a drill coming up because i would say it is north of Vietnam ,but much closer to Vietnam than China. Now we come to Fonterra,the worlds biggest dairy exporter,which has just let 42% of these units be sold overseas,mostly to AUS. Will the Aus keep them.Well they sell everything else to China as fast as they can,so why not the Fonterra units.You are right I have no proof but by the time i have you will never get them back.
Fonterra has been turned down to directly make and sell its products in China. Great so we should let them have as much of NZ as they like and you are a xenophobia if you think other wise. I believe all human dealing have to be on a reciprocal arrangement. Now i will let you go back digger Balance and I will go off somewhere and deal with the strange new sensation of hateing myself.God almighty I am 71 and until you pointed to this small fact ,no matter how indirectly, it out it never occured to me. Thanks we never stop learning do we.

[peat]

Isn't it about time that this thread got back to discussing the investment merits of these units?the company looks an alright investment from an earnings and dividend perspective, even at market price. there is some risk associated with the structure and its novelty, but that's pretty minimal I guess. earnings trend has plateaued perhaps and world overproduction may be an issue but given the paucity of available quality exposure to the dairy industry it seems like this should become a portfolio core. For debt it has an A+ (outlook:Stable) rating from S&P as of June 2012. You may question the value of agency ratings but that's a high rating and is a very relevant piece of information. It has quite a few significant consumer brands such as Anchor which pull in over half the earnings and also has large international companies as its customers eg Coco-Cola and Kraft. It is geographically diversified with Asia and Latin America very strongly represented in sales . Things going against it are its dependence on commodity prices which do tend to have cycles with large peaks and troughs so volatility in price may be high. In sheer scale though with US15.7 billion turnover it does represent an opportunity to be part of something big, something NZ and something which other international investors can not enjoy. I want some.4238

[skid]

Gotta say..it does raise some issues with other large NZ co. about to be put on the selling block---sorry,back to business....

[Baddarcy]

Has anyone else had trouble with ASB Securities not processing orders? I put in a sell order this morning and its been sitting there Order Pending for some time now .... Anyone else had a similar experience?

[Anonymous]

Has anyone else had trouble with ASB Securities not processing orders? I put in a sell order this morning and its been sitting there Order Pending for some time now .... Anyone else had a similar experience?

I sold my FSF on Friday through ASB no problem. You haven't set a limit price above market price which is waiting to hit?

[Baddarcy]

I sold my FSF on Friday through ASB no problem. You haven't set a limit price above market price which is waiting to hit?

Gave them a call and sat on hold for sometime, my order had ended up in a error queue apparently, seems they are so busy it took some time to get to it.

Normally that would peeve me off somewhat but in this case the price went up 2c while i was waiting, so can't complain ...too much anyway :-)

[sharer]

...
Xenophobic emotional race based comments have no place in any decent society.
As New Zealanders, we are better than that. ...

Have to agree with you Balance. Not only on "xenophobic" but also on "indigenous" related issues.

Unfortunately, such comments are found very frequently on our forum.
It would indeed be much more helpful if comments focused on the merits or otherwise of particular investments, as advised by one of our gurus earlier above.

[skid]

Lets face it ..the Indians and Chinese are just a side issue.
From where Im sitting the real issue that throughout this rather senseless debate,what you both seem to agree on is that Fonterra could have looked after Its Kiwi subscribers a bit better.
You dont have to be a racist to be frustrated that the majority of shares in this issue got shipped off overseas.
Its the worlds largest dairy producer,and alot of people feel an affinity towards the fact its ''Kiwi''....I can understand the frustration.
Im glad its successful,and hope it stays that way,but also feel its fair enough that some are gutted with the way this went down.

[skid]

And getting back to the business side of things--Unlike facebook,.Its looking like they sold a bit to cheap

[Balance]

Lets face it ..the Indians and Chinese are just a side issue.
From where Im sitting the real issue that throughout this rather senseless debate,what you both seem to agree on is that Fonterra could have looked after Its Kiwi subscribers a bit better.
You dont have to be a racist to be frustrated that the majority of shares in this issue got shipped off overseas.
Its the worlds largest dairy producer,and alot of people feel an affinity towards the fact its ''Kiwi''....I can understand the frustration.
Im glad its successful,and hope it stays that way,but also feel its fair enough that some are gutted with the way this went down.

Hardly a side issue when it is so obviously wrong.

Where the stock went has a big bearing on the aftermarket - if it's the Chinese, they would tend to take a much longer term view.

If it's the Australians, they tend to be more circumspect and are more aggressive traders.

What I feel is so wrong is for the dairy industry debate in NZ to be so skewed towards xenophobia towards Indian and Chinese investments. Heck, as has already been well-covered, more than 95% of foreign owned dairy farms are non-Indians or Chinese!

I object to New Zealanders being manipulated by the red-neck elements in NZ. The best example of this is "Savethefarms" brigade with the insider trader Kerry Hoggard as one of its front persons - same individual who was happy to move his company to Australia, and then sell his stake to the Japanese. Forget about Michael Fay - he is too obvious.

[CJ]

And getting back to the business side of things--Unlike facebook,.Its looking like they sold a bit to cheapYip - price holding up. To be expected in this low yield economy with so many overseas investors (whose bank rates are even lower than ours).

[RTM]

Your exactly right Skid... selling to whatever race is a side issue and not what the flavour of this discussion should have been about...and largely wasn't until Mr Un Balanced got on his soap box. A little national pride and satisfying Kiwi demand first was all the people wanted to see.

It wasn't a racial debate.

[Balance]

Have to agree with you Balance. Not only on "xenophobic" but also on "indigenous" related issues.

Unfortunately, such comments are found very frequently on our forum.
It would indeed be much more helpful if comments focused on the merits or otherwise of particular investments, as advised by one of our gurus earlier above.

Disgraceful how others pretend that there was no xenophobia.

[Jaa]

Disgraceful how others pretend that there was no xenophobia.

Balance normally I find myself agreeing with you but you are dead wrong here. You are focusing on a couple of lines by one poster rather than the debate itself. Move on.

This was a company nurtured and protected by the NZ state and thus all Kiwis over many many years that unnecessarily shafted its long term supporters.

[skid]

Hardly a side issue when it is so obviously wrong.

Where the stock went has a big bearing on the aftermarket - if it's the Chinese, they would tend to take a much longer term view.

If it's the Australians, they tend to be more circumspect and are more aggressive traders.

What I feel is so wrong is for the dairy industry debate in NZ to be so skewed towards xenophobia towards Indian and Chinese investments. Heck, as has already been well-covered, more than 95% of foreign owned dairy farms are non-Indians or Chinese!

I object to New Zealanders being manipulated by the red-neck elements in NZ. The best example of this is "Savethefarms" brigade with the insider trader Kerry Hoggard as one of its front persons - same individual who was happy to move his company to Australia, and then sell his stake to the Japanese. Forget about Michael Fay - he is too obvious.

So let me get this straight-because of Kerry Hoggard,we should allow ''open season'' on our Large new Zealand farms to foreign ownership?
It amazes me how easily you get distracted by side issues and miss the main point.
I think it must just be your nature,and probably shouldnt waste my time[you've wasted enough for both of us]
Do you agree with those that are frustrated with the fact that Fonterra sold to overseas interests instead of its own people?
Maybe save all the other side issues for talk back radio

[Balance]

So let me get this straight-because of Kerry Hoggard,we should allow ''open season'' on our Large new Zealand farms to foreign ownership?
It amazes me how easily you get distracted by side issues and miss the main point.
I think it must just be your nature,and probably shouldnt waste my time[you've wasted enough for both of us]
Do you agree with those that are frustrated with the fact that Fonterra sold to overseas interests instead of its own people?
Maybe save all the other side issues for talk back radio

Skid, please read my last posting carefully. I laid my thoughts on what I think happens to the sp - depends on where the stock went.

False information was posted on this thread about where the stock went.

That is relevant information.

Then the same poster started on Crafar farm etc - what is the relevancy of that?????

As to 48% of Fonterra shares being sold to overseas interests, I have no problem with that. I know for a fact that local institutions and investors were very lukewarm to the issue until the overseas investors showed extremely keen interest. Local investors cannot have it both ways.

I wonder how many local investors will be lining up for this one :

ww.nbr.co.nz/article/synlait-posts-63m-maiden-profit-likely-seek-more-capital-wb-133455

When they tried to IPO 3 years ago, local investors all yawned. So typical of local investors.

[Silverlight]

Down 5% over the past 2 days, below the original open price.

Lets hoped this continues back to 6ish so those who missed out can choose to take a position around $6, probably what the original IPO price should have been set at.

I have not heard much commentary out from the farmers about this pro and cons of the issue. While the higher value is good for them, the fact that Fonterra (the company they own) issused 90m shares at a price that was clearly below what market was willing to pay, their company has raised $50 -$100m less capital than they could have.

[skid]

Absolutely agree.
Those buying at todays price are buying into a co. worth 50-100m less than it could have been.
Balance ,your point that it wouldnt have fetched as high of a price if it wasnt listed overseas is fair enough,but Im sure those many Kiwis who tried to get allotments and failed[not to mention those that would have taken much more than was offered]would disagree with you.
Fonterra could have easily given kiwis ''first option'' on a larger share.
I suppose the ''selling NZ to overseas interests'' would merit a thread in itself.

[skid]

QUOTE
As to 48% of Fonterra shares being sold to overseas interests, I have no problem with that. I know for a fact that local institutions and investors were very lukewarm to the issue until the overseas investors showed extremely keen interest. Local investors cannot have it both ways-----

Why Not? If they had had the oportunity to buy,then they could have,and overseas interests could have taken the rest.
It simply would have been more oversubscribed on the overseas side of the ledger

[Balance]

https://www.nzx.com/files/attachments/168087.pdf

The Australians are the big buyers.

Interesting that.

I wonder what happened to the Indians and Chinese.

Fonterra may find themselves shut out of the Indian and China markets?

[Balance]

Chalkie's take on the allocation :

http://www.stuff.co.nz/business/opinion-analysis/8035810/NZ-Inc-put-out-about-Fonterra-allocation

"When Fonterra was canvassing instos for their interest, it is said, some of the local feedback about the fund's governance was too candid for its liking. The foreigners, on the other hand, were apparently just happy to be involved.

Chalkie reckons there is some truth in this scenario, having overheard one of Fonterra's own local investment banking advisers describe the structure as "a dog"."

[ratkin]

Has anyone here made the effort to find out what these might actually be worth?

[Balance]

Has anyone here made the effort to find out what these might actually be worth?

$7.56 - based upon yield and growth play by overseas investors.

[winner69]

$7.56 - based upon yield and growth play by overseas investors.

Balance mate .... I got $7.62 ... pretty close eh ... what brand of abacus you got?

[Balance]

Balance mate .... I got $7.62 ... pretty close eh ... what brand of abacus you got?

High tech HP calculator - 1992 pedigree!

[Jaa]

Milford's active fund has disclosed 1.2% of the fund is invested in Fonterra, worth nearly $984k by my calculation.

While their conservative fund disclosed they received what must have been a very small allocation (the fund is only $130k in size) and has sold it already??

[Silverlight]

Milford's active fund has disclosed 1.2% of the fund is invested in Fonterra, worth nearly $984k by my calculation.

While their conservative fund disclosed they received what must have been a very small allocation (the fund is only $130k in size) and has sold it already??

And more:


The Fund was very active during the month and took advantage of new issues in the bonds of National Australia Bank, GPT Property and KiwiBank as well as new share issues of Fonterra and Goodman Property Trust in NZ and Goodman Group in Australia. The Fund was also very active in reducing holdings in companies which had reached our price targets including Fonterra, Fletcher Building and Steel and Tube.

"Well we got a good price in Fonterra and stagged it straightaway." Good if you are invested in this KiwiSaver fund I guess... this is one of the lucky NZ Fund Manager's that got a piece of the pie.

[ratkin]

Would quite like some of these , however , having missed out on the float have decided to bide my time, and excercise some patience .
Once the initial rush has subsided might be some better entry points

[robbo24]

The dairy cooperative increased its forecast farm-gate milk price by 25 cents to $5.50 per kilogram of milk solids and held the expected dividend payment of 40 cents to 50 cents per share, the Auckland-based exporter said in a statement. Fonterra also increase advance rate payments to farmers by 40 cents after the Shareholders' Fund float strengthened its balance sheet and reduced redemption risk.


http://tvnz.co.nz/business-news/fonterra-raises-2013-farm-gate-payment-forecast-5277517

Not bad - wonder if the SP will strengthen today?

[keepitsimple]

Fonterra dose not pay 40-50 cents divident it retains about a third.The divident has averaged about 30 cents in the last three years

[CJ]

Fonterra dose not pay 40-50 cents divident it retains about a third.The divident has averaged about 30 cents in the last three yearsPretty misleading statement by Fonterra then. They should get told of for that as being highly misleading.

[macduffy]

Regardless of the last three years, this is what is now reported.

"The dairy cooperative increased its forecast farm-gate milk price by 25 cents to $5.50 per kilogram of milk solids and held the expected dividend payment of 40 cents to 50 cents per share, the Auckland-based exporter said in a statement."

Note that this is the expected dividend.

[GR8DAY]

........surely someone can clarify this? I am considering investing (longterm) and would like to/need to know what return I can expect.........even count on??! Surely to god this should be a black and white statement for all the other potential investors like myself! Can anyone categorically clear this up with a 100% guarantee........even 90% would do for now!

[777]

........surely someone can clarify this? I am considering investing (longterm) and would like to/need to know what return I can expect.........even count on??! Surely to god this should be a black and white statement for all the other potential investors like myself! Can anyone categorically clear this up with a 100% guarantee........even 90% would do for now!

Do you want the same from all companies on the NZX?

[macduffy]

Companies regularly make statements about expected profits and dividends but profits depend on earnings, which depend on ( in this case), milk prices and milk product prices. Fonterra have regularly "adjusted" their expected milk payout and I'd expect that to continue as market prices and currencies fluctuate.

So no assurances!

[winner69]

Read the actual announcement .....all they said was NPAT was going to be 40-50 cents ....in line with prospectus

No mention of a dividend in the announcement

[CJ]

Winner - your a winner. Not sure where the above quote came from but you are correct, Fonterra only said NPAT of 40-50c. Looks like the media (businessdesk.co.nz and all their followers) got it wrong.

Did the prospectus announce a dividend policy - ie. 60-70% of NPAT???

[Silverlight]

They forecast a dividend of 32 cents in the prospectus (no imputation), so about 4.8% gross.

[Xerof]

Jeez, now they're going to let 'cash-strapped' staff stag them, because some of them can't read a document.

what a crock

[winner69]

They forecast a dividend of 32 cents in the prospectus (no imputation), so about 4.8% gross.

Also even if there are droughts or devastating floods or snowstorms or if the $ goes to a US$1 the divie will be 32 cents ...or maybe just a bit more

Wouldn't want to disappoint the first time round would we

[winner69]

Jeez, now they're going to let 'cash-strapped' staff stag them, because some of them can't read a document.

what a crock

So a few Xmas bonuses eh ....for the masses earning over $100k

Many said governance was going to be an issue

[Balance]

So a few Xmas bonuses eh ....for the masses earning over $100k

Many said governance was going to be an issue

Back above $6.90 and heading to $7.00.

$7.62, here we come!

[winner69]

Back above $6.90 and heading to $7.00.

$7.62, here we come!

Might even 700 today

Pleased you using my 762 ....my abacus is a Casio .....apps for the iPad are useless

[peat]

Jeez, now they're going to let 'cash-strapped' staff stag them, because some of them can't read a document.

what a crock
Hey Xerof
are you suggesting that the structure of this equity is an issue witty of concern to investors

[Xerof]

Hello peat, long time no speak

no mate, I'm just saying that if staff (who doubtless had a firm allocation) want to take up shares, with a trade-off being that they will be held in escrow for a short period, then that should remain the status quo, and a feeble excuse such as 'I didn't understand, and need the money now' should not wash

it's just more niggle and face-slapping to Joe Public

[peat]

Yeh for sure
Air NZ made their staff hold onto shares for three years before they had rights to sell. They did receive a discount, but realistically everyone who was allocated FSF got a discount too. :D

PS witty = worthy (stupid autocorrect)

[winner69]

Back above $6.90 and heading to $7.00.

$7.62, here we come!

By Xmas?

Don't think morningstar followers wil get their sub 5 bucks do you ......ever

[blobbles]

........surely someone can clarify this? I am considering investing (longterm) and would like to/need to know what return I can expect.........even count on??! Surely to god this should be a black and white statement for all the other potential investors like myself! Can anyone categorically clear this up with a 100% guarantee........even 90% would do for now!

Dude, when your product supply relies on how much sun your fields get, when your price is determined partly by demand in far off lands (e.g. Chinese attitudes to milk etc), you could be legislated by the NZ govt to do things like force your farmers to spend time and money cleaning up effluent... when x,y,z,a,b,c could happen affecting the amount or price you sell at... seriously you want a guarantee of a specific return? Good luck! This as known as the risk of investing!

[troyvdh]

...dear GR8DAY....no disrespect but you have to be young.....and have never lost any money in your life...be it from buying a leaky home or from taking advice from some fast talking smooth shaven suit wearing and overly convincing individual...,.who when asked how much he/she has invested in the product ...stutters......Ive looked at all the previous posts....I will mention 3 things...

...Ive heard (and this may be well be incorrect) that NZ cows are virtually 100 efficent...I.e....there aint much more that we can get out of the poor blighters..apart from having more of the aforementioned...
....foot and mouth issues remain...I understand that its more a case of when than if.....
.....aint this whole dairy story amazing....brilliant....our saviour.....almost perfect in fact.......well in my 56 years on this earth.....I have never come across the perfect answer...

...having said that (which I know I will be roundly lambasted)...I have/had several residential investments for over 30 years....nothing flash...not sexy...fairly grubby at times...but none the less consistent and believe me well above 10 %..a year....cheers

...one word of advice....when someone recommends anything....be blunt..ask what they are worth and how much they have in that in that recommendation....

good luck

[bohemian]

Troyvdh there is huge potential for increasing dairy efficience. Its more about grass production per hectare. Top dairy farms can achieve over 1700 Kg MS/ha where average for New Zealand is about 900 Kg MS/ha. Anyway as far as FSF is concerned in my view it is more about how much added value they can produce along with increasing volume.

[troyvdh]

...you are correct totally....it is all about grass....its just my concern that when everyone is convinced that "this is the answer to prosperity".....blah blah....sorry to appear so negative.....

[GRIFFIN]

Yes it is all about grass,it is also about good management, good genetics and trying to manage increasing input costs not to mention the revenue regional councils are stealing from dairy operations .

[skid]

Its about alot of things ,but throw Mother Nature into the mix and ,well you get the drift...[Hint-have you ever seen cows eat dirt or tread water?]

[Balance]

Might even 700 today

Pleased you using my 762 ....my abacus is a Casio .....apps for the iPad are useless

Casio's are great, especially when they give the right answers!

The overseas fund managers take the big macro view that NZ is a stable country to invest in and the most competitive industry NZ has is dairying.


So what is better than to have exposure to Fonterra? A dividend yield better than the bank and there's growth.

[Silverlight]

Casio's are great, especially when they give the right answers!

The overseas fund managers take the big macro view that NZ is a stable country to invest in and the most competitive industry NZ has is dairying.


So what is better than to have exposure to Fonterra? A dividend yield better than the bank and there's growth.


Marginally better than the bank, currently 4.4% on prospectus forecast.

[CJ]

4.4% ok for NZ but great for overseas investors

[BIRMANBOY]

Dont step too close to the edge of the world.... you might fall off. I know xmas can be depressing but its not all bad...you could be wiped out by a slow moving bus on Lambton Quay.
Foot & Mouth desease and you're wiped out ... :(

[Joshuatree]

..you could be wiped out by a slow moving bus on Lambton Quay.[/QUOTE] . Wiped out because you were hopping across the road with one foot in mouth.lol maximas merrimas

[Balance]

Foot & Mouth desease and you're wiped out ... :(

Likewise the NZ economy.

But who cares, 21 December and the unknown moon size asteroid is already on its way and will collide with Earth.

Enjoy the holiday season!

[BIRMANBOY]

Yes , this is why they reserved so many for overseas investors. No flies on these guys.
4.4% ok for NZ but great for overseas investors

[elZorro]

Troy - the sun hits the paddocks of NZ and 2% of that energy (on average) gets turned into sugars and carbos etc that herbivores can process. The animal itself then manages (on average) to convert 2% of that into meat, wool or milk energy for human use. We pay a lot for the outputs, but the only way it works with a 0.04% efficiency is because farmers pay nothing for the sun's energy. Even the rain can be viewed as concentrated solar energy.

Those dairy farmers that produce a lot more than others are often paying other farmers to grow feed for them, are importing feed, or pay others to take some of their animals, especially replacements, during tight feed spots. But some are very good stock managers too.

The interesting idea from all this is that if farmers treated grass as a very special crop that must be encouraged more, they could perhaps double production, and still have a fairly poor overall energy efficiency. It's harder and slower to change the breeding stock than to look after the grass, or try new cultivars and forage mixes. But farmers are slow to change practices on average.

If farmers did find they had more profits (in line with other business sectors with that sort of capital employed), they would then have no excuses for mitigating any effluent runoff into waterways, the main drawback I see from increasing production, for the rest of us.

[winner69]

A lot of the country pretty dry at the moment ......drier than normal and last year ......methinks drought conditions in lot f country to prevail ......dry grass less milk

Look at the amount of yellow range and red on this from niwa

http://ftpmedia.niwa.co.nz/climate/smd_map.png?1234

[elZorro]

A lot of the country pretty dry at the moment ......drier than normal and last year ......methinks drought conditions in lot f country to prevail ......dry grass less milk

Look at the amount of yellow range and red on this from niwa

http://ftpmedia.niwa.co.nz/climate/smd_map.png?1234

Yep winner69, it is a bit dry, and after a really wet winter it didn't take long to change. All that sun energy is good at drying out soils too. I've been thinking for a while that farmers with gullies and areas that could handle a dam with not much effort, could sacrifice some farm for spare backup water supplies. But since each paddock needs over a metre of water on it during the year, these would need to be big, deep dams.

[777]

Yep winner69, it is a bit dry, and after a really wet winter it didn't take long to change. All that sun energy is good at drying out soils too. I've been thinking for a while that farmers with gullies and areas that could handle a dam with not much effort, could sacrifice some farm for spare backup water supplies. But since each paddock needs over a metre of water on it during the year, these would need to be big, deep dams.

And in reality would the RMA or other restrictive Acts of Parliament allow that to happen.

[winner69]

714 at Xmas .......our 762 shortly in the new year balance eh

[macduffy]

A second Chinese firm in a month announces plans to build a $200m processing plant in NZ.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10858537

Plenty of milk to go round or is this starting to put pressure on Fonterra's future raw milk supplies?

Disc: Holding FSF

[CJ]

Well it's made the NZX50 (no surprise there) and forbars put a reduce recommendation on it.

http://www.stuff.co.nz/business/farming/8169552/Fonterra-leaps-into-NZX-50

Disc. Never a holder

[macduffy]

And from the AFR:

Fonterra Shareholders’ Fund was one of the few initial public offering success stories last year, but the stock may have run a bit too hard according to bookrunner Goldman Sachs.

Goldman Sachs, which floated FSF on the New Zealand and Australian exchanges along with UBS and Deutsche Bank/Craigs Investment Partners, has initiated coverage on the stock with a “neutral” rating and $NZ7.80 a share price tag.

[J R Ewing]

714 at Xmas .......our 762 shortly in the new year balance eh

This looks to be a distinct possibility now!

[winner69]

This looks to be a distinct possibility now!

Did you ever doubt our trusty Casio calculators

[J R Ewing]

Did you ever doubt our trusty Casio calculators

I have to confess, I looked at your numbers with some skepticism when first posted!

[robbo24]

The casios seem right - but the market doesn't?

http://www.stuff.co.nz/business/farming/8189586/More-price-rises-at-Fonterra-dairy-auction

Another strong showing for Fonterra's online dairy auction has augered well for dairy farmer incomes, possibly adding another 25c to the predicted farm gate price at the end of the season. Overnight, the fortnightly Global Dairy Trade-TWI price index ended 1.1 per cent higher, building on a 2 per cent rise at the previous auction.

It dropped from 753 to 740... I don't get it?

[CJ]

The casios seem right - but the market doesn't?

http://www.stuff.co.nz/business/farming/8189586/More-price-rises-at-Fonterra-dairy-auction

Another strong showing for Fonterra's online dairy auction has augered well for dairy farmer incomes, possibly adding another 25c to the predicted farm gate price at the end of the season. Overnight, the fortnightly Global Dairy Trade-TWI price index ended 1.1 per cent higher, building on a 2 per cent rise at the previous auction.

It dropped from 753 to 740... I don't get it?I may be wrong but the higher the milk powder auction, the higher the price paid to the farmer for the supply of milk. The more paid to the farmer for supply of milk, less profits available for FSF dividends.

[robbo24]

But aren't farmers paid per share which correlates to the dividend of FSF units?

Provided that demand remains consistent then the higher price should mean a higher dividend per share/FSF unit.

That U.S. drought looks good too...

[zigzag]

But aren't farmers paid per share which correlates to the dividend of FSF units?

Provided that demand remains consistent then the higher price should mean a higher dividend per share/FSF unit.

That U.S. drought looks good too...

Farmers get a dividend according to how many shares they own, but they also get paid per kg. of milk fat? that they produce. There is an inherant tension in this arrangement.

[macduffy]

Farmers get a dividend according to how many shares they own, but they also get paid per kg. of milk fat? that they produce. There is an inherant tension in this arrangement.

Yes.

There is a mechanism in the form of the "Farmgate Milk Price Manual" administered by the "Milk Price Group" which is intended to set a "fair" price for milk. We'll have to wait and see how this works in practice.

[macduffy]

Farmers get a dividend according to how many shares they own, but they also get paid per kg. of milk fat? that they produce. There is an inherant tension in this arrangement.

Yes.

There is a mechanism in the form of the "Farmgate Milk Price Manual" administered by the "Milk Price Group" which is intended to set a "fair" price for milk. We'll have to wait and see how this works in practice.

Apologies for the duplication>

:mellow:

[J R Ewing]

The casios seem right - but the market doesn't?



I think the drop today could be just a reaction to the recent rapid rise up through $7.50, a nice round $2/unit profit for those that got them in the IPO. Roll on $7.62!

[keepitsimple]

The casios seem right - but the market doesn't?

http://www.stuff.co.nz/business/farming/8189586/More-price-rises-at-Fonterra-dairy-auction

Another strong showing for Fonterra's online dairy auction has augered well for dairy farmer incomes, possibly adding another 25c to the predicted farm gate price at the end of the season. Overnight, the fortnightly Global Dairy Trade-TWI price index ended 1.1 per cent higher, building on a 2 per cent rise at the previous auction.

It dropped from 753 to 740... I don't get it?

It is real simple,dairy farmers get paid a base price according to what the world will pay for their milk.The value add section of fonterra have to pay the same price as every one else and sell there product at a profit.The higher the base pr
ice of milk the lower the value add profit may be.When world prices sky rocketed a few years ago the dividend was only 24 cents lower milk price last year gave a 32 cent divident.So dont get excited when GDT prices go up it may lower investers returns.

[robbo24]

When world prices sky rocketed a few years ago the dividend was only 24 cents lower milk price last year gave a 32 cent divident.So dont get excited when GDT prices go up it may lower investers returns.

That's a good explanation - thanks for that.

[peat]

Forsyth Barr put out a reduce recommendation at these levels - just as it enters the NZX50 ?

[keepitsimple]

I personly don,t see any reason for the price to stay at this level,a 4%return before tax isn,t that great is it?especially with a real risk of capital loss due to speculaters suddenly dumping these non shares that most investers dont seem to understand.

[CJ]

Forsyth Barr put out a reduce recommendation at these levels - just as it enters the NZX50 ?Probably not a bad idea - take profits while there is strong buying support from the indexes. So not a typical reduce but a reduce all the same.

[CJ]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10859798

Interesting article and a good question too.

Shareholders are only interested in profits for value add, such as baby milk power, not the sale of raw milk product to others for processing. Fonterra seems to be allowing others to use its competitive advantage (clean green NZ - just dont swim in the rivers).

[sharer]

Thanks for the reference CJ. I agree with your comment.
I am seriously pondering what might be best to do regarding FSF units investment. Looks like we might get clobbered by NZers' incompetence, as a substantial business risk to be added to our risk assessment guesswork in arriving at a justifiable value to pay for the Units.

[ananda77]

SELL - only way to go with present fantasy price
...and start accumulating slowly below 550
...frontera will always be strong with the supply of basic products but can not compete in the value added market against the like of Nestlé etc.
Kind Regards

[ananda77]

I agree the current price of $7.34 is more than it should be on fundamentals. I see a $6.50 price tag unless they exceed earnings growth consistently, but I can't see $5.50 anytime soon unless there is some kind of global collapse again.

...fair enough, but 550 will come at some stage - in the meantime, there are better value companies out there to line the portfolio

Kind Regards

[CJ]

...fair enough, but 550 will come at some stage - in the meantime, there are better value companies out there to line the portfolio

Kind RegardsIf I held (and I dont) I would be taking profits at the first sign of weakness. There is the posibility of more irrational exuberance before then so I am not sure if I would sell just yet (not a holder so not something I have looked into).

[robbo24]

Forsyth Barr put out a reduce recommendation at these levels - just as it enters the NZX50 ?

Did they know something about DCD before the market did...

[CJ]

Did they know something about DCD before the market did...Fonterra knew this before they listed. Many of the employees who have sold out would also have known. The question is 'is it a material piece of information' and if the current slide can be attributed to it, that question should be asked by the NZX.

[lowrolling]

Fonterra knew this before they listed. Many of the employees who have sold out would also have known. The question is 'is it a material piece of information' and if the current slide can be attributed to it, that question should be asked by the NZX.

This will probably fall under the FMA probe. NZX dont have the authority to investigate this.

[CJ]

The argument will be whether a level of DCD that is 1% of the threshhold was a material disclosure at the time. They will argue it was not. They can argue all they like but if Mr Market has another view, then reality could prove them wrong. Depends how much it falls in the absence of any other bad news.

Lowrolling - Any of the TLA (three letter acronym) will be fine whether it is FMA, NZX or IDK (I dont know).

It could also set an interest precedent depending on how the government discloses the Tiwai Point negotiations in the MRP IPO. Sure MRP doesn't supply the smelter but the government currently owns 100% of both so I would argue, the seller (goverment) has 100% knowledge, even if MRP management/executive doesn't know the state of the negotiations - it isn't MRP doing the IPO (ie raising funds) it is the Govn selling their investment.

[macduffy]

So Fonterra is to issue bonus shares to farmer shareholders, but presumably not to Shareholders' Fund "shareholders"?

Dilution already?

I don't hold.

[lowrolling]

So Fonterra is to issue bonus shares to farmer shareholders, but presumably not to Shareholders' Fund "shareholders"?

Dilution already?

I don't hold.

This bonus applies to FSF unit holders also.

[macduffy]

Thanks, lowrolling.

The news item I heard specifically mentioned "farmer shareholders". But then, it was the rural news!

;)

[peat]

perhaps the drought will allow some accumulation of FSF




at more reasonable prices




than have been on offer since the IPO.





http://nz.finance.yahoo.com/news/from-the-farm--sunny-skies-230708765.html


... Northland, where milk production is down about 20 percent, is officially in drought and the Waikato region output is down 15 percent,




The MetService doesn’t expect any substantive rainfall, able to replenish water tables, for weeks.

[robbo24]

So... that drought huh? Is there an alternate argument that the higher Farmgate Milk Price will just mean that people will simply pay more for the same products and improve the bottom line of Fonterra?

[Silverlight]

So... that drought huh? Is there an alternate argument that the higher Farmgate Milk Price will just mean that people will simply pay more for the same products and improve the bottom line of Fonterra?

If cheese doubles in price to $15 for 1kg block and milk cost $5 for 2l, will continue to buy the same amount?

The farmgate milk price is one of Fonterra's biggest costs, and they have to manage that along with the exchange rate risk of selling value add products into emerging markets. A higher price, on the same milk volumes and on the same margins would mean higher profits, however the drought will probably lead to lower volumes, so would expect net profit to fall on a YoY basis for processing division, even if margins are maintained.

[robbo24]

...so would expect net profit to fall on a YoY basis for processing division, even if margins are maintained.

Seems like the market agrees :) Maybe some good entry points coming up.

There's also the 2.5% bonus share offer for shares held on 18 April (I think that's the date anyway) to work into the calculation...

[macduffy]

Can I just get some confirmation that the bonus share offer of 1 unit for every 40 units held goes to everyone who holds shares in FSF and not just farmers?

Also, I don't have experience with this kind thing, but shouldnt this just deflate the SP by 2.5%?

It will certainly dilute shareholdings - that's the nature of bonus issues! Whether or not it has a proportionate effect on the SP depends on the market and how much "feel good" effect the issue has.

I'm not following FSF closely these days but wasn't the purpose of the issue to reduce the requirement on farmers to buy new farmer shares as their milk production increased? They have control, after all!

:cool:

[robbo24]

It will certainly dilute shareholdings - that's the nature of bonus issues!

The day they announced the bonus units the share price dropped far more than 2.5% though - I would say the bonus units are already built into the price...

[digger]

14.8% increase in world dairy prices (seventh straight gain and the biggest since Sep 2010) coupled with a weaking NZD should help buffer the drought situation a bit.

it all depends on how much of this season has been presold. Been talking to different dairy farmers about this and the censes is about in the same sort of agreement that we get here on sharetrader. Which means mostly they do not know or as one farmer put it---the amount sold is price sentsive and is not released for commerical reasons. So if the price goes up as it is is that a help for this year or next??

[J R Ewing]

The day they announced the bonus units the share price dropped far more than 2.5% though - I would say the bonus units are already built into the price...

The record date for the bonus issue is 18 April, so the dilution can't be built into the price before that date - the drop on the day must be due to other factors.

[robbo24]

The record date for the bonus issue is 18 April, so the dilution can't be built into the price before that date - the drop on the day must be due to other factors.

Surely the market buys and sells on future events and not only ones that have already occurred?

[robbo24]

I assume higher dairy prices (all else equal) should provide a boost to the SP, as would lower exchange rates.

Some people say the FSF units are tied to processed products such as cheese, etc, that has to be purchased at the market price for milk products. So if the market price for milk goes up then so does the price of dairy products... I suppose its not too bad if demand remains the same... Right?

[Bjauck]

Can I just get some confirmation that the bonus share offer of 1 unit for every 40 units held goes to everyone who holds shares in FSF and not just farmers?

Also, I don't have experience with this kind thing, but shouldnt this just deflate the SP by 2.5%?

Yes..all shareholders in FSF will get the bonus https://www.nzx.com/companies/FSF/announcements/233482

The bonus will have no affect on total assets so the SP per unit will be diluted after the record date...unlike a rights issue which would only dilute the SP to the extent of the discount to the Market price of the existing head shares.

I got a small holding in FSF in the float. I have not added to it. I admit I did next to no research and applied purely on the basis of sentiment and desire to have a stake in an important part of NZ's economy and heritage. I see that the ft.com poll of brokers show 2 recommend overweight, 2 hold, 2 underperform and 1 sell.

[duncan macgregor]

All in favour of exporting the greens to any country that might be silly enough to take them. however the climate is changing fast, and the NZ dairy industry looks a bit vulnerable if the change continues. The problem is the world is over populated, and increasing at a faster rate than global warming, so Fonterra might make a larger profit from a reduced sale in the short term. The problem is GOVT come in borrow to to much to look after the no hopers, then eventually dipping in and stealing money out the bank accounts of those unlucky enough to work and save for a rainy day. The wise investment is material things that you operate your self, at least when it all hits the fan you are left with something you can look at and say its all mine. Macdunk

[Bjauck]

Not so much "stay away from Fonterra" but "The loopy distribution of shares in their public offering meant I could only get a pittance amount, so not worth my trouble applying for, since the only way I could get a meaningful amount would be to buy more on market at a higher price, and what is the point of that?"
I don't know which brokers the Financial Times/Investors Chronicle polls. I guess that it would be British brokers with an international focus. However it has more readers in the USA and the FT prides itself on the coverage it gives world-wide markets. It could well cover the main brokers in NZ. I have not looked for any reports on FSF as I do not intend to add to my small initial subscription. Part of the reason for my not adding to it, is the unusual structure of the FSF..is it equity? Is it a bond? Is it a unit trust? Another reason for my not adding...I think there are better investment prospects with other NZX listings....especially given the price that FSF is trading at.

[duncan macgregor]

Wow so many things in one short paragraph that I disagree with that I dont know where to start. All good as different opinions is what makes this site useful.

Can I just take you up on one thing though, wasn't it the farmers with more of a "Green" mentality that came through the drought better? I'm talking about the farmers who prepared for the effects of climate change by growing trees etc which could be used as a substitute for grass during times of drought. Thereby not needing to kill off their older stock because they couldn't feed them, or needing government/bank assistance to prop them up.Good point but how much land required to grow drought resistant trees, against the small return?. like most greenie ideas it becomes an alice in wonderland story. I would presume if you did that you might save the labour content cutting them down if you crossed a jersey cow with a giraffe. On the other hand it might be more practical to crop farm, and shed feed. Grow crops and shed feed would be against all the greenie ideas about conserving energy. I presume most practical farmers will come up with better solutions than I might ever think up. Fonterra will still be very successful regardless, simply because of production cost due to scarcity, countered by price increase of the product. I would think piping water from streams and rivers at high points to irrigate low points without the use of power is the best I can come up. The greenies would want to tax the water so there you go. Macdunk

[J R Ewing]

I don't know, that jersey cow-giraffe idea is pretty impressive!!

The farm dogs won't be at all impressed, giraffes are used to fighting off lions and hyenas!

[peat]

Forsyth Barr has a reduce "the units appear expensive even when considering our above-prospectus forecasts"
Craigs also believe overpriced.

Interim result out on 27 March.

FB expect NPAT of 386m up 14% again pcp.

[lowrolling]

Forsyth Barr has a reduce "the units appear expensive even when considering our above-prospectus forecasts"
Craigs also believe overpriced.

Interim result out on 27 March.

FB expect NPAT of 386m up 14% again pcp.

FNZC have an outperform rating with a price target over $8

[robbo24]

Good times ahead for the SP of Fonterra, for the short term at least...



31 January 2013


(NZD million) 31 January 2012


(NZD million) Percentage


Change


Revenue from sale of goods 9,334 10,026 (6.9%)


Net profit attributable to Shareholders of the company1 449 339 32.4%


Non-controlling interests 10 7 42.9%


Net profit for the period 459 346 32.7%


1 Net profit attributable to shareholders of the company is equivalent to


profit from ordinary activities after tax attributable to shareholders of the


company (as required to be disclosed pursuant to Clause 1.2 of Appendix 1 of


the NZSX and NZDX Listing Rules).

[robbo24]

It's that, however, that I've got my eye on. Just how big will the drought's hit be to FSF units. A drought of this severity is going to do something, you can be sure of that.

That's right - but a predicted 32c dividend for the year is a nice little short term carrot for buyers here and abroad. It will be interesting to see how the relationship between dairy prices/dairy production/FSF units pans out over the next 12 months. Should be a good education for the long term investment.

[Taijon]

That's right - but a predicted 52c dividend for the year is a nice little short term carrot for buyers here and abroad. It will be interesting to see how the relationship between dairy prices/dairy production/FSF units pans out over the next 12 months. Should be a good education for the long term investment.

Forecast dividend is 32 cents. No imputation credits so on current price of $7.30 the yield is 4.3%. Don't think the share price will move much, possibly even drop.

[Lease]

Commentary on Fonterra Interim Result


Fonterra has just released half year results to 31 January 2013. Normalised EBIT is up 26% to $693 million, earnings per share(EPS) up 21% to 29 cents, dividend up 33% to 16 cents. Looks quite sound and let's take a look in depth.






1H 2013
2012
2H 2012
1H 2012
2011
2H 2011
1H 2011














Sales


9334
19769
9743
10026
19871
10515
9356


Half YOY Change

-4.20%

-2.82%
-4.65%

12.39%



Gross Profit

1736
3048
1473
1575
3010
1569
1441


Gross Profit Margin

18.60%
15.42%
15.12%
15.71%
15.15%
14.92%
15.40%


Net Profit


459
624
278
346
771
478
293


Net Profit Margin

4.92%
3.16%
2.85%
3.45%
3.88%
4.55%
3.13%



You can see the total sales has actually dropped in three consecutive six months period. The company has explained dropped revenue is mainly attributed to lower dairy prices and strong NZ dollar. But Gross Profit Margin(GPM) has reached highest level since 1H 2011. Fonterra has indicated favourable relative cheese and protein pricing, effective management of product mix and higher price premium compared to dairy commodity price help company achieve higher GPM.

It is a good sign that Fonterra has smart management with ability to improve earnings.


For each segment, NZ milk products are the largest profit contributor. But it's mainly this segment suffered by lower dairy prices and strong NZ dollar, and management have done great job to improve GPM which is 11.79%, the highest one since 1H 2011.





NZMP


1H 2013
2012
2H 2012
1H 2012
2011
2H 2011
1H 2011














Sales


6762
15717
8157
7560
15579
8362
7217


Half YOY Change

-17.10%

7.90%
-9.59%

15.87%



Gross Profit

797
1406
789
617
1213
665
548


Gross Profit Margin

11.79%
8.95%
9.67%
8.16%
7.79%
7.95%
7.59%


Net Profit


422
515
260
255
431
237
194


Net Profit Margin

6.24%
3.28%
3.19%
3.37%
2.77%
2.83%
2.69%



For business in Australia & New Zealand(ANZ), the company has pointed tough trading conditions in Australia and consequently normalised EBIT is down by 32% to $98 million compared to same period last year, but if we look the following table, and you can see the results of 1H 2013 are actually better than 2H 2012, in terms of sales, gross profit margin, and net profit margin. Therefore my opinion is ANZ segment is on the way to recover.





ANZ


1H 2013
2012
2H 2012
1H 2012
2011
2H 2011
1H 2011














Sales


2018
3848
1597
2251
4360
2210
2150


Half YOY Change

26.36%

-29.05%
1.86%

2.79%



Gross Profit

423
780
298
482
909
441
468


Gross Profit Margin

20.96%
20.27%
18.66%
21.41%
20.85%
19.95%
21.77%


Net Profit


98
204
59
145
252
99
153


Net Profit Margin

4.86%
5.30%
3.69%
6.44%
5.78%
4.48%
7.12%




In Asia/AME & Latam, all looks good but I'm a bit concern GPM is lower than 2H 2012.





Asia/AME

1H 2013
2012
2H 2012
1H 2012
2011
2H 2011
1H 2011














Sales


1049
1855
833
1022
1687
855
832


Half YOY Change

25.93%

-18.49%
19.53%

2.76%



Gross Profit

362
631
311
320
599
312
287


Gross Profit Margin

34.51%
34.02%
37.33%
31.31%
35.51%
36.49%
34.50%


Net Profit


100
194
115
79
186
93
93


Net Profit Margin

9.53%
10.46%
13.81%
7.73%
11.03%
10.88%
11.18%














Latam


1H 2013
2012
2H 2012
1H 2012
2011
2H 2011
1H 2011














Sales


559
805
300
505
830
424
406


Half YOY Change

86.33%

-40.59%
19.10%

4.43%



Gross Profit

148
245
98
147
272
139
133


Gross Profit Margin

26.48%
30.43%
32.67%
29.11%
32.77%
32.78%
32.76%


Net Profit


67
129
65
64
119
55
64


Net Profit Margin

11.99%
16.02%
21.67%
12.67%
14.34%
12.97%
15.76%




Overall, Fonterra has posted an excellent interim results. From the figures shown, there is large potential in Aisa/AME & Latam as population there is dozens more times than one of ANZ. But sales of Aisa/AME is only about half of ANZ, and sales of Latam is about a quarter of ANZ. There are substantial growth rooms for Fonterra in these regions.

[sharer]

Many thanks to Lease for a clear exposition of the factual situation with FSF so far. This gives us a real basis for investment planning & ongoing adjustments to our $$ allocations, and for assessing future results.
Like most others, i got only a small stake from the IPO & continue to follow closely with a view to expanding the holding for the longer term. This is very difficult with current high share price which most commentators deem too high, & investment yield too low compared to other NZX opportunities. It is even harder when one is trying to avoid becoming a "trader" for tax purposes. My intentions have not changed - still trying to gradually expand as market conditions permit, while trying to avoid ending up with a holding acquired at too high a price. My guess is that patience will be needed for at least several years in order to build up a reasonably substantial holding. I aim for about 10 - 15% of the overall portfolio eventually, but first goal is to get near a tenth of that. That will quite possibly be some years after i depart the planet, so i'm trying to record advice for my surviving trustees to consider. And, always remembering there are a few other good long term prospects competing for investment, & probably at better yields.
Nothing is easy, but that's what makes life so interesting.

[winner69]

Might even 700 today

Pleased you using my 762 ....my abacus is a Casio .....apps for the iPad are useless

Our (mine and Balances's) abacus(es) not that bad as did get to mid 750's ..... but a bit off since then

[rocketship]

Looks like people feel the drought is over (my opinion) and the SP is on the move... UP! 4.5% today, finishing at an all-time high of $7.66 :)

DISC: Thought it was time to join the movement and buy.

[winner69]

Our (mine and Balances's) abacus(es) not that bad as did get to mid 750's ..... but a bit off since then

Our abacus(es) were right after all

[Balance]

$7.56 - based upon yield and growth play by overseas investors.

It IS what it IS.

I learnt a long time ago to ignore the rantings and ravings of NZ based fund managers when it comes to what price a share will ultimately trade at.

The local fund managers keep a close eye on the overseas fund managers and dance to their tune.

Too many examples around but in recent times - FPA (locals sold out, overseas bought in big time and takeover happened at a very high price relative to where the locals were selling out at), Diligent, Xero, etc.

[macduffy]

A point to ponder.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10881461

[keepitsimple]

A point to ponder.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10881461

lol article looks familiar

[MAC]

It is totally appalling, perhaps we should all be signing some sort of petition to be ASB to change their analyst.

[lowrolling]

Earnings revision.... Downwards. Looks like at lower end of EPS guidance of 45c. EBIT notso hotso.

https://nzx.com/companies/FSF/announcements/238950


Worst drought in 20 years and EBIT is only revised down from 1.079B to 1B....

[robbo24]

Worst drought in 20 years and EBIT is only revised down from 1.079B to 1B....

Oh well, it's not so bad given that the 300 job cuts from Fonterra will save $65m annually before restructuring costs: http://www.google.co.nz/url?sa=f&rct=j&url=http://www.stuff.co.nz/business/farming/dairy/8896740/Fonterra-confirms-300-jobs-to-go&q=fonterra+redundancies&ei=y2nwUb_7OoyRigfsvYDwCA&usg=AFQjCNFkw7HWhMNTcslmMlwlGyQvxCLJhA

Is the sky really falling?

DISC: Not a holder since a month or two ago

[Joshuatree]

Forecast cash payout FY14 up 50c to $7.50 per kgMS and div est 32 c

[CJ]

Could be a good buying opportunity for those want one of the dairy stocks.

My issue is this is 15m ago! ( may last year from what I read)

[winner69]

Past baby formula but OMG whey products in sports drink

Ah so ... google says whey contains high level of protein ... good for sports drinks

One never knows what goes in what

Hope Coke doesn't have any bad stuff in it

[CJ]

Past baby formula but OMG whey products in sports drink

Ah so ... google says whey contains high level of protein ... good for sports drinks

One never knows what goes in what

Hope Coke doesn't have any bad stuff in itwhen they say sports drinks, they mean protein shakes, not power aid type drinks

[winner69]

when they say sports drinks, they mean protein shakes, not power aid type drinks

Thanks a lot

[winner69]

when they say sports drinks, they mean protein shakes, not power aid type drinks

Like the stuff the footy players use in Australia?

[CJ]

Like the stuff the footy players use in Australia?Any competitive sports person would use is my guess. Also any serious gym person. If you want to build muscle (or lose fat), stop muscle breakdown after exercise, or lose weight, you need to up you protein.

http://www.sportsfuel.co.nz/protein.html

Much tastier than raw eggs and easier than eating a huge steak at every meal.

[janner]

Mmm. Not Forsyth Barr's latest research from 1 August.



As exposure to agriculture in NZ goes, PGW, ATM and SML are looking better bets right now.

Have PGW as a pick in the comp.. VERY DISAPPOINTED.. Only 4 months left for that.. Think that we will be correct in the long term..

Disc.. Not holding.. PGW.

[Vince]

Members

If you work for Fonterra you must identify yourself as working for Fonterra and in what capacity, please refrain from posting anything that contradicts this.

Thank you
Vince
ST Admin

[RTM]

Will this create a buying opportunity for FSF? . Synlait has a lot of overseas ownership already, (not sure where to see this as yet), presumably by companies who want to have some control over their raw materials. This should perhaps largely underpin their price. But maybe the FSF price might drop quite a bit ?
If one believes the Fonterra success story, then this is an annoying blip that will be forgotten after a couple of years of good performance - fingers crossed. So perhaps an opportunity at ~$6.00 ?
Any thoughts ?

[goldfish]

Definetly a good opportunity to buy in, i got some at 550 and sold at 800 so looking to get back in if the price is right. Can see huge drop on monday in the price and this is just really a blip in the big picture of fonterra. The amount of testing they do im hugely surprised they didnt catch this earlier. Food safety is huge for them. Maybe a operator send some down the wrong pipe i dont know. Still not a good look for them but they will sort it out and will be forgotten about not to far down the track. Definetly some good buying chances coming up, its just going to be timing it right.

[CJ]

Definetly a good opportunity to buy in, i got some at 550 and sold at 800 so looking to get back in if the price is right. Can see huge drop on monday in the price and this is just really a blip in the big picture of fonterra. The amount of testing they do im hugely surprised they didnt catch this earlier. Food safety is huge for them. Maybe a operator send some down the wrong pipe i dont know. Still not a good look for them but they will sort it out and will be forgotten about not to far down the track. Definitely some good buying chances coming up, its just going to be timing it right.While a small blip 9only 32 tonnes), the underlying is quite worry. It was in circulation for 12 months before the issue was raised, then it took another 3 months to confirm. So their internal testing failed and then their rechecks took 3 months.

You have to love the damage control: "none of our brands are contaminated".

On a more serious note, one one of the 8 customers have come forward. Why haven't the other 7 been forced to come forward. As members of our family consumer both baby formula and whey protein sports drinks, I think it is shocking that the rest haven't been disclosed.

I am off to the gym shortly and if it wasn't for the fact I am already 3/4 though my current pack of whey, I would be wondering whether I should take it or not.

[winner69]

Seems an awful long supply chain ...stuff sitting around in warehouses not bring used doesn't quite seem right

[goldfish]

Sounds like a bit of trade envy putting the boot into the worlds largest dairy exporter. No reason for russia to stop imports. And CJ i think it took months (3) to test it, thats just how long these tests take, most strains of it are harmless and are found everywhere.

[MAC]

Cripes, http://www.stuff.co.nz/business/farming/dairy/9000131/Fonterra-at-the-centre-of-formula-fury

[baller18]

well.... wonder how much the SP will drop by tomorrow, at least 50 cents in my books

[Minerbarejet]

well.... wonder how much the SP will drop by tomorrow, at least 50 cents in my books
Knowing this crazy market in NZ it will probably go up:)

[RTM]

Yes, we are all wondering that. I think it will be more like a dollar, maybe more. And the exchange rate may drop as well I suppose ?

[bull....]

Yes, we are all wondering that. I think it will be more like a dollar, maybe more. And the exchange rate may drop as well I suppose ?

probably big falls dollar , fonterra and im thinking synliat is the biggest loser

[iceman]

It gets worse. Now Russia has banned ALL Fonterra products
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10908148