Compass, dodgy SPPs, exec pay, MAP, Mirrabooka AGM, Manningham, Cornwall, Ten, RACV, China, capital raisings, big Canberra speech, Rich List and much more

February 2, 2010

Dear Mayne Reporters,

First up this week, tonight on ABC1 make sure you watch the religious program Compass which is billed on Aunty's website as follows:

What Should I Do? - Part 1

Once upon a time the big decisions in life were about births, deaths and marriages. But today many of our little, everyday decisions have grown into big dilemmas. It's become harder to make choices when the consequences seem increasingly complex and far-reaching. In the first of this two-part Compass special, Geraldine Doogue is joined by five guests who discuss their dilemmas and help answer the question: What should I do? At the table are: shareholder activist Stephen Mayne, Buddhist nun Robina Courtin, former ACT Chief Minister Kate Carnell, outspoken Catholic priest Father Bob Maguire and social activist James Arvanitakis.

Gordon Farrer from The Age's Green Guide certainly gave it a good review last Thursday with the following:

One of the most interesting (ethical dilemmas) concerns whether charities or churches should accept money from dubious sources - the proceeds of crime or gambling, for instance. Shareholder activist Stephen Mayne says no way; controversial Catholic priest Father Bob Maguire says he would accept it to help the poor; Buddhist nun Robina Courtin says you should accept the money because it helps the karma of the person giving it but you should never give money to someone who might use it for dodgy activities. These are the sorts of conversations you hope families have over the dinner table to develop and reinforce moral and philosophical frameworks. To have a public setting for such discussions is welcome. My only gripe is that the programs should be double the length and parlayed into a whole series.

And how timely to have such a discussion as the media pours out stories on street violence, football drunkenness, rugby league suspensions and the grand final eve deal that saw Melbourne's Catholic Archbishop Denis Hart give Father Bob Maguire another two years in his South Melbourne parish.

The program was recorded almost three months ago and was indeed a very refreshing discussion that should be worth tuning into tonight at 10.05pm on ABC1. Former ACT chief minister Kate Carnell even has a go at me about running a Noel Crichton-Browne hatchet job in Crikey a few years back which damaged her Federal preselection prospects. It was also good to put Kate on the spot about the biggest member of the Food and Grocery Council industry group that she leads, Woolworths, and its enormous unethical push into the pokies.

Taking a dump on grand final eve

The time-honoured practice of dropping bad news when no one is looking was on display against last Friday as several companies elected to release bad news as the nation's attention turned to the AFL grand final.

Who can forget 2007 when Fairfax, PBL and Seven all released their annual reports on grand final eve.

While you can, check out the flow of ASX announcements on Friday and here are my personal favourites for cynicism:

5.47pm, Fortescue Metals: change of CFO

5.29pm, Seven Network: annual report released with pathetically inadequate disclosure of executive pay.

5.11pm, Engin Ltd: struggling Seven-controlled business appoints new leadership team.

4.51pm, Babcock & Brown Infrastructure: annual report released with more fee gouging.

4.15pm, Babcock & Brown Power: annual financial report with more fee gouging.

3pm, Woolworths: annual report showing big pay rise to CEO Michael Luscombe and poor pokies disclosure.

11.59am, Toll Holdings: annual report with more excessive pay packets after the scandals of recent years.

10.07am, Wesfarmers: annual report with ridiculous $8 million salary package for CEO Richard Goyder.

9.38am, Consolidated Media Holdings: notice of meeting for AGM showing 6 directors up for election.

9.37am, Crown: annual report showing big pay packets despite $1.4 billion in write-downs.

9.20am, Suncorp: annual review with more excessive payouts for poor performance.

9am, Computershare: notice of meeting for AGM reveals it is one of the first companies seeking pre-approval of termination benefits for executives given legislative changes that are coming.

8.27am, Macquarie Media: annual report with more appalling governance under Millionaire Factory's external manager model.

This sudden deluge of excessive executive pay information on Friday is most appropriate given the media discussions over the weekend coming out of the G20 and the next item. Read on...

ASX, MAP, executive pay and big corporate governance speech in Canberra

This Wednesday is going to be a big day. We're on an early flight to Sydney for the ASX AGM at 10.30am which will be followed by what will be a highly contentious EGM at Macquarie Airports starting at 2pm, as the Millionaires Factory attempts to extract an outrageous $345 million go-away fee and AFL President Mike Fitzpatrick attempts to add to the $100 million-plus he has already made personally clipping the ticket on infrastructure deals over the years.

Fitzpatrick's opportunism is breath-taking especially given the pile of money Victorian taxpayers dropped when he was chairman of our state sovereign fund, VFMC, and approved the ridiculous purchase of a 48% stake in Birmingham Airport for about $1 billion from Macquarie Airports at the very top of the market in mid-2007. The pound has since sunk like a stone and airport valuations have plunged as well, yet Fitzpatrick now wants to run the whole MAP show for a huge fee.

We'll only be able to stay for the first hour of proceedings at MAP because there is a big corporate governance lecture to be delivered that night at the University of Canberra. Allan Fels will be in the audience and the details are available here, so please feel free to come along if you live in the ACT.

Professor Fels will also be having a big day given the Productivity Commission's draft report into executive pay will be released at midday on Wednesday. I'm hopeful some of the suggestions we bowled up will be in the mix. Check out the submission here along with this transcript of our 70-minute appearance on June 24.

Mirrabooka kicks off 2009 AGM season with a Manningham connection

Mirrabooka is a $240 million listed investment company chaired by former JB Were executive chairman Terry Campbell which specialises in stocks outside the top 50. The outfit opened the battling for the 2009 AGM season last Thursday and put in a polished performance, rattling through the formalities in the first few minutes ahead of the late arrival of a certain shareholder activist and then settling down for a very thorough and interactive discussion about various companies it invests in.

David Meiklejohn, the former long-serving Amcor finance director, was re-elected to the board with the usual 96% in favour despite the odium of having chaired Paperlinx for the past decade as it almost went broke. If a little more punctual I'd have asked why Mirrabooka didn't appear to have any Paperlinx shares in its portfolio but was happy to accommodate its chairman on the board for another three years? The answer would no doubt have been that Mirrabooka invests independently of its directors and Meiklejohn has sat on a stack of boards over the years with Paperlinx the only major blot on the copy-book.

Asking such a question might have been a tad awkward given the current Melbourne Cricket Club chairman is a Heidi ward constituent within the City of Manningham and even confessed to voting for me last November when we bumped into each other at the local pizza place.

He said it again after the Mirrabooka AGM when we even discovered that Meiklejohn had helped get up the council-owned nursing home in Manningham almost 25 years ago. Strangely enough, the current crop of Manningham councillors have devoted more time to this well run nursing home than any other issue over the past 10 months. Even more than fire preparedness over our vulnerable green wedge areas and the coming $100 million-plus sale of the 48ha Eastern Golf Club in Doncaster, where Meiklejohn also happens to be a member.

The inherent corruption of placements

The other interesting element at the Mirrabooka AGM surrounded institutional placements and Terry Campbell was quite open in admitting that the company spreads its brokerage around and generally gets well looked after by the investment banks in capital raisings.

This just highlights the inherent corruption of placements and partly explains why Mirrabooka has out-performed the index over a long period of time. When discounted stock is being handed out to the big end of town, the old JB Were stable of listed funds apparently do pretty well in the battle to pocket as much benefit as possible from the collective dilution and shafting of retail investors. Mind you, Mirrabooka's out-performance has mainly come diligent stock selection and avoiding companies with too much debt and vehicles which were externally managed by fee-gougers such as Macquarie, Babcock, Allco and MFS.

Unfortunately, I didn't take the recorder as the Campbell explanation about capital raisings was very interesting so we'll ask managing director Ross Barker if he can shoot through the transcript.

From our comprehensive AGM archive, this is the only previous Mirrabooka encounter before last Thursday's AGM:

Mirrabooka AGM
Sept 29, 2007
Chairman wanted it off the record - see Mayne Report.

Brickworks leaves the door open and see share register expand 500%

Ever heard of Brickworks? You should have because it's part of a $2 billion investment conglomerate controlled by Sydney's wealthy Millner family which dabbles in everything from building materials through Austal bricks to pharmacies through the Soul Pattinson chain to coal mining and even telecommunications.

The structure of the conglomerate features a series of shareholder unfriendly cross-shareholdings between different listed vehicles but the performance has been good so investors don't compain too much.

Brickworks is an extremely conservative organisation carrying no debt but the company has behaved like a dodgy penny dreadful mining stock by leaving the door open for opportunists with the announcement of a $15,000 share purchase plan last Thursday morning.

Brickworks went into Thursday with about 2500 shareholders but foolishly declared the record date was next Wednesday, September 30. This meant anyone who bought the stock on Thursday or Friday would have a chance to buy 1209 shares at $12.40, a 7.5% discount to the previous close.

There were 6288 transactions on Thursday and 8863 on Friday meaning the Brickworks share register has expanded about six fold as floods of opportunists poured onto the register after the arbitrage play buzzed around share market chat rooms.

The stampede caused the company to release this special announcement on Friday morning confirming that purchases that day would qualify for the SPP and rather obliquely reserving the right to scale back the opportunists piling in for the SPP.

However, the board also claimed they were "delighted with the reaction to the SPP".

The only obvious "reaction" to the 24 September announcement was the buying of thirty odd shares by each of those extra 6000 shareholders on Thursday. The fact that the 25 September announcement refers to Brickworks being "delighted" suggests they will accommodate all the SPP applications, including the extra 8863 trades on Friday.

Based on past market experience, these sorts of reactions to companies which leave the door open with delayed record dates are now entirely predictable, yet Brickworks has not informed the market of its "capital requirements" which is the only criteria to be used in any SPP scale back.

However by not expressing disapproval of the purchases on 24 September and the foreseeable purchases of 25 September, it has led the market to believe that those capital requirements are such that it will satisfy all the SPP applications arising from the purchases on the 24th and 25th of September.

It really is time the ASX or ASIC banned the practice of capital raisings with delayed record dates. As you can see from this shame file, there is a large number of companies doing it. Indeed, Boart Longyear announced its $15,000 SPP at 27c on Friday and the record date was September 24 yet this offer was first flagged way back in July.

It's fine for punters like your correspondent as we've profited to the tune of more than $30,000 this year from the lurk, but it completely rips off the original shareholders when a stampede of applications from opportunistic applicants causes everyone to get savagely scaled back.

I was already on the Brickworks register and didn't get onto the lurk in time to double or triple the play through my wife and employee so on this occasion I'll be one of the shafted.

Cornwall, Iran, uranium and the G20

Good call to block Chinese takeover of Lynas

The Rudd Government's decision to block the Chinese government from getting control of rare earths company Lynas caused plenty of headlines on Friday. I explicitly called on the government to do precisely this nine days ago on Sky's Business View program as you can see from the wobbly video at the top of this playlist.

More Chinese ownership

Our comprehensive lists tracking foreing investment in Australia now include this latest entry in our Chinese compilation:

China Investment Corp: the sovereign wealth fund recently purchased a 14.5 per cent stake in trading firm Noble Group. In May this year, Noble bought Australia's Gloucester Coal for around $498 million. Becoming a large stake holder in Noble, China Investment Corp are effectively becoming more involved in global commodities.

Have a look at these lists tracking every resource project that has Chinese investment and other Chinese investments in Australian resources

Also, watch this video compilation of short commentary about Chinese investment in Australia.

Time for Channel Ten to look after retail

The following email was sent to Ten Network executive chairman Nick Falloon and a couple of his executives on Friday after it was confirmed that controlling shareholder Canwest had indeed finally exited:

Subject: time to resurrect the SPP

Gday Top Tenners,

Well done on managing Canwest out. Now there is no reason to delay the retail SPP after the selective placement in August.

It doesn't need to be the full $15,000 if you're worried about raising too much new capital or diluting all your new institutional investors. Just a minimum of $5000 at $1.15 would do the job and a cap of $50 million would be appropriate given the amount you raised from institutions.

No need to reply just feeding this into your decision making process and looking forward to the announcement ahead of the AGM.

Regards, Stephen Mayne

Have a look at our SPP shame file of companies which did selective placements with institutions whilst failing to offer retail investors a share purchase plan. Network Ten is on it but the ball is now in their court to get off it.

Meanwhile, have a listen to Friday's discussion on 4BC Brisbane with Michael Smith about what Canwest's departure means for Ten.

Vote for Trevor O'Hoy and Paula Piccinini in RACV election

Australia's biggest and most successful remaining mutual, Victoria's RACV, is having its annual board elections and my better half, Paula Piccinini, is one of the incumbents.

Paula has teamed up with former Foster's CEO Trevor O'Hoy to produce this flyer spelling out their credentials and some joint policies.

More than one million ballots have been sent to elligible roadside members this week along with the October issue of Royal Auto.

If you're a member, don't forget to vote because turn out rates in RACV roadside assistance elections are traditionally less than 10%.

It was good to hear an RACV advertisement on 3AW promoting the election and member participation during the lead up to the AFL grand final on Saturday.

Donations to The Mayne Report

Cripes, after the last edition we received 6 donations totalling almost $1000. Many thanks for such generosity and if others would like to join in to help fund our advocacy, click below:

The latest capital raising plays

It has been a good year playing the capital raisings in Australia and the $230,690 of gross profits have unfolded as follows on a monthly basis:

January: broke even
February: broke even
March: $10,170 profit
April: $36,996 profit
May: $31,639 profit
June: $86,600 profit
July: $28,293 profit
August: $12,758 profit
September: $27,821 profit so far

However, don't forget that there have been about $40,000 in transaction, under-writing and financing costs plus more than $100,000 in crystallised losses in other plays, plus the $200,000 we've dropped over the past two years on The Mayne Report.

That said, it has been good to find an alternative to subscriptions for funding out activities. The completed plays since the last edition have been as follows:

September 21
Hills Industries:
$5000 into SPP at $1.40 but scaled back by 50% to 1786 shares. Exited at $1.94 for gain of $964.

$25,000 into two entitlement offers at $4.30 but scaled back to 656 shares costing $2820. Exited at $5.56 for profit of $826.

September 22
Bank of Queensland:
$8000 into entitlement offer at $10 with no scale back. Exited at $10.81 for profit of $648.

$10,000 into $10,000 SPP at $1.30 but scaled back to 2693 shares worth $3500 and exited at $1.695 for profit of $1063.

Offers we're currently committed to

This list tracks how much cash is down for various offers awaiting either allotment or refunds:

Clarius Group: $20,000 into 1-for-3.5 entitlement offer at 64c with ability to apply for extra. Closed September 25 and trades October 5.
Cougar Energy: $13,400 so far into two $15,000 SPP entitlements at 8.25c. Closes September 29 and trades on October 5.
Elders: $600 so far into two $20,000 SPP entitlements at 15c. Closes on October 23 and trades November 3.
Folkestone: $200 so far into 2-for-1 entitlement offer at 15c with ability to apply for extra. Closes September 30 and trades October 7.
Gunns: $18,000 into entitlement offer at 90c which closed September 25 and trades October 8.
Healthscope: $200 so far into $15,000 SPP at $4.19. Closes October 1 and trades October 13.
Ramsay Healthcare: $35,000 into three $15,000 SPP offers at $9.835. Closed September 25, trades October 8.
Skilled Engineering: $15,000 into SPP at $1.50 which closed September 18 and trades September 28. Scale back coming.
Spotless: $15,000 SPP at $2.16 or 2.5% discount which closed September 17 and trades September 30 with no scale back.

Total live applications: $116,000

We'll be out of Skilled Engineering for a 4-figure gain tomorrow once the scale back detail is confirmed and then Spotless on Wednesday where the full $15,000 has been allotted and should deliver almost $3000 in profits.

Tracking the scale back refunds

The scale backs have been getting more common in recent offers and we're having a run of slow refunds at the moment with the following offenders:

Amcor: $22,180
Energy and Minerals Australia: $10,916
Hills Industries: $2500
Sedgeman: $6500
Skilled Engineering: details coming Monday

The total refunds outstanding are currently $42,096 so that leaves total funds committed at $158,096, with $10,000 of that coming from a third party financier.

Finally, check out this complete chronological list of all capital raising plays in 2009 and at the bottom is a list of the 20 or so upcoming offers.

There's also this version ranking the top 50-plus plays since January. For the latests shuffles in our ridiculously large tiny share portfolio, check out all trades in 2009 plus the full portfolio of more than 700 holdings worth less than $50,000.

From the press room

Besides from Compass tonight, there's been quite a bit of media activity over the past week as follows:

Lateline Business: Discussing the Fairfax board battle
Wednesday, September 23, 2009


4BC Brisbane
with Michael Smith discussing Canwest selling out of Network ten.

774 ABC Melbourne
- with Lindy Burns discussing Mike Fitzpatrick, Fairfax rumblings and the market.

ABC News Radio -
discussing the Fairfax board tilt with business editor Peter Ryan

For Crikey subscribers, there was also this story on power and Fairfax.

Mayne Report video blog

Over the past few weeks we have been putting together playlists of videos covering similar topics and additionally, collections of videos from television appearances. Check out these special edition videos.

Subscribe now to our free new audio and video podcast service, highlighting the best of our audio from radio and AGMs, and bringing together the best of our video blog.

Mayne Report RSS Feeds

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Sign up for Mayne Report Tweets

We have only been twittering for a few months, but now have more than 720 followers and are regularly dropping out the latest developments from AGMs, capital raising plays and even Manningham Council. Sign up below to get the latest updates from all our activity and check out some of the latest tweets.

Cornwall cartoons for The Mayne Report

Former Fairfax and Crikey cartoonist Mark Cornwall has been contributing his satirical commentary to the Mayne Report since March 2009. Here is a collection of his best cartoons and there are now some amusing animations he has begun. Go here to see his animations.

Most recent Mayne Report editons

Sign up here to receive the weekly Mayne Report member editions for free and you can see an archive of all editions from 2008 and 2007.

If you've only just got on board or missed some recent missives, try these for size:

Fairfax, RACV elections, MAP, capital raisings, Manningham, Wallis, hostile EGMs, video, AGM diary, rich list and much more
September 22, 2008

Bad Bendigo, Mark Day, Manningham, pokies, NAB, Asciano, Rich List, Paladin, hostile EGMs and much more
September 15, 2008

Elders rip-off, NAB excuses, Woolies grog push, Virgin scale back, Australand windfall, McCrann, Walkleys, activism, Macek, AMP and much more
September 8, 2009

Come along tomorrow, Fairfax article, profit season, Business View, Australand looks good and NAB scandal
August 28, 2009

NAB shafting, capital raisings, pokies, council taxes, REA Group, Laker, Richies and much more
August 25, 2009

Manningham, bank bashing, capital raisings, Fairfax, Asciano, NAB, McCrann, Charlie Aitken, developers and much more
August 17, 2009

Macquarie, Trevor Rowe, capital raisings, Murdoch, Rich List, Qld In and much more
August 7, 2009

Macquarie AGM, Melbourne's decline, Asciano EGM, capital raisings, Goyder's pokies, speeches, fire, AGM diary and much more
July 28, 2009

Asciano, capital raisings, AGM schedule, Rich List, ASIC jail list, PC transcript and much more
July 17, 2009

The Mayne Report Rich List

Since we began compiling the Mayne Report Rich List documenting every Australian currently or previously worth more then $10 million, it has grown in numbers, now up to 1390 entries, and popularity such that no other feature on our website can match it for traffic. Here are some of the newest entries:

Steve Ackerie: the grandson of a hairdresser, he arrived from North Lebanon to ply the family trade. In 1964 he opened his first salon in Longreach which has expanded into 55 salons becoming the largest hair dressing organisation in the history of Australia. He also owns a restaurant that caters for over 1.5 million people a year which pushes his wealth to around $88 million.

Geoffrey Edelsten:
the former flamboyant owner of AFL club Sydney Swans and medical entrepreneur, once owned thirteen medical centres, with around 200 doctors seeing more than 20,000 patients each week. He was deregistered from practising in New South Wales in 1988 and also in Victoria, but it is reported he still owns three practices and residential properties in Melbourne pushing his wealth to around $10 million.

Hooker family: US-based L. Janusz Hooker is in discussion with Suncorp-Metway to buy back the LJ Hooker real estate business which was sold to Suncorp in 1989. Mr Hooker is the grandson of founder Leslie Joseph Hooker who set up the first LJ Hooker office in Sydney in 1928.

Nev Pask: one of Queensland's most respected property developers and businessmen, is Chairman of a group of 25 companies. He was responsible for the development of over 1500 house and land packages on the Redcliffe Peninsula as well as several commercial projects.

Sarina Russo: founder and managing director of the education, recruitment and investment companies that form the Sarina Russo Group. She has achieved great success as an educator, businesswoman and property owner. She owns a portfolio of both commercial and residential properties in Brisbane.

Ron Wanless: founder of Wanless Enviro Services specialising in waste recovery and environmental services, the former scrap metal dealer, has also has interests in speedcar driving , boxing and polo. He owns an expansive piece of land used solely for his Beaudesert Polo facility which hosted the 2008 Motorline BMW Polo tournament.

Terry and Rhonda White: as former President of the Pharmacy Guild, Terry, along with his wife Rhonda, founded the Terry White chemist franchise. They appointed their first franchisee in 1994 and now has 111 stores from Cairns to Perth with a turnover of $550 million. This has pushed their personal wealth to a reported $100 million.

Noel Whittaker and Cheryl Macnaught: they established Whittaker Macnaught Financial Planning which was sold to a subsidiary of Royal Bank of Scotland, St Andrew's Australia, for a rumoured figure that was north of $30 million. CBAbought the business last year.

Ashley Williams:
Melbourne-based property developer has survived the downturn in the commercial property, building a diverse portfolio pushing his wealth north of $120 million.

Keith Williams: the now retired founder of Seaworld on the Gold Coast and Hamilton Island Resort in the Whitsundays built his personal wealth from nothing to more than $150 million.

That's all for now.

Do ya best, Stephen Mayne

* The Mayne Report is a multi-media governance website published by Stephen Mayne with occasional email editions. To unsubscribe from the emails click here.