Haley Van Leeuwen
The acquisition of Farmside by TeamTalk appears to add
value to TeamTalk in its own right, plus it has a strong growth
story to tell, Forsyth Barr broker Haley Van Leeuwen says.
Subject to shareholder approval, TeamTalk will buy Farmside
on December 14 for $31 million - $12 million in equity and
$19 million of debt.
Farmside was the leading provider of telecommunication
services to the rural sector and the only significant New
Zealand provider of satellite broadband, Mrs Van Leeuwen
Farmside had around 15,000 customers and had a strong brand
in the rural community.
"The growth potential in Farmside is significant and has the
capacity to be TeamTalk's fastest-growing division."
Broadband penetration was relatively low in the rural
community and with an estimated 290,000 rural dwellings - of
which 40,000 were likely to have to rely on satellite or
other wireless solutions to get a high-quality broadband
service - there was growth potential, she said.
"We are positive on the transaction."
The current operating performance of TeamTalk was mixed, Mrs
Van Leeuwen said.
Reversing the trend of recent years, the mobile radio
division was going well and winning new business. In
particular, it had won a significant NZ Bus contract that
would boost the second-half 2013 earnings.
In contrast, CityLink was being hurt by the Government's
Margins were being squeezed and some contracts lost.
However, there was no change to Forsyth Barr's full-year 2013
forecast, she said.
Forsyth Barr had upgraded its recommendation on TeamTalk from
hold to buy.
MethvenThe sharebroker has retained its accumulate
recommendation on tap and shower-ware maker Methven but has
downgraded its full-year earnings forecast by 2.6% to $14.9
Methven recently reported a 14.7% fall in first-half
operating earnings to $5.8 million on a 7.2% fall in sales to
Broker Tom Bliss said he continued to like the longer-term
prospects for Methven based around the water and energy
conservation features of its proprietary shower ware.
Methven was continuing to seek further costs reductions and
operating efficiencies across all business units. The company
had a robust balance sheet capable of sustaining
bottom-of-the-cycle earnings, Mr Bliss said.
ArgosyForsyth Barr also retained its accumulate
recommendation on property company Argosy Property after the
first-half result was ahead of expectations.
Mrs Van Leeuwen said Argosy's large diversified portfolio of
more than $900 million of property was 74% weighted to
Auckland. The company had successfully divested smaller
assets and land and had restructured its joint venture
Although its gearing was one of the highest in the sector,
Argosy had significantly reduced its lease-expiry risk and
had improved its occupancy to 96%.
"Argosy has an internalised management structure, very
attractive dividend and has reduced its operating costs," Mrs
Van Leeuwen said.