Greg & Greg Tickle The Bourse's Fancy

Sydney Morning Herald

Tuesday September 27, 2005

Edited by Colin Kruger

Lend Lease's Greg and another Greg at Mirvac share a nosebag and excite investors.

It started out as a harmless bite to eat for two execs with an interest in the same field. Now it has turned into the market's favourite takeover rumour.

The two Gregs of the property world, Messrs Paramor and Clarke, were recently spotted lunching together, heightening speculation that Clarke's Lend Lease was running the rule over Paramor's Mirvac. Not that Paramor would be complaining, given Mirvac's share price is up more than 20 per cent from its lows in May partly because of its status as a potential target.

The idea is that Lend Lease is looking to rebuild its asset base to compensate for the loss of GPT. Certainly Mirvac, with a market cap of $3.6 billion, could be easily integrated into Lend Lease, which is worth $5.4 billion, as both have development, construction and funds management operations.

However, it's unlikely that Paramor would even contemplate a buyer under $5 a share (compared to yesterday's close of $4.21) and even then it would be a fight.

There have even been rumours that Lend Lease would join forces with Babcock & Brown to do the deal. Insiders responded to that one with "You're kidding, aren't you?" It seems the GPT debacle is still fresh in the memories of all involved.

Another likely, although far less interesting, explanation for Mirvac's share price rise is that the property group is rebounding after taking a big hit after its profit warning in May. Brokers also point out that sentiment towards the residential property sector is warming.

But from all reports Mirvac is not the happiest of places at the moment. Since the merger last year of Paramor's James Fielding and Mirvac, there have been several staff departures, mostly from the Mirvac camp. Some have been retirements, with the chairman Adrian Lane pulling up stumps last week.

Fone Zone plays it bold

Telstra mobile phone dealer Fone Zone is out tempting the market again with plans for a $62.5 million public issue and prospectus next month. The company could be announcing official details, including its results for the year to June 30, 2005, this week. UBS is reported to be at the helm of the projected float and ready to offer the public up to half of Fone Zone's issued shares.

Whatever enticed the mobile-phone reseller to go public it certainly wasn't the market conditions. Telstra's legal brawl with another of its mobile dealers, Crazy John's, has erupted again and is one of many examples of how fraught life can be when you're in bed with an elephant.

Recent downgrades to both Telstra and Optus have also stripped away any doubts about how tough the mobile market is becoming, thanks to the mobile cap plans from Hutchison Telecom and Vodafone. Ominously, Telstra expects its mobile growth to halve this year.

Crazy John's has previously indicated it will be seeking to diversify into other markets (possibly India) and could divorce itself from Telstra before even contemplating a public offering.

Fone Zone is also asking Joe Public to cough up the dough weeks before Telstra announces the results of its company-wide strategic review.

This is expected to take a brutal look at what the big telecom needs to do in order to grow the top and bottom line.

On the plus side, Fone Zone's most recent earnings reports at the Australian Securities and Investments Commission - for the year ending June 30, 2004 - showed a $10 million net profit on revenues totalling $144 million.

The company had little debt at the time and reported net operating cash flow of just under $27 million - and had a franking credit balance of $11 million. The only update from Fone Zone until now is that revenues are expected to reach $198 million for the year just ended.

Primus on the move

A company which might find float conditions more tempting is Primus Telecom, which has been threatening to emerge from under the wing of its US-listed parent for some time.

It is halfway through installing its own broadband infrastructure on Telstra's network and is one several telecom tiddlers poised to carve up Telstra's broadband and voice businesses. Primus said it had already moved some 30,000 customers from Telstra's broadband wholesale service to its own network, which should give its margins a significant boost.

Despite a stream of investment banks beating a path to its door, Primus has given no indication it is revisiting the idea of a listing.

Flinders' perfect match

It isn't often that Andrew "Twiggy" Forrest is upstaged on his home turf.

But yesterday, explorer Flinders Diamonds - which holds gem exploration rights on Fortescue Metals' iron ore tenements in the Pilbara - grabbed the limelight by forming an alliance with South African diamond giant De Beers.

Flinders is run by geologist Dr Kevin Wills, who helped find Rio Tinto's big Argyle deposit in the 1970s. It has already found diamonds in South Australia but has yet to firm up an economically feasible project there.

Yesterday's deal initially involves a data exchange but De Beers can later earn a 70 per cent interest in Flinders' Hamersley project in the Pilbara for $7 million. De Beers is frantically searching for promising projects to replace its dwindling reserves.

Flinders's kimberlite pipe dream is tiny compared to Twiggy's grand $2.3 billion iron ore project. But unlike the fast-talking WA entrepreneur, Wills has managed to find a respected international partner early in the game.

xchange@smh.com.au