Continuous Disclosure: Cricketer Ross Taylor’s biggest investment mistake, Pacific Edge revalued

Black Caps cricketer Ross Taylor has revealed his love of share investing – and his biggest investment fail.

Taylor, who was speaking at a webinar for boutique fund manager Castle Point, of which he is an investor, said many top sportspeople chose to put their money into real estate.

“As a cricketer growing up, and probably most professional sportsmen, we get paid in lump sums and we are fortunate enough to have disposable income at a certain level.

“Traditionally most professional sportsmen have invested into real estate – buying a house, rentals.”

After talking to a lot of people, said Taylor, he was advised to diversify his investments once he bought a house. But he admitted it wasn’t something that got him excited to start with.

“My initial thoughts, like every other player in our team, was a little bit scared about equities and the share market, with hearing about all these crashes and not really seeing and learning what it is all about and being in there for the long haul.”

But he became convinced and now has a reputation for checking his stocks even when he is on tour.

“There is a lot of down time when you are a professional cricketer and when you are on tour I find nothing better than to get away from the game of cricket and to check the stock market and pretend to know what I am doing.”

Taylor has even been known to spend time checking his share portfolio while team mates are playing a round of golf or heading to the driving range.

“When you are in places like India and Bangladesh, Sri Lanka, you can’t really go very far from your hotel so it’s nice to go down to the lobby. Don’t get me wrong, I do enjoy golf now and then but probably not as much as some of my team mates.”

Taylor said he had both good and bad investing experiences.

“The first thing that comes to mind from a bad point of view was a few years ago now, in 2009, my father-in-law knew the CFO of Xero and they asked if I would like to invest in Xero at $500k. And I didn’t.

“To say that I would probably be here today if I had invested in Xero – I’d be lying.I probably wouldn’t even be playing cricket. But in saying that, you live and you learn and things happen for a reason.”

At Xero’s current share price, Taylor’s $500,000 would potentially be worth more than $50 million.

Jarden gives Pacific Edge 'buy' rating

Shares in bladder cancer tester Pacific Edge have had another boost, rising from 70c to 78c over the last few days.

One reason could be the initiation of research coverage by broking firm Jarden.

Jarden began coverage on Tuesday with a buy rating and a target price of $1.40 – double the price it was trading at on Monday.

Analysts Christian Bell and Adrian Allbon say the bladder cancer market is large and the current standard of care invasive, expensive and offers poor efficacy.

They say Pacific Edge’s Cxbladder is scalable, can be completed in home – an advantage in the Covid environment – with the test samples analysed centrally and at a granular level.

“Commercially, PEB is also well advanced through the time-intensive clinical review process and has achieved guideline inclusion and CMS approval.

“Whilst competition exists, our analysis suggests these products are lower performing and
materially lag PEB in the commercialisation stage.”

The analysts said while the next key phase for PEB of changing urologist practice and generating adoption carried inherent time risk they believed PEB’s strong
first mover advantage should allow a long duration to execute that.

“Our positive growth outlook assumes successful adoption and a ten year window for PEB to scale US volumes materially.”

The analysts expect revenue to grow to around $900m by 2030 from first half 2021 revenue of $3m, losses to continue into financial year 2022 and a dividend to be paid from 2024.

The target price is 40 times the FY2022 revenue which was consistent with sector pricing, on a growth adjusted basis, they said.

There is one disclaimer: Harbour Asset Management owns 14.47 per cent of Pacific Edge and Jarden is the majority shareholder (76 per cent ) of Harbour.

Kiwibank first mover

Kiwibank is the first major bank off the ranks in raising capital ahead of new capital increases for the sector.

The state-owned bank this week announced that it would look to raise up to $275 million in an unsecured loss-absorbing subordinated note to be listed on the NZX debt market.

The note will pay interest quarterly and have an annual rate, yet to be finalised, of between 2.3 and 2.5 per cent, with an initial five-year term and a possible five-year extension.

David McLeish, senior portfolio manager at Fisher Funds, said there had been an expectation that banks would wait until after July next year before beginning to raise capital once the rules were finalised.

Reserve Bank consultation on what qualifies as appropriate capital is still underway and won’t be closed off until the end of March.

“Kiwibank has definitely jumped the gun a little bit on this one'” said McLeish. “So it will be interesting to see if the other banks follow suit before July or if they hold off until there is full clarity.”

The challenge in launching the note now is that it carries a condition which means the Reserve Bank can make a non-viability call on the bank, which could result in some or all of the money not being paid back to investors.

“You would hope the price is reflective of the risk and I think that is the case.”

McLeish said not only was the loss absorption risk something investors had to be aware of, there was also the five-year early redemption date as well as the final maturity date.

“It does make knowing when you might get your money back harder with this type of investment as well. So there are extra risks around repayment and timing of that.”

Not as bad as expected

The October/November reporting season has finished better than expected, although it is still in negative territory, say Forsyth Barr analysts.

Matthew Leach and Liam Donnelly noted this week that of the 20 companies which reported, 10 were ahead of their earnings per share expectations, two were in line and seven were below expectations (one deemed non-applicable).

The analysts said the season was boosted by better than expected results from companies in the property sector.

While the median revenue was worse than expected, earnings and net profits were better than predicted across the 20 companies.

Excluding the six property companies, the median normalised earning per share was up 7.6 per cent, lower than the expected 8.8 per cent rise.

But including them, EPS was down 1.9 per cent, better than the expected drop of 5.1 per cent.

However, the analysts said investors’ reaction seemed to be one of dissatisfaction.

Using three-day post-result price reaction, they found that just two companies – Argosy and Investore – had strong positive share price rises while 11 underperformed and seven were in line with the market.

In terms of dividends, just two companies reported dividends above analyst expectations – Mainfreight and Trustpower – while four surprised on the downside – Arvida, Fisher & Paykel Healthcare, Ryman and Napier Port.

The analysts said since the results they had made three positive and four negative revisions to financial year 2021 dividends and three upgrades and five downgrades to 2022 dividends.

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