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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: Bosco who wrote (8503)	4/20/1999 1:10:00 PM
From: Paul Berliner	Read Replies (2) \| Respond to of 9980

Because the Australian Stock Market has been closely tracking the U.S. Indices over the last 12 months (contrary to what one would expect considering the abundance of commodity stocks on the All Ordinaries Index, though Telstra & News Corp are largely responsible for it's steep ascent), I thought that this article would be of interest to several on the thread in one way or another: afr.com.au Note: PBL = Publishing & Broadcasting Ltd., Packer's Co. Packer is known to be a shrewd gambler & risk taker. ------------------------------------------------------------------- Packer's punt: bear market is on the way Comment, By Ivor Ries Kerry Packer, the country's best market timer by a country mile, yesterday declared the 1999 bull market in media, telecommunications and internet stocks to be over. At least, that is, for the time being. There are a great many factors that influence when Packer senior decides to buy or sell an asset. But the most important question he asks, over and over again, is this: is today the right time to be getting in or out? In agreeing to sell $500 million worth of PBL shares to institutions - through a gutsy placement at $10.29 underwritten by JB Were - Packer is effectively reducing his exposure to the sharemarket and cashing up for opportunities that lie ahead. And opportunities will come in abundance if the Packer camp is right and the whole hyped-up media and internet sector is headed for a major shake-out later this year. Kerry and James Packer's decision to issue new PBL shares clearly wasn't taken lightly, as the unusual decision to suspend trading in PBL shares for 24 hours indicates. The reason this decision is momentous is that it further dilutes the Packer family's ownership and control of the company's flagship enterprise. At the beginning of the decade, the Packers owned 100 per cent of most of the businesses that now make up PBL. In January, the family stake in PBL was down to 45 per cent and, following the completion of the scrip-funded Crown takeover, down to 38.2 per cent. Following yesterday's placement, the Packers will hold just 35.3 per cent of PBL. That's still a controlling shareholding. But, as Conrad Black once said more elegantly about another company, exerting 100 per cent of the effort for 35 per cent of the profits (or less) is a bum deal. Clearly the Packers would not be watering down their PBL holdings unless there was a compelling reason. And the compelling reason is that, at the current PBL share price, taking money from institutions is about as good as it gets. The whole assumption underlying that bet is the expectation that PBL shares - probably along with the whole market - will be considerably cheaper at some time in the near future. And Kerry Packer has indicated that he will be there when that happens. It's hard to argue with Packer's timing instincts. The hype and hot money pumping into the internet, media and telecommunications sectors this year has had a distinct tulip mania flavour to it. With internet stocks trading on 200 or 300 times revenues - if they have any revenues - the difference between internet stocks and tulip bulbs is purely in the eye of the beholder. In truth, in two years from today, most tulip bulbs will provide more pleasure to their owners than 70-80 per cent of the current crop of internet hopefuls. As Packer would know, the really great fortunes made in the Dutch tulip mania were made by those who had the courage to sell at or near the top of the market. Those too afraid to sell lost everything. It's hard to argue with the big man's timing instincts. After all, Big Kezza sold most of his Crown shares at $2.70 in late 1996 and bought them all back again for less than 90¢ two years later. In the 1980s, he sold Channel Nine to Alan Bond for $1 billion, then bought it back again for $200 million. Time and time again, Packer has shown uncanny timing, both buying and selling. Yesterday's placement isn't the end of the PBL cashing-up process. Soon there will be the spin-off of ecorp Ltd, PBL's internet arm. With another $200 million to $300 million from ecorp, PBL will be sitting on $700 million to $800 million worth of dry power. That cash will buy an awful lot of strategic assets for the PBL empire if and when the sharemarket has the rude awakening we all know is coming, sooner or later.