September’s market comment starts off with a rather sobering quote last week,

Meanwhile, former Fed chief Alan Greenspan said there are many similarities between the current market situation and those of years when the stock market crumbled.

"The behavior in what we are observing in the last seven weeks is identical in many respects to what we saw in 1998, what we saw in the stock-market crash of 1987," said Greenspan, according to The Wall Street Journal

August represented one of the most volatile months that investors have ever experienced with huge day to day moves making investment an unnerving business.
Have we seen the worst? Traditionally a 10% fall on the Dow is seen as a correction while anything near a 15% slide is a recession.
Top index companies seem to have solid balance sheets, and in many cases are still looking to buy back their own shares or grow by acquisition, so it is more a case of what will drive the markets higher with hedge funds continuing to be sellers and with the likelihood that private equity funds will play a smaller role in markets.

On the local market it has been interesting to watch the volatility on each stock
i.e. Air NZ way oversold now bouncing back nicely.

Remember: when everyone is talking doom and gloom often the predicted crash doesn’t happen because buyers are standing back waiting to buy.
Feel institutions comfortable with their weightings.

Kiwi Income Property. Asset backing.
KIP directors are in an interesting position with the latest valuation of $1.75 per share seeing the stock currently trading at $1.48 a 16% discount.
Could it be time for a share buy back? Or are the valuations to high?
Brokers seem to prefer KIP and Goodman Property Trust (GMT) with positives being strong management, quality well diversified property portfolio and room to
continue developments that enhance asset backing.
The softness of the property sector due to a change of sentiment around the problems in the USA has brought KIP and GMT back to value levels.
The PIE announcement in August is available to investors from October 1st onwards. The implied gross yields for investors paying 33% tax are 8.8% for KIP and 9.3% for GMT.
On the charts KIP looks to have good support at $1.45 and any if you believe interest rates are peaking KIP and GMT could be good buying around current levels.

Dairy Equity Limited. Asset backing
DELCA directors are faced with the question “Do we wind the fund up?”
One would imagine this would be an unpalatable task as any fund manager would find it hard to pass up the management fees generated by such a fund.
Is there a conflict of interest between the fund manager and shareholders when the basic premise for such a fund has changed? Apparently several large investors / shareholders are asking the directors this question.
To this end the board has appointed Mark Benseman, a well regarded analyst to review and consider all possible options for the future of the company.
NTA is approximately 50 cents as such the shares are trading at a healthy discount, with some proactive shareholders on the register the December meeting could be very interesting.

Restaurant Brands. Recovery Story?
RBD directors have forecast a net profit this year for the fast food factory of $9m-$10m. If these targets can be achieved RBD will be an attractive pe ratio of 8.2 to 9.1 and an equally attractive gross dividend yield of 11.8% if previous payout ratios are implemented. (an assumption on the writers part)
Pizza Hut: RBD shareholders have had some severe indigestion pains recently with the Pizza Hut investment in Victoria proving to be a costly mistake. The exit of this business is largely complete.
The Pizza Hut operation in New Zealand has also seen a reduction in net trading profit due in no small part to the “pizza wars” resulting in EBITDA being down $6.7m on the prior year to a profit of $5.1 or a net result before non trading being a loss of $0.4m).
The Directors will continue to close down the Red Roof operations and concentrate on the more profitable takeaway and home delivery business.
There has also been a roll out of point -of-sale equipment which is helping with improved controls over inventory and labor as well as providing more information on customer trends.
Menu rationalization, price simplification and a revamped marketing program are also playing a part in this business turnaround.
KFC: A total of 25 KFC stores – including 3 new stores have been transformed with indications suggesting store-transformations are having a positive effect on sales and more importantly margins. The KFC operation is one of the best performing franchises in the world and accounts for 63% of group sales. With agreements now in place with master franchisor YUM the directors are looking for a strong performance from the brand in the current year.
Starbucks: Directors continue to see growth in the Starbucks Coffee chain and first quarter sales are up 7.9%, but margins are getting tight with the increased labour costs and rentals.

Takeover talk has been a cost in terms of executive time and focus, however something that had to be pursued on behalf of shareholders.

Outlook
RBD Chairman Ted Van Arkle is determined to see a turnaround in the fortunes of RBD and along with the board has implemented some hard decisions based around control of costs, implementation of better reporting systems and a number of new marketing programs.
There is also a belief that RBD has the brands that can continue to grow and maintain market leaders in their respective sectors.
Much of this work has now been implemented and the results should start to come through. The directors have stated “that net profit is currently forecast to be in the vicinity of $9 to $10m, compared to $6.5 million in the 2006/7 year.
If these results come to fruition market fundamentals would suggest that the share price can move back through the $1.00 mark
Ask your advisor.

Regards.