By Stephen Mayne, who bought 380 PMP shares last week

The Age’s Christopher Webb reported yesterday that Hunter Hall bought almost ten million PMP shares after last week’s profit warning and keen Crikey subscriber Peter Hall, the wealthy CEO of the contrarian London-based value investor, emails us:

We are comfortable buying ten million PMP shares at $1.30-$1.40, especially as we had sold ten million at an average of $2.05 in November. We are still believers in Captain Kirk and regard the current profit downgrade as a short term problem. When the new plant is installed and pumping, profits should kick up and we should see a rerating of the shares (fingers crossed).

Meanwhile, like any All Black captain who took a hit, PMP CEO David Kirk is ringing the changes. An internal memo went around yesterday morning announcing that Andrew Williams, Director of Print and PreMedia Sales, has taken a month’s leave, and his future role at PMP will be discussed when he returns. In the interim, his role will be filled by Kathleen Bailey Lord, Group General Manager Solutions Sales, an outsider who was recruited from law firm Phillips Fox. How this will influence the boys’ club within PMP Print should be interesting.

Williams is believed to have initiated his own exit, unlike the departure last week of the head of PMP Distribution. All up, these two blokes have 37 years experience at Australia’s biggest printing company, so they both remember the days when it was a 100% owned subsidiary of Rupert Murdoch’s News Corp.

With PMP shares wallowing at $1.31, the company is now capitalised at about $400 million and has an enterprise value of about $640 million when you include the $240 million in debt it carries. Yet News Corp pocketed more than $1 billion from its two-stage sale (when the company also owned a large magazine stable, since offloaded to the Seven Network).

The first slab was floated at a hefty $3.40 a share in 1991 and underwriter JB Were was left with a large stake that it held for three years. This float was at the height of Rupert’s debt crisis and when the details were discussed at a Herald Sun news conference, then editor-in-chief and loyal Murdoch man Piers Akerman declared: “That sounds like a good buy.”

Cheeky former Herald Sun business editor and chief-of-staff John Beveridge piped up: “How do you spell that?” Hmmm, not a good way to fast track your career with News Ltd, where optimism about the company is a regime requirement.

News Corp raised another $325 million when it dumped its remaining 40% PMP stake in July 1997 as the stock hit $3.65 – a level it has never reached since. News Corp had to accept a 12% discount of $3.20 a share and once again JB Were was left with another large parcel which caused an overhang. The institutions that bought News Corp’s stake received arguably the worst hospital pass Rupert ever made, as PMP almost went broke in 2003 when the stock muddled along at around 40c for almost six months.

Kerry Stokes was part of the turnaround story but the Seven Network sold its 14% PMP stake far too early, booking an $8 million profit when it exited at 75c a share in May 2003 before Captain Kirk really won over the market’s confidence.

Peter Fray

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