Opportunities Update - 14 August 2014
In their 7 July media release, Motor Trade Association Dealer Service’s Manager Tony Everett said strong motor vehicle sales for the first half of the year across all sectors is a healthy indicator of a buoyant market, with strong consumer confidence.
When you ain't got nothing, you got nothing to lose
You're invisible now, you've got no secrets to conceal
How does it feel, ah how does it feel?
To be on your own, with no direction home
Like a complete unknown, like a rolling stone
A draft of Bob Dylan's lyrics for his groundbreaking 1965 song "Like a Rolling Stone" sold on 24 June 2014 for $2.045 million.
Hi John,
We continue to see indications of the confidence in the New Zealand economy. And you don’t have to be an economist to understand them.
Motor Vehicle Sales
In their 7 July media release, Motor Trade Association Dealer Service’s Manager Tony Everett said strong motor vehicle sales for the first half of the year across all sectors is a healthy indicator of a buoyant market, with strong consumer confidence.
The used imported passenger segment had the strongest June for 9 years - and the strongest first half since 2006. Even the motorcycle segment of the vehicle market was up 14% against the same time last year.
There’s also a clear indication business is seeing the increase in confidence too. Everett said “It’s been the biggest new commercial month since our records began in 1981 – as well as the biggest first half. June is historically a big month for commercial vehicles due to Fieldays, but this is exceptional. That we’re seeing these huge sales for the first half suggests these are sustained trends, rather than spikes of short-term exuberance from special deals and the like”.
And if that wasn’t enough, their 7 August media release said the sales for used imported vehicles were up 25% on the same month last year with 12,052 used imports coming off the ships and onto the market.
MTA Chief Executive Rob MacGregor said “This July saw the most used imports since March 2006, with a 12 percent jump on the month before. The market is still 2,825 units off setting a new overall record – in March 2004, when the Japanese Used Import market was at its peak, the sector sold 14,877 units. However, that we are this close is unexpected – there will be a lot of busy dealerships across New Zealand”.
Property Sales
Mark Synnott, the chief executive of Collier International's New Zealand arm, believes the commercial property's bull run could continue for another three years. In an interviw with interest.co.nz, he said the current market upturn was the strongest and most sustainable he had experienced in his 27 years in the industry.
"Between the late 80s and the mid-90s it was really tough. Way, way tougher than the GFC," he said. "We started to come out of that toward the late 90s and then we hit the Asian crisis. Then we had that rush of blood to the head in the mid-2000s and then we've gone through the GFC. But this is the strongest period of sustainable growth. The growth we had in the early to mid-2000s wasn't sustainable."
And in another interest.co.nz article, Westpac senior economist Michael Gordon said that after adjusting for seasonal patterns, the figures suggested the housing market was showing some new signs of life.
"Both we and the Reserve Bank have been expecting an upturn in the housing market over the second half of this year," he said. "Net immigration is approaching record highs, banks are utilising more of the high-LVR loan limit, and some popular mortgage rates are actually lower now than they were before the first OCR hike in March.
“The July figures are consistent with that view, but at this stage it's too soon to tell whether the upturn will resemble our modest expectation (with annual house price growth slowing to 4.5% by year end) or the RBNZ's more bullish view (with prices re-accelerating to 6.5% a year)."
“Rock Star” Economy
For an economist’s view on this confidence, see the ASB bank’s latest Quarterly Report which says “The purported ‘rock-star’ economy is halfway through what we expect will be the strongest year of the current expansion.”
At TBK Capital we’re seeing this increase in confidence in the SME capital and debt markets too.
In the time since we formed this business three and a half years ago, we’ve never had more interest from investors in taking part in this growth - as can be seen by the offers we currently have now or are in the pipeline.
We’re also seeing more interest from lenders.
- Non-bank lenders abound, with many now advertising on TV. Banks are becoming more aggressive - and not just with housing loans.
- So far this year we’ve arranged bank loans for a variety of clients from a $465,000 development loan facility to consecutively build and sell houses on a new Christchurch subdivision, to an $8 million property refinance in Auckland.
- Bank and non-bank lenders are looking at more innovative ways of lending to businesses without seeking that familiar property security.
Low Interest rates
In late July the New Zealand Reserve Bank increased the Official Cash Rate by 25 basis points to 3.5%. They said “New Zealand’s economy is expected to grow at an annual pace of 3.7 percent over 2014. Global financial conditions remain very accommodative and are reflected in low interest rates, narrow risk spreads, and low financial market volatility.” They go on to say “Today’s move will help keep future average inflation near the 2 percent target mid-point and ensure that the economic expansion can be sustained.”
It’s interesting to see how the OCR has moved since March1999 when it was first introduced. It started at 4.5% moving to 8.0% in July 2008, dropped to 2.5% in April 2009, and then fluctuated between 2.5% and 3.0% until June this year. Also see a comparison of world interest rates and how low they are - especially amongst our trading partners. And they have been low for a considerable time.
Low interest rates are good for borrowers but not for investors seeking returns on their investment. In fact it makes it difficult for them to simply preserve the value of their assets. See Deutsche Bundesbank article. So institutional and individual investors are looking at alternative investment as they seek returns greater than they have experienced since the GFC hit six or seven years ago. And the continuing fragile nature of the Global economy probably means the current low interest environment will remain for some time.
Raising Capital for SMEs
At TBK Capital it’s our mission to help businesses attract funds to allow them to start or expand their operations. Our specialty is arranging a suitable mixture of debt and equity funding to provide working capital for growth - and “expertise” through active investor participation.
See two of our recent newsletters on this subject Choosing the Best Loan and Lender and Money for Business.
The first of the FMA’s new “Crowd Funding” licences have now been awarded and TBK Capital has entered into an arrangement with one of these to provide smaller and/or early stage capital for SMEs.
For those looking for large expansion of their business early “private” capital raising will ultimately assist businesses to reach the level where they can attract an exit strategy such as a trade sale or “liquid” equity via the NZX, ASX or other listed exchanges. We’re not directly involved in the listed markets but have arrangements with people who are.
So here’s an update on some of the projects we are currently promoting, or where an IM is about to be released. TBK Capital has been mandated to raise capital for all of these.
For further information simply reply to this email listing the offers that interest you, or call me on 09 307 3257 or 021 902 901.
New Projects
CleanPaleo
CleanPaloe is an emerging New Zealand company, which specialises in the manufacture and supply of packaged foods that cater to the Paleo lifestyle. You may have seen their product range as you shop - they are already in more than 70 retailers now.
The business has shown unprecedented growth in the food industry, and after trading for only 16 months, is already stocking major supermarkets, pharmacies, and health/organic food stores. CleanPaleo has already received their first export order to a major Australian distributor - just 12 months after commencing trading.
The company is about to expand its global presence to take advantage of its first mover status and the lack of competition globally. They are already recognised as the worldwide leader for their innovative packaged Paleo foods. Their aim is to be a major presence in the world food market.
Accordingly CleanPaleo is looking to raise capital to:
- Purchase and manufacture the required stock to meet current and future orders.
- Complete the research and development of their desired product range.
- Effectively market their brand and products for launch into Australia, the U.K., the U.S., and Europe.
The first capital raising is to instigate an organic global approach focusing first on the Australasian market. This new share issue will raise $2,500,000 for a 25% shareholding in CleanPaleo Limited. A cornerstone shareholder would be offered a seat on the board of directors of the company.
Subsequent capital raisings will be in several stages to launch entry into the global markets. We expect these to be of interest to a corporate or institutional investor that may wish to confirm the growth anticipated has been proved before investing.
Were the initial or subsequent investors to participate in these later rounds CleanPaleo recognises the new investors could end up with a majority shareholding in the company.
An IM will be available soon. Expressions of interest are being taken now.
Exploron - Social Network Aggregator
Allele is a New Zealand based start up developing the Exploron “app” that eliminates the every day hassle of checking in, monitoring and interacting with multiple social networks. It’s aimed at “Socialites” - people heavily active across multiple networks like Facebook and Twitter.
Today, millions of people around the world check into social networks on their Smartphone. Unfortunately they also experience a jumble of relevant and irrelevant activity within their social sphere. We are increasingly becoming tangled-up with information in our social networks that simply does not matter to us!
Allele solves the frustration of information overload felt by over 90% of social network users with Exploron. This app eliminates the everyday hassle of checking in, monitoring and interacting with multiple social networks by Socialites on-the-go. Exploron understands what information is relevant to the user’s world from his/her networks and deciphers what really matters from what doesn’t.
The company is raising $100,000 for the seed round to build the proof of concept for trial in the Australasian market. The next round will be $400,000 to launch the full-featured app globally.
The IM is available now.
Projects - Update on Current
Kiwi Rider Limited
Kiwi Rider is a new company formed to introduce a new, spectacular, and very profitable adventure tourism attraction to New Zealand and Australia. Similar businesses are already earning their operators substantial returns in the U.S., Asia, South Africa and throughout Europe.
The equipment central to the operation has been sourced, and a favourable purchase price negotiated with the U.S. based sole supplier of this particular product from offshore. The supplier wants to enter the New Zealand and Australian markets and is keen to negotiate a Sole Purchase and Supply Agreement with Kiwi Rider. A formal MOU between the two is in place now.
The company is raising capital through the issue on new ordinary shares for 74% of the company. The other 26% will be owned by the founder, who is experienced in setting up Bungy Jump operations overseas, and will manage the operation.
The funds sought will be sufficient to establish its first operation in New Zealand. The business has the potential to produce a return greater than the full investment after the first full year of commercial operation. Accordingly it could possibly self-fund its expansion in selected locations in New Zealand and even Australia.
This project was featured in the June Capital Comment Opportunities and Kiwi Rider is now in discussions with an interested corporate as a joint venture partner. All applications will be considered.
The IM is available on signing a Confidentiality Agreement.
Retirement Village Expansion
Our client is raising capital to expand an existing retirement village consented for 129 units. 61 villas have already been built, construction commenced on 10 apartments, and the core of the common amenities completed. They also wish to build an aged care facility on adjacent land.
The village has achieved strong sales and the business is run by an experienced management team. This is an opportunity to invest in a sector where the listed entities have experienced significant growth in share value over recent years and to share in the substantial uplift in value as the village grows.
The village is currently owned by three individuals who are ideally seeking one cornerstone shareholder to join them. They are now in discussions with a private investor group who are undertaking due diligence. All applications will be considered.
The IM is available on signing a Confidentiality Agreement.
Imersia
Imersia Limited is a New Zealand company that is in business now. It has invented a revolutionary and patentable method of distributing digital and immersive gaming technology content to any location without any hardware. Imersia is a mobile-centric, location-aware, engagement platform. Content can be delivered to any location on Earth where there is connectivity. Only one app is required.
It‘s already the leader in using in-game mobile enticements to reward its clients’ customers for performing real world desired behavior patterns - for example visiting a specific shop, watching a TV program at a certain time, brand recognition or product purchase. Alex St. John, originator of Microsoft’s DirectX technology is on the team. The patents are in the process of being registered in the U.S.A.
Existing revenue streams include customers such as 20th Century Fox, Westfield, and KiwiYo. The market is truly global and growing extremely quickly.
They’re now raising a new seed capital investment round of $400,000 to continue to develop the platform, increase revenue, lodge patents and prepare for the next Series A funding round.
They’ve already had a strong expression of interest from a professional investor in the industry for $200,000. They are now seeking one other investor for the balance. Each $200,000 represents 6.67% of the company. The investors in this round will have pre-emptive rights to the next round.
An IM is available now.
5th Element – Revolutionary Bionic Hand
This is a start up business which has developed a robotic (“bionic”) prosthetic hand that will better enable amputees to resume their lives with confidence, dignity, and in comfort.
The 5EL Hand has been specifically designed to meet the challenges faced by amputees and to overcome the shortcomings of currently available devices to effectively empower amputees to “get back on the horse” – it is not another me-too device.
Their proof of concept prototype has been validated by leading U.S. clinicians as demonstrating superiority to all other prosthetic devices with regard to reliability and dexterity.
The company is raising $750,000 by the issue of new ordinary shares to produce and test pre-production prototypes, and undertake user and clinician trials here and in the U.S. Investment in this Series A round is available now and participants will have pre-emptive rights to partake in the next capital raising round. An earlier presentation in Sydney attracted attention and interest from potential investors.
The IM is available on signing a Confidentiality Agreement.
Living Green
This offer, jointly promoted by Pacific Channel and TBK Capital, closed fully subscribed last year. See our website for a description of that offer.
Since then results to date have resulted in the business looking to expand further and it is raising $250,000 by way of convertible notes. These will pay 12% per annum and convert in 24 months (at the current share price) to about 20% of the company.
The company now has Chinese investment to assist with China market sales development. It has made good progress within the New Zealand Market in the past 6 months where it’s:
- Very close to gaining New Zealand wide distribution into Foodstuffs, having received verbal acceptance.
- Now a preferred food manufacturing chemical supplier to Orica within New Zealand (Major chemical distributor globally)
- Gained acceptance by Fonterra HQ, on its own anti-bacterial office treatment programme.
The new IM is available now.
Freeflow Pipes
This issue has now closed fully subscribed.
Like a Rolling Stone
As you can see from the above, there’s plenty on, and plenty more for us to take on, in this growing economy.
We’re not like a Rolling Stone and we’re always looking to partner with people who share our vision. So if you’re interested in talking to us about that, reply to this email or give me a call.
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None of the above are offers of Securities to the Public and are available only to eligible investors as defined by the Securities Act, or those excluded from the Offer provisions of the Securities Act. They are intended for distribution only to selected people to whom, under the relevant laws, they can be lawfully distributed. They cannot be distributed in any other jurisdiction, or to any other people. They are not offers or solicitations in any jurisdiction in which such offers or solicitations are not authorised, or in which the person making such offers or solicitations are not qualified to do so, or to any person to whom it is unlawful to make such offers or solicitations. Any representation to the contrary would be unlawful. No action has been taken by any person that would permit a public offering in any jurisdiction where action for that purpose would be required.
Cheers
JP
John Paine B.Sc., Dip BIA
TBK Capital Limited
Level 15, BDO Building
120 Albert Street
Auckland 1010, New Zealand
Phone +64 9 307 3257
Fax +64 9 309 4519
Mobile +64 21 902 901
Email john.paine@tbkcapital.co.nz