Tower shareholders' continued irritation at the low share price bubbled over in Wellington yesterday (Wednesday), with a bunch of them trying to quash a directors' fee increase.
A vote from shareholders at the company's AGM went against a resolution to increase non-executive directors' fees by nearly 60 per cent to $360,000. However, chairman Colin Beyer then demanded a poll that came out clearly in favour of the rise.
The mood of frustration from shareholders was in many ways echoed by Tower managing director James Boonzaier and by Beyer himself, as they extolled the company's financial achievements but lamented the share price. After listing at $5.65 last September, it's been as low as $4.30 and is currently around the $5.10 mark.
Boonzaier said Tower shares were undervalued even relative to similar stocks. He put up CS First Boston figures showing that Tower, on a shareprice of $5.00, had a return on equity of 9.7 per cent but a "miserable" PE of just 10 times earnings. That compared with AMP (7.2 per cent, with a PE of 19), Colonial (7.5 per cent and 16) and National Mutual (8.1 per cent and PE 15).
Meanwhile, Beyer said one reason for the low share price was that many shareholders were also policyholders, leading to relatively few small share parcels being traded. Average daily trades since listing have been less than 200,000.
After the meeting, Boonzaier repeated recent comments that no suitors for Tower were imminent. A share price rise over the last couple of weeks had been put down to takeover rumours, but he scotched that and said that the recent takeover bid by CBA for Colonial had just highlighted that Tower shares were undervalued.
Boonzaier also dismissed suggestions that Tower's shareholder cap could be depressing the share price. No shareholder can own more than 10 per cent of the company in the first four years after listing, although this rule can be overturned if 75 per cent of shareholders agree.
At the meeting, shareholders were told that overall operating profit for the first financial quarter of 1999/2000 was ahead of budget and Tower was on track to exceeding profit forecasts for the year to September. Australia now generates 60 per cent of all business and areas the company is concentrating on there are the "high growth sector markets" with products such as unit trusts, single premium and master trusts.
Tower will also seek a Standard and Poors rating (which wasn't possible when it was a mutual) and will be integrating the customer base from different Tower companies.
Another new market is China: the company opened an office in Beijing in December, and is currently seeking a licence to distribute life insurance products in that market.
Meanwhile, Boonzaier said further acquisitions were "still on our radar, and still a fundamental part of Tower's business strategy".