smart directors, page-2

SELL RECOMMENDATION

Goodman Fielder (GFF)

The trading environment will remain challenging. Rising cost pressures (fuel, wheat, canola oil, etc.) and possible loss of market share to cheaper labels are downside risks that will keep management on its toes. Recently, Woolworths noted shifts of bread and dairy products to private labels. Additionally, a third of Goodman Fielder’s revenue is generated from New Zealand and its NZ business may be affected by a weakening economy. Adverse currency movements and competitors discounting prices suggest better value elsewhere.

Biota Holdings (BTA)

Litigation between Biota and GlaxoSmithKline has concluded through mediation. While Biota, an anti-infective drug development company, will receive a $20 million payment, each party is bearing its own legal costs. This long, protracted case diverted valuable time away from Biota’s product development, not to mention the cost of legal fees. Competing products have gained considerable market share since the litigation started. Further delays to trials could add to the disappointment.

NOVUS CAPITAL