(SWNSX) Ferret's Stock to Watch: NSX LTD RWE News 8:48:020 30/06/2005 COMPANY GETTING ITS ACT TOGETHER FOR NEW SHAREMARKET
Sydney - Thursday - June 30: (RWE Aust Business News) *****************************************************
OVERVIEW ********
Shares in the Newcastle Stock Exchange Ltd (NSX) have not been one of the Ferret's great success stories after he began watching them when the Exchange was relisted last January. Issued at 50c each, the shares sold at 86c on the first day. Ferret has still not lost confidence but investor interest has ebbed over the last six months, reflected by the market. They tended to ignore the influence of its big brothers in the capital cities showing big profits. A major plus for the company should be its recent acquisition of the Bendigo Stock Exchange (BSX) which has 19 listed securities and three three registered broker participants. NSX believes that there are synergies between the two exchanges and that a merger will create a stronger type of stock exchange within Australia. The company paid for the entire issued share capital of BSX Group Holdings Ltd and controlled entities by way of the issue of 10 billion fully paid ordinary shares in NSX Ltd. However, yesterday the NSX had to face the ASIC annual review of its operations, which were not overly flattering because the company still has to comply with a number of regulations. The corporate regulator, though, did conclude that the NSX has adequate operating rules, structures and policies for the supervision of its market and for handling conflicts of interest. But in a backhander it said the NSX had not yet established and fully implemented procedures for disciplining participants and listed entities, including procedures for notifying ASIC of disciplinary action taken. ASIC identified a number of inadequacies in the NSX's arrangements which must be addressed: * implement its planned additional conflict handling arrangements, including a more effective structural or functional separation of business and supervisory roles; and * reconstitute its Listing Committee so that its members are all either independent or NSX supervisory staff, and develop procedures for its meetings. But NSX chairman Ray Whitten told the Ferret that the company had been dealing with these problems and more favourable remarks appeared in the full report. A regulator must uphold the rules and the NSX understood that, he said. "We are happy with our progress to date," the chairman added. He said one problem was finding people for the listing committee because of the liability problem. As part of the Stock Exchange of Newcastle Ltd's Australian Financial Markets Licence, NSX is required to have in place minimum cover of $800,000 to compensate investors. Of this amount a minimum of $100,000 is sourced from the NSX Fidelity Fund and the remaining $700,000 is in the form of a cash deposit provided by NSX Ltd held as a letter of credit with Westpac Bank.
SHARE PRICE MOVEMENTS *********************
Shares of NSX yesterday slipped 2c to 51c. Rolling high for the year has been $1.10 and low 49c. The company has 46.6 million shares on issue with a market cap of $24.7 million. The listing of the Newcastle Stock Exchange at the beginning of the year went extremely well considering the company posted a loss of $271,000 for the year to June 30, 2004. But the consolidated statement of cash flows for the half year ending December 31 showed a negative cash flow for the period of $78,615 and a cash balance at that date of $917,644. NSX Ltd reported a net loss for the half year of $22,280 compared with $131,076, for the corresponding period last year. Listing and application fees for the period was $244,990, an increase of $87,734 on the corresponding period last year. It would hard to imagine another company gaining listing on the ASX with these credentials other than the fact that it could be complementary to Australia's number one exchange. It could become like the US Nasdaqs picking up small listed companies which have the potential to eventually rise into the big time. At the moment the company is an analyst's nightmare because it has yet to make a profit and has given no earnings guidance for the current year. It reminds the Ferret of the ill-fated second board concept that for a time was linked to the main board of the ASX. The idea was to signal a company had prospects but didn't quite have the financials to take on full listing requirements. However, in the present era of companies seeking listing and the prohibitive cost of meeting all the requirement, a listing on the Newcastle Stock Exchange would be a good way of attracting public investor interest. What is in NSX's favour is the track record of the ASX, which went from strength to strength and finished up a very valuable stock. The climate is right for another source in which to seek capital from the public.
BACKGROUND **********
The Stock Exchange of Newcastle Ltd is Australia's second official stock exchange approved under Corporations Act in Australia. It was listed on January 14 under its parent, NSX Ltd. The company has developed a unique set of listing rules to assist small, medium and regional or national businesses to list their securities on an approved Stock Exchange. The Stock Exchange of Newcastle Ltd was officially opened for business in March 2000. It provides an efficient mechanism to mobilise growth capital for innovative and growing businesses as well as those segments of the economy requiring tradeable securities. NSX provides specialist listings in certain investments sectors, just as the Alternative Investment Market in Great Britain and the NASDAQ in the United States supplement listings in the major markets and attract emerging new businesses. It was founded in 1937, incorporated in 1972, reactivated under Corporations Law as the Stock Exchange of Newcastle in 2000 and fully regulated by ASIC. In its former trading days, the company was the home exchange for up to 300 companies. Many of these were local and regional businesses that went on to become significant Australian companies. Among these were Brambles Industries Ltd, Coal and Allied Industries Ltd, NBN Ltd, New Redhead Estate and Coal Company Ltd, Newcastle Gas Company Ltd and Steggles Holdings Ltd. NSX had previously been a publicly unlisted company with over 80 shareholders and with a strong national network of member brokers and corporate advisers. The company operates a state of the art trading engine licensed from the ASX based on SEATS, called NETS. All securities listed on the are fully transferable and registered with CHESS. Settlement for all trading is T+3, which is a globally agreed standard. ENDS !END
