Aldoga: not yet very bankable

Where to from here for Leighton's share price?

A statement from the newly launched Fluor-Leighton Aldoga joint venture says the construction of a $3.8 billion aluminium smelter could start in March. It is estimated the four-year project could add $1.5 billion to Leighton's work-in-hand.

If it is started.

With the enigmatic Aldoga Aluminium Smelter Pty Ltd yet to give concrete details on how it is funding the project, some analysts are cautious.

Aldoga's spokesman Bob Stephens admitted that an air of mystery surrounded the company, telling xChange: ``We're a bit like a whale, we don't surface too often."

In a report titled, ``Who is Aldoga?", ABN Amro questioned the project's March starting date and put the deal in the same basket as Leighton subsidiary Thiess's contract to build Pima Mining's $750 million magnesium plant in South Australia.

Pima is expected to finalise a $250-300 million equity raising early next year.

``At this stage we do not believe that any upside should be factored in but the situation should be closely monitored," ABN Amro says.

Of more urgent consideration is NextGen. Is it about to collapse? If so, it would cost Leighton $95 million in equity and revenue guarantees. ABN Amro says this equates to 35c out of Leighton's share price, which closed 9c higher at $9.49 as the company won a $170 million construction contract from BHP Billiton's Yarrie-Nimingarra iron ore mining operation.

But Leighton's share price is still down $1.41 compared to a month ago. Along with concerns over political instability affecting Leighton's Indonesian operations, ABN Amro has reduced its 12-month target from $11.69 to $10.91, maintaining its ``add" recommendation.

Quick $90m issue

Chris O'Donnell's Investa Property Group cashed in on the popularity of listed property trusts yesterday and raised $90 million.

The cash will be used to retire debt and keep the trust's gearing ratio below the 30 per cent industry benchmark.

Some of the funds will also be used to help pay for last Monday's $38.6 million purchase of Penrhyn House in Canberra.

The raising was through a book build completed by UBS Warburg at about $2 a stapled security.

Lack of logic

For the past month funds have flowed out of the banks and to the consumer-related stocks such as Coles Myer, Foster's, Woolworths and Southcorp. Whether that's a sound choice is a matter for debate when you consider that the main reason for selling bank stocks is to reduce exposure to rising macro-economic and financial uncertainty.

So, in one sense, the fall in bank shares implies a downturn in consumer activity. If that's the case then you're unlikely to get much mileage from owning shares in companies dependent on consumer demand.

Rather, the strategy team at JB Were suggests, consider switching from Foster's into Amcor and/or Origin Energy, a move which maintains a broadly defensive exposure but without the leverage to the consumer.

Or else, try swapping Coles Myer for Harvey Norman or Billabong. There are similar cyclical risks involved but less risk in another sense as Coles Myer works its way through a recovery program.

Also, drop newspaper publisher John Fairfax Holdings (perish the thought) and, again, try Harvey Norman. ``Go where the cycle has substance," implores JB Were.

Finally, if you've had enough of Wesfarmers, Orica, or Leighton, try Patrick Corp or Toll Holdings, which carry similar cyclical risks.

Salmat, Worley delay

It's hard work getting a float away. The Laminex Group got knocked off last month by New Zealand's Fletcher Challenge before it had a chance at a $450 million float and now two smaller issues are working through a few sticking points.

Salmat was expected to unveil a $250 million float yesterday but word is the promoters are chatting to institutions about a few things, such as the prospective price-earnings ratio of 12-13 times.

There is apparently enough demand for Salmat to get its issue away at $2 a share but the fund managers are suggesting that $1.85 would be better for them.

We're expecting some word on the float, underwritten by Macquarie Equity Capital Markets, either today or perhaps early next week.

Meanwhile, engineering outfit Worley is having a battle getting investors onside for pretty much the same reason. A P/E of 10-11 times projected earnings is considered a bold ask in a sharemarket offering up more value plays by the day.

Fund managers have mentioned to the float's lead manager UBS Warburg that Worley would have a lot less trouble if the $85 million to $95 million share issue were repriced.

At last report, Worley was targeting a November listing.