Interesting trading today. There were a few tiny trades then a large parcel went. I wonder if that went to Waterman or another buyer looking to spoil their quest for 19.9%
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Interesting trading today. There were a few tiny trades then a large parcel went. I wonder if that went to Waterman or another buyer looking to spoil their quest for 19.9%
ALF probably needs some cornerstone holders in there with the approaching economic turbulence,
NZL results being eroded by hefty financing charges and all the boys & girls showing so much love
every time NZL tries to dig it's way out with a Cap Raise ;)
Any 2024 ALF dividend indication yet .. or still waiting to examine the economic forecasts into early 2024 ? ;)
If things get real bad NZL might have to borrow a further bundle to pay ALF's Fees for all the array
of Managing & Performing duties, that is if the boys and girls still dont want to throw more pocket money
at NZL Cap Raise begging bowls ;)
The last share issue job from NZL @ $1.60 a shot or so for all the Management fees must have gone down like a bad lingering case of indigestion for Management Co when NZL shares then lost so much value in just 6-8 months subsequently - was it half the value of fees lost in impairments on new shares ? ;)
These sort of things happen when cheap dough becomes as scarce as hens teeth and approaching storm
clouds scare most into holding onto their pennies hoping things dont get worse ..
But it could be or get even worse .. Receivers & Liquidators are now having difficulty seeing interest in failed businesses .. imagine what could happen if advanced Primary Sector doom and gloom hits which is possible and if a whole cupboard full of distressed non performing Ag & Forestry hits the skids at Firesale values, possibly less in attempts to stop things totally sliding down a slippery slope. ;)
Once a slide starts and damage done, there won't be many smiles anywhere .. ;)
NZTX - once again (or as always) - I don't think you have a good grasp on what you are talking about or in a position to talk about in any constructive way about ALF's fundamental value. While I certainly wouldn't buy anything from Waterman, I get a whole lot more interested when they are buying something, and have a lot more faith in their track record over yours.
For whatever reason you love to dump on this share but consider this. At 70cps, and using FY23's statutory NPAT attributable to shareholders, gives it a PE of just 6x. ALF holds what 2.8m NZL and at closing price gives that holding a value of $2.3m, so mcap net of surplus NZL assets is $17.9m, or a PE net of surplus assets of 5.35x.
Did you consider that now that ALF fully owns the rural land management company (for only 1/4ths the year, but has now fully paid for the company by way of cash issue (partially funded by debt) and transfer of NZL shares) it will now be able to fully consolidate its earnings going forward whereas previously it just equity accounted its earnings? Holding all else equal, that will give rise to a large rise in NPAT. So if you did a pro rata adjustment for the (at least) 1H result that would result in another $417k is profit. Accounting rules require the contract to be amortised which is a bit like goodwill amortisation which is bogus (in my view) so you could easily addback that at $131k, and then less say a proforma full year interest expense associated with the debt they took on to fund the acquisition. Plus one off transaction expenses associated with the tax loss revenue and costs associated with the valuation of the rural land mgnt company, you are talking about a sub 5 PE multiple.
That doesn't include the full year going forward contribution from the enlarged forestry estate. Yes, performance fees are likely to be lower, but they already have been in the full year just been, and quite well reflected in the go forward position. ALF's holding in NZL shares may be volatile but you can account for that by doing to mark to market on the shares ALF holds in NZL at the prevailing SP. and even if you don't think any performance fees will be payable going forward (ever), all you have to do is look at a broker report showing the ongoing (high margin) base management fees payable to RLM/ALF, and it puts its all in perspective.
This has the hallmarks of a pivot in strategy, away from traditional livestock business (which has been going very well) to a more predictable, higher margin, higher value rural investment/asset management focus. And no, no dividends, but why would you want to declare unimputed dividends when you have massive tax losses that you can utilise to buy other adjacent rural asset management companies and use the tax free cashflows to rip down debt and grow shareholder value? That is, in my view, unarguably the strategy that's been put in place.
No chance Waterman will be buying my shares that I recently purchased well below their entry cost (they want to make 2-3x their money over 5 years, and were very keen paying 75cps recently, so offering 71.5 is taking the absolute piss in my view) but I look forward to the shenanigans they may put forward in their unsolicited offer to get to 19.99%.
Excellent research and analysis.
Thank you for sharing as we have a modest holding in the wife's name..
I have a few pennies. Couldnt buy much.
Thanks Fiordland for your excellent analysis and cogent presentation.
I see ALF as massively undervalued. If we add the tax losses the undervaluation is even greater. I believe Watermans will have a plan to utilize these tax losses. The trading was strange yesterday. It looked like an algorithm was operating trading little amounts. The large seller looked like a blocking sell to force sellers below its price. If it was Watermans buying it should be noted in a substantial security holder notice soon. If it wasn't it may be game on as another party may share our view of massive undervaluation and may soak up nervous holders. I see this going to 1.40 over the next few years and sooner if another party is building a large stake.
The uptrend just start ,it is hugely undervalued Alf
Good post and last ever at that from the great FiordlandMoose :cool:
Didnt like the name - changed it to Muse
Was it pronounced "Fiordland Muse" all along :ohmy:
Received the letter from waf wonder anyone would sell as the share price is already over the offer price ha
Waf hungry for more. Even buying on market at 72c
Got another 2%. Up to 18.7%.
http://nzx-prod-s7fsd7f98s.s3-websit...690/403537.pdf
Let’s see if waf is known in advance that on November are we expecting some kind of dividends
I sure hope with WAF's ~20% gobble together with the new MD's purchase that, together w/ normal course of business trading, doesn't breach the shareholder continuity test anytime soon and forgo the massive tax losses available. Likewise, that the pivot to asset mgmt doesn't breach the business continuity test for retaining tax losses. I presume not, and can't be bothered to check, but would be a pity if those tax losses were lost.
https://www.ird.govt.nz/income-tax/i...losses-forward
@golden city I wouldn't count on dividends soon. I'd prefer it if ALF debt funded the acquisition of other rural asset firms and used the tax free cashflows to paydown debt. Then do the odd debt funded stock buybacks and capital returns, and when all that was done, maybe then start paying unimputed divvies.
Wonder when a director from WAF joins the Board.
I hope they could find good acqusition opportunties ,maybe getting back on rural estate agency business
Waf will be very happy almost accomplished what they wish for
We are starting the uptrend as not many shares on market
Buyers are appearing now. The register has tightened with WAF soaking up most of the nervous holders.
We are ready to break the dollar soon I think
Let’s see if we will closed at 85c this week
WAF going from 19.90% to 19.96%.....getting as close to 20% as they can.....
https://www.nzx.com/announcements/420487
Darn .. should have waited .. if you wait long enough some other sucker will be along chasing your shares for good dough ;)
Maybe they come along next week wanting all they dont already own for a buck a shot .. to help a mate out :)
Who cares about a skinny Dividend holiday with this mob, when there is an abundance of eager beavers now circling
happy to make the ALF experience prosperous without having wait for New Year :)
They've been pretty clear for a couple of years now - no dividends planned because they are sitting on a pile of tax losses and it would be inefficient to do so.
Help me get my head around this.
Is the inefficiency because of the tax losses carried over, they will not pay tax on profits until these losses are used up. Therefore there will be no imputation credits attached to the dividends so shareholders get hit the full whammy tax on the dividends.
You are on the right track.
In order to attach imputation credits, you must have paid tax / have tax paid income.
ALF is sitting on a massive pile of tax losses. Therefore, there is no tax to pay on its profit before tax, and thus can't attach imputation credits.
That doesn't stop the company from paying unimputed dividends. They are free to do so. Many do.
But the existence of those tax losses also provide a financial incentive for the company to potentially grow by acquisition, using sensible amounts of debt, as the cashflow from its operations will be quite strong (given it doesn't have to pay tax) and it can use those strong cashflows to quickly paydown any debt. I suspect that is why WAF has bought in. The nature of ALF's rural land management business is quite cashflow positive as well.
The problem with companies that pay unimputed dividends, is that they have to pay the RWT amount to the IRD in cash. Effectively giving away cash for nothing. It is a losing situation in the NZ tax regime. It would be better for them to return cash via other means, like a share buy back or as Muse has pointed out, grow by acquisition. Or do what SKT did and pay back capital.
Share price performing better after acquisitions of shares
Cockies still smiling sweetly through the storm clouds .. or showing signs of getting nervous ? ;)
Have to watch out for mysterious double or triple whammies that happen to just sneak up from
behind out of nowhere ..
hopefully not the sound of sh*t hitting multiple fans .. ;)
It looks like the share price could breakout anytime
My target price is 1.50 by 31.12.24
EPS currently at 11.59c and it is growing average over 20% in the last a few years if it kept going $1.50 is very reasonable
Positive for ALF.
https://www.nzx.com/announcements/424986
Yes very positive in deep
I believe we will see ongoing value accreting moves from the astute boards of ALF and NZL
ALF has some clever shareholders in our top 10
Yes they are surprising me by every move at present
It is going to be a 5m profit year so eps will be around 18c so 1.50 per share valuation is very reasonable
Share Buyback might see double that SP - just cancel 1 out of every 2 shares :)
Easy way to double EPS too, even if no-one sees a dividend
then Split shares again .. followed by a rinse & repeat .. very tax efficient
Poor old ALF might even reach $5 a share on that pattern .. who wanted a dividend anyway ? ;)
I think ALF are ok with this. I have recently come on board again. I see the previous board were effectively rolled by Swasbrook and co. They are clever Auckland money people and have nothing with farming per se from what I can see.
However setting up NZL and the subsequent management company was a stroke of genius. Out of thin air a management company valued at $5m? was generated. Alf effectively have a portion of this.
Out of the 2 investments, ALF is the one to be long, NZL the one to be short. (Just my humble opinion)
ALF own 100% of the NZL management company. NZRLM.
• On 27 March 2023 Allied Farmer’s acquired the 50% of NZRLM not already owned, having exercised its call option on 19
December 2022. The purchase price was $8.3m as determined by an independent valuation undertaken by PwC in accordance
with the terms of the call option agreement. The purchase price was satisfied by the payment to the vendors of $6.55m of cash
(funded by a loan from Heartland Bank), and the transfer to the vendors of 1,800,227 NZL shares owned by Allied at their 20-day
volume weighted average price prior to completion date of $0.9721 per share, being a total of $1.75m.
• Allied Farmers' total acquisition cost for 100% of NZRLM is $10.8m ($2.5m for the initial 50% in December 2020, and $8.3m for the
remaining 50%), compared to the PwC valuation of $16.6m. Coupled with the return on investment to date, this has been a
significantly value accretive investment for Allied.
We are heading to 10 years high soon looks like
Whats going on with the share price today? Dropped like a stone.
Where da trend taking us now ? .. looks like towards the 2 year low
didn't even touch the magic Dollar before getting bucked back down
would doubling the dividend or paying two special dividends from the heaps of Muddy Boots
Empire Performance fees flowing into coffers slow the slide down a muddly slope .. or not ? ;)
things must be bad out there if no-one love ALF anymore :)
Only any good if there is something left to manage .. and the hardening times dont mean more of the dairy
& forestry clods need to be hocked off to keep the Lenders at bay with their butterfly nets out to scoop up
huge usary dallops for the privilege .. like hungry wolves pounding on the door ;)
these sort of situation have a bad habit of arising when large bucketfulls of OPM are roped in to be used
to buy stuff .. and then economic times change to another set of factors .. let's face it - love it or not
but ALF's Divie abolished is just one casualty of this, no matter what excuses are trotted out to cover it ;)
Are you referring to NZL or ALF?
NZL in my humble opinion is financial wizardly of the highest order, a company contrived and then saddled with a management contract that at the stroke of an IPO managed to make a lot of money for the owners of the management company which was immediately valued at $xm. ALF bought a piece of this off the "originator" and now owns 100% of this.
Not sure who is on the board of NZL but if shareholders don't like it, they can always vote them off.
Remember, the recent NZRL deal was good for ALF. The management company gets a cut of the transaction and continues to manage the sold land for the new owner. ALF get to have their cake and eat it, and you're trying to panic shareholders that they might have to suffer another windfall profit in the future?
ALFs dividend policy has been well explained to you on here and by the company itself so let's drop that and reconsider once the stash of tax losses has been worked through.
More management fees for ALF.
Apple and Forestry Land Acquisitions
20/2/2024, 5:09 pm TRANSACT
New Zealand Rural Land Company (NZL.NZX) has today entered agreements to acquire the land supporting three apple orchards located in the Hawkes Bay region in the North Island and forestry land located in close proximity to its existing estates for a total purchase cost of approximately $27.6 million ($18.1 million and $9.5 million respectively). The land will be acquired by the Limited Partnership formed as part of the recently announced Roc Transaction.
Apple Orchard Land
The orchard land has a total land area of approximately 97 hectares of which 82 hectares are planted in a range of apple varieties. The orchards will be leased to Kiwi Crunch for a period of 30 years with a year one income of ~$1.4 million (~7.5%), subject to uncapped annual rental adjustments of CPI or 2.5%, whichever is higher. NZL will own only the land not the trees. Located near Twyford, the orchard land features high quality soils well suited to intensive horticulture and enabling a range of alternative uses.
Kiwi Crunch operates a vertically integrated apple and pear business spanning nurseries, orchards, packhouses, coolstores and an export marketing division. The company employs more than 140 people (over 350 during harvest) and has interests in Hawkes Bay, Nelson and Central Otago.
The acquisition is conditional on obtaining certain third party approvals and settlement is expected to occur in March 2024. This acquisition represents entry into a new sub-sector for NZL and sees the addition of an experienced, well capitalised tenant. Furthermore, the 30 year lease term materially increases NZL’s weighted average lease term, increases the frequency of rental reviews and further increases portfolio yield.
Forestry Land
The forestry land has a total area of approximately 1,119 hectares and is leased to New Zealand Forest Leasing (NZFL) for a period of 16 years. The estate has year one income of $760,000 (~8.0%), and is subject to annual CPI-linked rental adjustments. The tenant will utilise the land for timber and/or carbon sequestration. This acquisition was both signed and settled today.
NZL believes this is an attractive acquisition and expects its value, once planted and taking into consideration the lease, to be in excess of its purchase cost. Additionally, forestry assets of scale have proven to be an attractive asset class, this purchase adds to NZL’s estate in one of New Zealand’s preeminent growing areas. The land is moderate to steep hill country poorly suited to other agricultural uses but ideal for forestry. This acquisition further diversifies NZL from a large pastoral farm land base while the 16 year lease term increases NZL’s Weighted Average Lease Term, increases the frequency of rental reviews and further increases portfolio yield.
Acquisition Funding
Both purchases will be funded by equity with NZL contributing 75% and Roc contributing 25%.
NZL’s total outstanding debt remains unchanged and the acquisitions are expected to directly contribute more than $1.5 million ($970k and $530k, respectively) to NZL’s FY24 AFFO. Following the acquistions we expect gearing to sit at approximately 30%. Further information on NZL’s financial position and outlook will be provided to the market on 29 February 2024 with NZL’s full year results.
Looking very good for Alf cash cow
Result out just a little bit off my expectation
https://api.nzx.com/public/announcem...436-420334.pdf
Seems a good idea to save the tax losses,however I have my doubts whether it is in small shareholders' best interests.?
Dear Shareholders,
I am writing to you regarding an important Resolution at our upcoming Special Meeting,
scheduled to be held online-only on Thursday 11 July 2024 at 11:00am. The Resolution seeks
your approval to amend our constitution to assist in the preservation of our approximately
$186 million of tax losses.
Your Board supports the constitutional amendments and strongly recommends that you vote in favour of the Resolution.
The problem is that those big shareholder has done a lot of the transaction not the small shareholders
To retain tax losses there needs to be >50% shareholders retaining their Shares?
But then the Co needs to make future profits to benefit from their tax losses
"Summary
1. This interpretation statement provides guidance on how the main aspects of the
business continuity test in s IB 3 apply. The key points discussed in the Interpretation
Statement are summarised as follows:
The main rule in s IB 3 provides that a tax loss may be carried forward despite an
ownership continuity breach if no major change in the nature of the business
activities carried on by the company occurs during the business continuity
period, other than a permitted major change (s IB 3(2)(c)).
Section IB 3 sets out various other criteria that must also be satisfied. Further,
targeted anti-avoidance rules in ss GB 3BAB and GB 3BAC can negate the benefit
of a tax loss carried forward under s IB 3 in prescribed circumstances.
An ownership continuity breach for a company occurs where there is a breach in
the requirements for continuity of ownership set out in s IA 5, that, if met, enable
tax losses of the company to be carried forward (s IB 2).
The business continuity period is typically the period starting immediately before
the ownership continuity breach and ending on the earlier of:
o the last day of the income year in which the tax loss component in question
is used; and
o the last day of the income year in which the fifth anniversary of the
ownership continuity breach falls.
However, broadly, for a company where 50% or more of its tax losses eligible for
carry-forward arose from bad debt deductions, the business continuity period
will end on the last day of the income year in which the tax loss component in
question is used. In other words, the five-year cap on the test will not apply
(s IB 4).
Where a major change (other than a permitted major change) or a cessation
occurs part-way through an income year, the tax loss component in question
may be carried forward and set off against income arising up to the time of the
major change or cessation respectively if the company provides the
Commissioner with adequate financial statements under s IP 6 calculating the
company’s income for that part of the income year (s IP 3B).
The main rule in s IB 3(2)(c) is concerned with the nature of the company’s
business activities. The Commissioner considers “business activities” means
“actions taken in pursuit of one or more businesses that may be carried on by the
company for income tax purposes” and that “nature” means “the basic or
inherent features, qualities, or character of a person or thing”, so the test is etc"
https://www.taxtechnical.ird.govt.nz...20221031001302
Didn't Robbo (during the reign of the Lost Left) bring in a variation - if the same sort of business is continued, then losses can be carried forward & offset - even with shareholding change of more major %'s ?
Now where has ALF's major Income earning priorities been going ?
The same, different, priorities into Leased property management activities or something else ?
The Weaner livestock & Saleyards parts probably havent grown so much or have retrenched ?
Has there been enough change or not enough since the time the Losses were generated to now or going forwards when or if they get offset ?
The Taxman, given te size of the Tax Losses is likely to have the whole issue put under a very fine microscope ;)
Of course now, ALF have thrown the matter out into the public domain, so everyone is aware of it
What part of ALF's share price is attributed to the large stack of tax losses ? any, very little or none ?
An interesting one as kiora has posted
The tax loss issue was dealt with by IRD in late 2022/early 2023 if you look back at ALF announcements. IRD are well aware.
There was no particular share price response to this at the time so I think the value is not recognised or priced in by the market.
Annual report released - looks good although juiced by the sale of the Frankton saleyards. ALF now have a large war chest looking for opportunities to use up their tax losses.
https://www.nzx.com/announcements/436768
We should have a nice acquisition very soon with that much cash
Hopefully something earnings accretive that help we growing faster and more