Apologies if this has already been posted http://www.stuff.co.nz/business/indu...-land-for-sale
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Apologies if this has already been posted http://www.stuff.co.nz/business/indu...-land-for-sale
Market Analysis ,at the risk of the wrath of the financial markets Authority(who've effectively outlawed him and his paid sub "Market Analysis for doing the same with MRP according to James Cornell) has a Dont Buy research note in his newsletter
"Paying unsustainable high divs to inflate the D/Y in an attempt to make shares look attractive to inexperienced investors could be misleading and deceptive conduct""
Thanks too karen. That land worth re $20 million 777.
I’ve decided not to invest in Meridian.
The forward electricity demand growth in the sector is low at 1.2% p.a and the market is presently over supplied with capacity and probably will continue to be so for a few years. It is likely that Meridian will trade in a tight range as CEN has done so for the last four years and MRP will probably do so for the same reasons.
The wild card here being if Genesis is floated inclusive with the Huntly coal fired units or whether they are mothballed and retained by the government as emergency reserve, much like Whirinaki was. A mothball announcement would be a better time to buy the sector.
Meridian may have some degree of forward growth through a small level of build abroad or through acquisition, but with the dividend policy they intend, this will be limited.
The IPO is occurring at a time of average hydrology, and I don’t believe that the IPO valuation and incentives out way simply waiting for a better entry point during dryer low storage events, although this could be some time away or even a year or two.
That’s not to say that the Meridian asset portfolio is not exceptional and that as a dividend play, this stock may suit those looking for low risk income which provides better return potential than a fixed term deposit, provided a trading range does not become a point of stress.
I’ve simply decided that there are much better value investment opportunities within the NZ50 at present and I can accept greater risk for greater return within my portfolio.
Comparing with Z which also has little growth in the forseeable future but is a good yield play. Currently up re 8.3% up since listing. I guess it depends on the Instos and how keen they are to take up. Anyone heard anything? cheers JT
I guess its my normal view that depreciation is an expense which if not incurred now , will have to be at some point, so as to allow the business to continue, and this would mean that a high short term yield (greater that profits) is only gobbling up the future - however as I understand it what you're saying is this may not be a concern with these very long lasting assets (hydro stations).
Fair point, peat. It's sometimes all too easy to dismiss depreciation as "not affecting cash profits/cash flow" and overlooking the need to replace assets sometime down the track.
pretty much. Especially in an environment where there is no growth so you are only maintaining, not growing your asset base so free cashflows will be high. CEN has said the same so expecting their yeild to increase in the next few years too.
My current thinking is:
- this will be a good income share going forward, based on an entry price of $1.60
- Greens/Labour policy is a risk so you really need to weigh up their change of getting in and if so, the chances that they implement as proposed. There are a number of other, easier options which would provide good results.
- Tiwai not a major risk as Transpower will come through with the required cable. However, as the expensive generators decommission, the spot prices will be lower so less margin, but still more than the other companies. Upside potential if the smelter ramps up again as I think the new contract for discount power is for a lower quantity, the any increase will be at a higher price.
You will have to hold on for 18 months to benefit from this as true price (solely looking at yeild) is looking more like $1.80, which the instos and buyers after IPO will be paying. The stag wont be there as the IPO discount is locked in for the instalment receipt period.
Some interesting comments re CEN and MRP. As noted in my previous post, Meridian would be less effected than other re tiwai but more from Labour/Greens.
http://www.kiwiblog.co.nz/2013/09/en...re_prices.html
Aluminium production in the Western World is a dead duck, so why would you even contemplate buying into a major supplier to a smelter that should & quite likely could be closed. I have traded base metals professionally for 15 years in Australia & one of my customers had a large stake in an ali smelter & they could have locked in a price of around $2800/ton at the time. I told them to hedge the bejeebers out of it & then sell their stake as China just keeps ramping up cheap production & the Mid/East is doing the same as they want to diversify away from oil & create middle management jobs & use their cheap energy to do so. There are also other countries in Asia & South America looking to emulate what the Mid/East is doing & what NZ did in the 1970s to absorb excess power created by the bigger than required hydro power stations. The idea was then bigger was better & perhaps it was, however now it doesn't make sense at all & not really sure it even did back then. Its obviously a political hot potato due to the jobs that would be lost etc & reminds me of the car assembly industry in Australia that has also been subsidized by the tax payer for far too long. Rio has written off something like $30Bln on their aluminium assets around the world. When they bought them we (commodity trading desk) thought they paid double what the should have, but infact it was more like triple. National is not listening to the public on many fronts & imo have lost sight of what average Joe NZer wants & there is a chance they could be turfed out at the next election particularly if the Greens & Labour form a coalition & you can bet the Maori parties would join them as well. So to make a quick buck the IPO has to show a quick profit otherwise you could be sitting on a lame duck imo. Mighty River has hardly been a stellar investment & I think this one has far more complications than MRP, again just my opinion obviously.
I believe there are a lot more South Island farming areas using irrigation for crops, and there are a huge number of dairy farm conversions going on for the foreseeable future .They use thousands of dollars of electricity a month/week to run.
I also agree with you, that the new City of Churchurch will put demands on generators.
Meridian will find themselves "well positioned" to supply these customers.
Because if they do close, they can sell that same electricity into the market at a higher price.
This will require Transpower to build extra transmission lines.
It will also result in expensive generators closing so the spot rates will reduce but the effect on Meridian will be less than the other power cos since its costs are low.
surely at the end of the day (I hate that) it aint a case of all in but perhaps just a wee bit.....buy a few...to add diversity...to what you have already....Sure as hell JK does not want a repeat of the last gummit IPO....the debate however is fantastic....
Don't touch it (at $1.60) - Excellent advice from Milford Asset Management executive director, and veteran sharemarket commentator, Brian Gaynor.
http://www.interest.co.nz/news/66575...price-too-high
Sounds as if the only people happy with these floats are the government and Key's investment banker chums.
Instos start screwing the price down then leap in boots and all.
I think gaynor may be right. I have invested in MRP, regret it now. For everyone's good but if you think its a good investment then make your day.
Sorry to hear that gv1, long term i hope it pans out for you.Luckily there will be independent research avail on the NZX on the 30th this time to help folks make an informed decision. From what i read on MRP on share trader and discussions with friends ,MRP was just too expensive and with the blackout stopping brokers from giving unbiased research and advice folks just had to go with their "neutral" brokers who were making commisions out of that float.
Yes, I respect BG's perspectives on the sharemarket, and would be delighted if the price is set at $1.30-$1.40.
Remember, if thats the bookbuild price, then thats also the retail price.
Bring it on you low-ballers you
gv1, don't fret about MRP - as the conspiracy theorists will tell you, it's being held down by the insto's until after the price is set for Meridian.
I tend to go with those thoughts personally - there are big bikkies at stake on these floats
cause the fund managers dont want many retail investors to get in , they get to pay a lower price because of lack demand and dont have to buy on market afterwards to get there quota
MRP at todays price + div and your hardly down that much from ipo
First NZ Capital research here if anyone hasnt seen it https://www.firstnzcapital.co.nz/public/
Have been studying various info on Aluminum smelters around the World. My reading of it is:
# Currently there are plans for around 35 new aluminum smelters worldwide
# 25 in Asia, 3 in Middle East, 4 in Europe /East Europe, 2 in Canada & 1 in Argentina
# Total production for all those at full production would be around 16 million tonnes p.a.
# Estimated electricity price in China & India is around USD 40/Mwh
# construction cost of India/China is around 1/3 of the Western World
# the average cost of electricity at the other planned smelters is around USD 20-25/Mwh
# First NZ Capital estimates new electricity contract with Tiwai at USD 39.4/Mwh
My conclusion is that, unless we get around 20% increase in aluminum prices and around 10% drop in FX for NZ$ against USD (both possible), Tiwai has no future. Shadbolt, prepare Southlanders for that happening, sooner rather than later.
BUT, from my reading of it, it will have only minimal impact on Meridian, CEN & MRP. The Labour/Green threat is the real issue here.
I really want to invest in Meridian. Think they have great assets, sustainable future dividends from very positive cashflow, but fear political changes.
For me the question is, do I put my money faithfully into Meridian or do I start liqidating NZ assets and move them off-shore fearing a Cunliffe takeover ?
As Mr.Gaynor says the big gainers from these floats are Key's investment buddies.
"The investment banks in charge of selling Mighty River had the potential to earn up to $1,333,334 each if they reached certain price and value targets.
This time around the bankers will be able to earn only up to $750,000 if they reached certain price and value targets.. Commission fees are then paid on top of that...."
http://www.nzherald.co.nz/business/n...ectid=11128967
Brian Gaynor, an executive director of Milford Asset Management, said initial public offers were a "gravy train" for the investment banks.
"Is this too high? They are all too high."
Gaynor said bankers were incentivised to get the highest price possible for the seller but there was little to ensure the price of the shares was not lower a year after the float.
He said that while the Meridian float was bigger, the size of a float did not make much difference to its costs.
"You are still having to go through the same process."
The bankers and brokers involved in the deal will get paid after the sharemarket listing, set down for October 29, despite 40 per cent of the money not due to be paid until May 2015..."
So, who has more incentive to alter the share price. Gaynor or the bankers? Looks like the latter to me.
And poor Gaynor doesn't fit into that eh ? I used to really like Gaynor's articles but recently he's gone really strange and I no longer put much weight on his comments. I was also very close to moving my retirement savings (those out of my day to day control) to his funds but belatedly decided not to because of what I regard as his recent change of tune !
From what I have observed "The Iceman Self Managed Fund" [TISMF] would have out performed all NZ Funds,including Milford over the last couple of years.Should "TISMF" be able to retain Iceman as Fund manager, this out performance should continue into the foreseeable future.!
Thanks Joshuatree for posting this link. I hadn't read it. One incredible bit of info in it is that in 2006 Meridian had 365 full time staff and in 2013 they had 827. Sales volumes have been static during this period. Efficiency of Government owned companies right there for all to see !
another thing is retail investors only pay 1.60 if institutions pay 1.80 then potential ipo opening price is 1.20 no wonder they dont want to pay anymore than 1.60 cause it designed to let retail investors make money?
Don't know if it works like that bull.... I think the price will be $1 for both insots and retail investors but retail investors then pay $.60 for the second installment while instos pay $.80. So the opening price will still be $1.00. Because if you buy on market, regardless if you are retail or insto, you then pay the $.80 second installment.
That is how I understand it anyway.
oh i was meaning if ya pay 1.60 an instos pay 1.8 then potentially if the shares trade at 1.8 you have made 20c + divs hope i got it right this time haha long week
My understanding is price cap $1.6 only for retail investors who participting in the IPO which hold the stock up to 18 months, if you buy shares on the market then you have to pay second installment same as institutions.
Our friend Chris Lee reckons the govt has been screwed good and proper by the greedy money men with these IPOs
Firstly they ensured the MRP one was not very successful ... made a small loss on that .... but ensured the bigger prize in Meridan is even cheaper now.
Good point ....Meridan gone from what most said was a $6 bill co to something like $4 bill ...... at a time that the NZX is up zonks. He said he going to buy just to some overseas insto getting their mits on the hige discount
You need to go and find his article if interested .... he doesn't like this sort of stuff being quoted or linked
"This emailed client newsletter is confidential and is sent only to those clients who have requested it."
not really when it's easily found with Google. Hardly confidential!
I guess the main attraction for me is the high dividend yield (artificially elevated due to partly paid nature) in the first 18 months - otherwise it is a dull utility just like many listed peers and PE multiples are similar too(high). So I am going to invest purely for income and I don't expect it to be a multi-bagger! I will be applying for my wife as well even though she does not want it!
I am sure there are far better long term buys in the NZX or ASX than these Govt controlled Utilites
Meridian forecasts a net profit of 187.9 m [7.3 cents/share] to June 2014 & will distribute 144% of these profits. A gross yield of 13.4% [page 9 of the prospectus] assuming full imputation credits---contradicting a note on page 9 saying future divs will be only partially imputed.
For the year to June 2015 an annual div of 9.5% is planned [plus some imp credits]--a distribution of 140% of profits.
How sustainable is all this?
How will the company grow with outgoings like this?
And there is the strong possibility of a Labour/ Greens Govt dictating in the future
Not a great picture for a healthy investment which shows share growth & a sustainable return
IMO there is no such thing as 'not on the global radar ' when investing on the NZX--the market is too small
I feel the object of investing is to increase ones wealth--& there are a no of shares with a much lower PE than these power utilities & with reasonably sustainable Yields.[ If one wants a bit more risk with a very much greater chance of high growth why not look at the ASX small companies]
IMO Power Cos are not safe utilities with a steady cash-flow ---there are the risks rainfall variations, political risks, water right risks & possible Maori claims
Still no research open on NZX. They said it would be avail when the offer opens which was 12.01 am this morn.
"IMO Power Cos are not safe utilities with a steady cash-flow ---there are the risks rainfall variations, political risks, water right risks & possible Maori claims"
Amalgam - add to the risk list declining demand as discussed on this morning's news. IMO this could be a big one in coming years as the use of solar on rooftops increases and other tech advances.
Twas up early preparing for my daughters birthday.. Hey i still cant access research provided by NZX.Is it my comp thats the prob or cant other people either.Thanks , I have to decide how many shares i take up this morn.
NZX have just rung and said the Independent research won't be available now until Thurs.
I don't think the 'Mums and Dads' ( I hate that condescending term) interest will now really affect the success or otherwise, of this IPO. There seems to be very good interest from Brokers clients already. This would indicate that some of the risks may not be as poignant as the media and Brian Gaynor are indicating.
The market alone will tell in due course.
Disc. Have been allocated what I wanted from my broker, which is a reasonably substantial holding.
I will leave it until the last poss moment to commit to my "substantial" holding. Awaiting anymore poss ambush from greens and labour and independent research on NZX and anything else that may appear in the papers.
I take your point(s)
Brokers etc have an allocation to sell, so would give the best spin they can.
Tiwai is still there !! Under Contract !!!?. well, Contracts can be/and are broken.
Lab/Green rantings.... Not very helpful at all.
The Waitaki infrastructure is getting close too, or passed it's useby date.
Canals etc. leaking.
'NZ power capacity in surplus
Not really a long term hold.
BB
Think about replacement costs for the Dams
Does anyone know if i can apply via asb securities and have the money taken out of cash management account?
Or do i have o apply via the meridian share offer site.
Can someone please answer this for me.
If they are making dividend payments of 13.4% and 7.4 - 8.9% in 2014, and we don't have to pay the final installment till 14th of may, doesn't it mean we are really purchasing these shares at roughly 90% of the book value price? Considering you get your dividend payments before your final installment payment for the shares...
Then if you take future dividend payments into account, the SP will really have to drop 15 - 20 % for you to lose any money...
Even if meridian cuts down the future dividend payments, say from 6 - 9 cents, we would get a cap rate of of the below. If bond rates were at 5.5
6 cents / 0.055 = $1.09
7 cents / 0.055 = $1.27
8 cents / 0.055 = $ 1.45
9 cents / 0.055 = $ 1.63
Meridian might noy be a growth stock by any means, but it seems quite attractive if my above calculations are right....
I just got my firm allocation through DB...
Question for those who have gone for a brokers allocation - why not just go for the general pool. My reading of the prospectus is you guys will get double scaled and I will get scaled less.
Eg. first scaled by your broker, then the brokers pool can actually be scaled as well and the prospectus advises the public pool will be scaled less than the brokers pools.
Hey guys, hae never participated in an IPO, so say If I applied for $10,000 worth of shares, got my mum to apply for $5000's worth, and there is scaling, how does it work?
Say if its scaled by 10%, does it mean both of us get scaled by 10% or only me because I'm after a larger amount? And my mum's amount doesn't get scaled
Depends - they can scale as they please and each different pool can have different scaling.. They could do a flat 10% off everyone. I think for MRP, the scaling only applied to purchases over $15k.
I expect it to be like MRP - they wont scale small M&D investors, only the bigger investors.
I've been allocated the amount I asked for... not that it was a huge amount
I'm planning on stagging Meridean.
Does anyone have any advice on stagging an ipo?? Or know of a book etc.
Is there a strategy for it? I watched the MRP and ZEL ipo's and noticed that it peaks then drops of a little bit at closing. Is there any technical analysis tools that can help determine the peak?
Craigs have confirmed they will hold my allocation until after i have read NZX reports on thurs so no pressure.
There's no book on stagging as far as I know and if there is I wouldn't be reading it! Actual experience on the day and immediately afterwards will depend on a variety of factors - the strength of demand beforehand; appeal to instos ( and whether or not the issue will be included in the various indices - which affects the degree of "must have" for various index and other funds - almost certainly will make the NZX50 pretty quickly; how satisfied those instos are at the IPO; the tone of comment from the press and brokers; random news events ranging from the political to the economic to the force of nature, etc.
In short, I wouldn't waste my time trying to second guess the market but would decide on a course of action beforehand, eg ride the market up, if it goes up, and sell when the trend reverses. That's if I was going to stag the issue - which I'm not!
And that's not advice, just an observation.
Cheers Macduffy
I haven't stagged anything before just came into some cash and looking to take a punt before putting it in some other companys for the long term.
I'll have a decent look at those factors.
I'll probably hold and sell the second it dips, not interested in holding.
Agreed Moosie got a full allocation of ZEL and am stoked :)
Hopefully there's enough of a rise to get something out of it.
Not advice but my general approach. First thing is I have to be comfortable that there will be a 15 percent gain on listing. It's not a hard and fast number but I am essentially looking at market sentiment pre listing. There was not enough strength in mrp so I wasn't in. I don't feel there is enough with meridian so I am not in. I plan on running with the market for three days. That means I watch pretty much every trade. I ride the rise over that time and once I get a sense there is a change in momentum I get ready to hit the sell button. A 5 percent dip off the high is about enough to do it.
IMHO the only reason to stag a IPO is if one is very sure the share is going to rise after the listing
I am not sure there is that much interest in Meridian--its not very difficult to get a full allocation [if u want some]
So why will the share rise after listing?
The only people making money out of these are the brokers--on buying & selling
That would probably be true if we knew that the investment funds etc (instos) were going to get their requirements filled at the IPO. Given the size of the IPO, there's little doubt that Meridian will quickly climb into the NZX50 where a number of funds, particularly index funds, will need to invest to an appropriate level.
Spot on Iceman, Western World production of aluminium is stuffed. That 16M tons of new production is around 40% of current world consumption. The price ain't going no where until high cost & loss making operations in the West such as Tiwai is shut down. Will tax payers be willing to stump up more to keep this going in the future particularly when the main beneficiary after Southland is MRP is partially publicly owned? There may be a quick buck in this with the yield its offering there may be not, however the Government is irresponsible to float such an asset that is so reliant on another redundant one.
The Tiwai closure will only have a 2c impact on Meridian so not a real concern. I also read somewhere that Tiwai is about middle as far as costs go, so is by no means the first smelter to be closed.
But if everyone does this, and they all do it just before you, the price you sell at will be lower, eliminating the benefit of the higher yield.
[QUOTEhowever the Government is irresponsible to float such an asset that is so reliant on another redundant one.
][/QUOTE]
That depends on the assumption that loss of the subsidised Tiwai contract would be detrimental to Meridian as distinct from its effect on the NZ economy. We've seen good arguments made here that it would be the thermal generators such as Genesis that would be impacted as the cheaper Meridian Manapouri (hydro) power became available to the wider market. All depending on completion of the scheduled Transpower upgrades of course.
Martin hawes rates meridian a good income play.
If you think its efficient to push power the length of the country where the demand is then by all means be my guest. Put it this way if Tiwai didn't exist, is that where you would build a new power station?
That depends on the assumption that loss of the subsidised Tiwai contract would be detrimental to Meridian as distinct from its effect on the NZ economy. We've seen good arguments made here that it would be the thermal generators such as Genesis that would be impacted as the cheaper Meridian Manapouri (hydro) power became available to the wider market. All depending on completion of the scheduled Transpower upgrades of course.[/QUOTE]
Yep I know. But the scaling, I believe, has to be pro rata.
If you've had a firm allocation on a substantial amount, they can't just say "we gave you too much" when compared to someone else. They're going to have to scale everyone at the same percentage, up to 20% as you say.
Given the amounts involved, I think significant scaling at this point is highly unlikely - this is a big float for the market to absorb
It's not efficient.... But do you really think they will build a new power station near Auckland ?[/QUOTE]
New Zealand's deep-pocketed conservation industry will not allow further large-scale electricity generation projects to proceed anywhere, CAM.
This seems to me to be something of a conundrum, as it is unclear where they will get the electricity needed to power their new, modern, clean, green, electric vehicles.
Time to eat another tin of baked beans and hook up the fart tube ?
Morning star has a fair value of $1.75.