Morningstar report here: http://www.interest.co.nz/sites/defa...r-Meridian.pdf
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Morningstar report here: http://www.interest.co.nz/sites/defa...r-Meridian.pdf
Page 5 is based on Morningstar's $1.75 fair value of MEL - given the retail price is capped at $1.60, the proposition is more favourable.
Overall, the report seems less comprehensive than the First NZ one, particularly in terms of valuing the different risks. They put very little likelihood on the Labour/Greens policy:
"We think it might take Labour (if it comes to power) at least four to five years to regulate the sector given the complexities involved in working out the regulatory asset base for each generation unit due to their differing ages and fuel types. Considering that elections are held every three years in New Zealand, we think the chance of regulation occurring during the next five years is remote."
Also, their DCF used a lower WACC (similar cost of equity, lower cost of debt).
At $1.60, it is only a 10% discount to fair value wheras TPW and MRP are about a 20% discount to fair value (calculated by Morningstar - it looks like they are using the same $2.75 for MRP they issued prior to listing. I wonder if they re-reviewed?).
That is a good point re regulated asset based - they could probably put the legislation into place quickly but the court cases on regulated asset base would go on for years, even after the ComCom/Central regulator make their initial stab in the dark.
More research from Woodward and TDB:
https://nzx.com/files/static/cms-doc...h-20131001.pdf
http://www.tdb.co.nz/documents/repor...rch-report.pdf
Excellent, thanks for that luigi. DCF valuations re $1.81 to $1.93. Drought the biggest and most likely to happen risk.
Edison putting up $1.70-$1.86. All of the reports are now here: https://www.nzx.com/meridian-research
They put the Labour/Greens policy as knocking up to 70 cents/share off the valuation although state: "we think the probability of the NZ Power proposal being implemented to its full potential extent is low and that the offer price more than accounts for the current risk adjusted impact to MEL".
Ive downscaled by two thirds to keep some funds free for ops.
Agree and nobody's talked about that up until you mentioned it and its a real risk that nobody seems to be factoring in. I rate First N.Z's research as better than anyone else and note they rate the company based on a comparitive PE basis to the other listed power companies at $1.43 - $1.60 but I don't agree with their risk assessment on either the smelter situation or Labour / Greens and believe they are materially underestimating the risks as i perceive them.
People are paying a PE of ~ 20 times in a zero growth industry with major risks of 41% of supply going to a smelter that's highly likely to close and when it does people seem to think it'll be easy to transfer that supply elsewhere, (something i'm not convinced of). Then we have the Labour Greens groundswell of support building on the fact that Mr Key stopped listening to average Joe Bloggs quite some time ago. All this against a background of real increases in electricity prices of circa 80% over the last decade to such an extent that many average families are struggling to pay their power bills and those that can are putting in efficient heat pumps and better insulation. Some think demand growth will get back to its long term trend after many years of zero growth, I am not convinced. New supply already in the pipeline coming on stream this year and next will further effect the present over-supply situation.
Too add insult to injury buying back an asset we as taxpayers already own feels like some sort of quassi taxation to me. I can see why people would look at this as an income stock but there are really serious risks with this stock, not the least of which is the timing of the float. I avoided the slow river power value destruction and will also sit this one out. My 2 cents.
Thanks for your very lucid analysis of the prospects, relating to our buying our own stuff back, from an increasingly dictatorial 'government'.
The terrorists we should be afraid of - and protected against - are those out-of-touch public servants (!?) whose world no longer seems to encompass the NZ public - unless you have links to BIG business or Multi-nationals.
The destruction of our freedoms and way of life, is coming increasingly, from within with the robbers running the show.
With the current situation in the USA and what looks like an increasingly high chance Labour/Greens will take out the next election. I am having major second thoughts about Meridian. It looks great for 2 years of income. However I feel 2 years in DIL, RYM, PEB or SUM could net more in growth.
If its true Meridian will be hit hardest by the planned one buyer electricity model. I might wait, perfect buy in time would be Labour/greens winning election during a drought in south island. I feel even though most believe the policy would take 4-5 years to implement the SP would be hit hard on news that National wouldn't have the majority.
I think the more small shareholders, as in the general public, get cold feet, the more the institutions will be smiling.
I wouldn't be surprised if the $1 instalment receipts list at a tidy premium.
Disc. I have been allocated quite a few so I'm biased.
I'm inclined to agree, biker.
There are risks in all investments and we can always find reasons not to buy, but to have all the risks line up in a "perfect storm" against Meridian seems to be taking risk aversion a bit too far for an equity investment.
Disc: Taking a modest position.
I share that sentiment. Meridian has got good assets that are providing some very good cashflow and despite the obvious risks, I am also taking a modest position, like I did with MRP. I should note though that I am not looking to trade but a long term hold with both..
Regarding the Labour/Greens policy, one has to remember that it was discredited by the very overseas economist that they were relying on as wonky economics. Key will slaughter them in the debates unless they change tack a bit.
You will also note they haven't said anything in the lead up to this IPO - they should be politiciking like hell as the media would give them lots of free publicity in the year before the election on a key National policy which is apparently very unpopular.
Disc: going in slightly bigger than I did for MRP in the hope of regaining a bit ("definition of insanity is doing the same thing over and over and expecting a different result")
I agree CJ that Labour/Green lack of comment about Meridian has been very notable by its absence ! It is definitely interesting.
I wonder if lack of comment form Labour/Greens means that they have realised they destructiveness of their policy and would be looking to backtrack on it if they win the election. Their policy could only be for the purpose maximising their share of the vote after which they simply would not implement it. Am I guilty of wishful thinking.
Yes, perhaps the penny's dropped that tying a generator's returns to its costs will encourage and perpetuate those nasty fossil fuel burning stations!
And a permanent loss of significant dividends to the Crown, read voters/taxpayers, as well as a huge writedown in the value of the 51% still owned by the Crown, read voters/taxpayers
The question that has to be asked is, what is the expected life of the Hydro system and what is the cost of generation using hydro.
The hydro consists of stored water, which can be switched on and off as required. Now That applies mostly to the water in the lakes. At the top of the system. I think you then get a certain amount of storage in the canals etc., but basically once the water starts flowing, its generating electricity. The water is not stored, it is used.
Ignore the wind farms. They are obviously cheap to build. But their economic life may well be only 20 years.
So, your conclusion Percy, of 'Sound Assetts at a Reasonable Price' is mine too. A long term hold with good dividends paid. Plus no 'buy' brokerage fees enables a modest investment to turn a profit even, plus we have the dividends.
Surely they realise that if the public buy up large in Meridian, just as they did in MRP, then when election time comes, nobody who bought either will vote for Labour, as this will affect the share price of both. It was a very poor move, and is a guarantee that Labour will lose the next election.
I would guess that 75-80% minimum of the Mums & Dads who buy into privatisations are John Key voters anyway regardless of whether they are now a shareholder in Meridian or MRP.
In for 10,000 each for Mr & Mrs FH , allocation confirmed from ForBar . ( Thanks Synlait !! )
I brought MRP and although a long term holder as we need the dividends, as with many have been disappointed with the price drop of around 10-12%. So trying to figure out how best to participate in the Meridian float. All in at IPO ? Or 50% in and keep 50% to buy post float, whether they go up or down. Or keep powder dry and invest at sometime in the future.
Trying to figure out a way to compare MRP with Meridian...and perhaps other power co's as well.
One approach I have been considering is to work out a market capitalisation price (share price x no. of shares): units of power capacity ratio. So some advice please. Does this seem a valid way to compare the companies ? I was thinking that if the Meridian ratio was say 10-12% lower than MRP ratio, then this might indicate that the price is about right. Assuming that Mr Market has now done a decent job of pricing the MRP company.
Any thoughts ? Or is this a waste of time ? Are there more meaningful ways to compare the two IPO's ?
Any help / thoughts appreciated.
Cheers
RTM.
MRP may have dropped 10% but you have had a 4% dividend in the meantime (my records show I'm down 6.8% from IPO).
Given it is a yield stock, I have focused on yield. Seem simplistic but I cant fault the thinking. The main question is whether the proposed yeild is sustainable.
Based on yield, Meridian is a good buy. Planning to send in my application this week.
^^First N.Z. capital compared the power companies on a relative PE basis and came to the conclusion that on this basis Meridian is worth $1.43 - $1.60.
Those of you who are investing might want to note the U.S. Debt extension deadline is October 17, that's October 18 here and the deadline for applications is hand delivery to the registrar by 5.00 p.m. Friday 18th October.
If I thought this was a good investment I'd be waiting to see if the American situation is resolved in a satisfactory manner and then hand delivering my application. On the other hand, with all this international uncertainity maybe the book build price will be around where Bryan Gaynor thinks it ought to be $1.30 -$1.40. ?
First NZ valued it on a DCF basis at $2 (I would have to read again - and I will) but I think they thought this was the best metric to use as P/E isn't suitable for reasons they gave.
Given the range is $1.50+, I assume that means Gaynor wont be buy ANY, for ANY of his funds. If he does, then will the DIL one might have been BS, this would be market manipulation in my view.
Their DCF valuation used a long term risk free rate of return of only 5% in their model. That might look pretty stupid in 18 months time when the American's have finished manipulating the long term rates.
A LOT of the assumptions in their valuation are matters I don't agree with, for example they are treating future Treaty of Waitangi issues as having no assessed impact on future cash flows. More meaningfully they assume smelter supply can be re-directed and a closure would only have a 2 cent impact on valuation.
WOW, I find that difficult to believe. 14% of the nation's supply comes to the market and it only affects the share price by 2 cents !!, okay, people can believe that if they like...
Relative PE to the other power companies is the best measure in my opinion and for a zero growth industry with what's hanging over them all with the Labour Greens risk...I think all the PE's in the sector look fully stretched and with potentially significant interest rate rises in the next few years we could see meaningful PE ratio contraction.
Gaynor's track record speaks for itself.
Projected dividend yield is the company's main attraction in my opinion...but you've got to wonder if this hasn't been window dressed to look attractive to the masses who are struggling to get 4% on their bank deposits.
Personally I think a stock like this with all its specific and industry risks in a zero growth industry with its present excess supply and potentially huge amounts of excess supply and in a rising interest rate environment deserves a PE ratio of an absolute maximum of 15 and even that's a real stretch which would mean I wouldn't pay a cent over $1.20.
For goodness sake you can buy good quality stocks like SKC with a dominant and protected position and real growth pontential on a PE of 18 without all the sector risk applicable to the electricity industry
I think it is well recognised that the MRP IPO was poorly done and certainly my broker sees it that way. I bought heavily into the IPO and on listing day saw it peak ( 2.74 comes to mind) then start to retreat. With what I had at stake I didn't want a capital loss take away my dividend gain so I bailed out in the 2.60's.
It wouldn't surprise me if English et al when presented with the recommended IPO price, got greedy and added an increment to the recommendation.
With Meridian, I think they will want it to go a lot better, and politically will not want to appear incompetent financially, which they certainly will do if Meridian goes the way of MRP.
Part of this appearing competent will depend on reading the market at the time and pricing the IPO accordingly. This would have to include the current Tea Party debacle in Washington.
So, IMO you have to be into the IPO. The current situation could make it even more profitable.
Watch the market from the moment it lists and if things are not playing out as you would expect, hop out until the dust settles and get back in for an increased dividend play. I will be very surprised if the instalment receipts open showing an immediate loss.
But, all this IMHO and I have been wrong many times before!
Disc. Have applied for and been allocated quite a few so I'm biased.
Too intent on getting the very top price IMO. As a UK resident during the Thatcher years I partook in all their floats and always made a decent quick profit. Why? Because they always left something for the next man unlike NZ treasury who have a habit of seeking full value. Good for the taxpayer but not for us PIs.
As for initially paying out more than earnings as dividend - seems something of a come-on for mug punters to me.
Thanks all for the input.....Amalgam...some of us older folk while interested in increasing our wealth are perhaps as or more interested in having a decent dividend and protecting the capital against inflation. On balance, I think I will participate in the Meridian float as well.
In addition there is the probably misguided matter of trying to keep these assets in the hands of New Zealanders. Buggar JK for selling these assets.
Cheers
RTM
You're most welcome. I hear this morning that Mighty River Power's board has announced that they have decided to buy back $50 million of its own shares. "Best use of shareholder funds", they claim LOL.
We all know the board is Govt controlled and if people can't see that both the timing of this announcement and the execution of the action itself isn't artifically contrived to help the Govt towards achieving its most optimum pricing on Meridian and Genesis then all I can say is there is none so blind as those that will not see.
Out of respect for those that have (for reasons best known to themselves) decided to invest in this company I won't comment further in this thread.
So many folks with diff needs and investment styles.. I decreased my app because although i will enjoy the income , the thought of sitting on a passive low, no growth investment for so long just doesn't suit my style. Not a bad income stock though imo. And way better ethically and morally then say investing in a gambling company.
Yes SKC is an objectionable stock to some, those that don't understand that well over 90% of the people that go to SKC's entertainment facilities have a good time. The small percentage who are addicted to casino gambling would probably be addicted to some other form of gambling or other addiction, horses, Keno, sports betting or dare I mention the national pass-time of wasting $20 plus a week by hundreds of thousands of households on lotto, which has a very poor payback ratio of less than 60%.
How many people do you know that waste $1,000 year plus on lotto, year in, year out and have never won a meaningful thing...meanwhile plenty of those same families are struggling to feed their kids breakfast in the morning, go figure...who's really sinning ?
Whos really winning?
Sharebrokers
Couldn't agree more i've been telling my two kids the same thing for years but they don't seem to listen. By the way, a pack a day which is a common sized addiction is now circa $7,000 a year, yet some people demonise Sky City as a sin stock, go figure...anyway back to market manipulation, maybe the Govt could convince the board of Air N.Z.to use their considerable cash reserves ($1 billion ?) to jack up the price of Mighty River Power too ? Pretty sure their Public relations spin doctors could come up with a perfectly valid reason why that's in everyone's best interests, opps did I really say that out loud LOL
Casinos are designed for and make profits by, attracting losers. Doesn't sound like fun to me and not my sort of investment. I don't think sin comes into it. Just the fleecing of losers and to make money casinos must attract them.
SKC, although it has peripheral income would not survive without losers.
Sort of like the MRP IPO Biker ?
Cheers
RTM
I am not sure sure Meridian or any of the power companies are necessarily 'ethical' or 'moral'. Remember the sickness beneficiary in Auckland who died because her power,and hence oxygen machine were switched off? And what about the poor who freeze in their houses in winter and the accompanying sicknesses that result all because the greedy power companies charge so much for power, that in Meridian's case has no fuel cost?
However, something like a casino is entirely voluntary to enter. And SKC for example,have people and procedures to deal with problem gamblers. What other form of gambling can you say that about? There is no advantage long term for a casino to cajoule more money out of a customer then they can afford to lose. As far as I am aware, no-one has died on a casino floor at any Sky City establishment.
SNOOPY
Biker...my sentiments exactly...This issue was discussed a while back...Whats more a few years back I believe that SKC got an award for some sort of commerce brilliance...like how hard is it to fleece dosh of loosers and poor brown people...give me a break.
cheers troy
Great post Snoopy. People are so quick to forget that their projected dividend returns are coming off the back of circa 80% real increases in the price of power in the last decade to the point where many tens of thousands of families can't afford to heat their homes properly. (Where's the ethical or moral aspect to that ?).
Bit of a scandal that we have some of the cheapest hydro generation in the world off the back of really plentiful average rainfall but our power prices are now about mid-point for the OECD ?. Wouldn't have anything to do with the Govt jacking up prices over the years so they could inflict a form of quassi taxation on the masses and then leverage those increases to flick the generators off, surely the Govt is not capable of such harsh ostensibly commercial behaviour !! You could easily make the case this is less moral than taking a small percentage win ratio off customers who chose to come into a casino after all people have little effective choice regarding power consumption. Which company is the greater sinner ?
quote ""Wouldn't have anything to do with the Govt jacking up prices over the years so they could flick the generators off, surely not !!""
Do you think Cunliffe would admit that?
Out of respect for those that have (for reasons best known to themselves) decided to invest in this company I won't comment further in this thread.[/QUOTE]
We are all addicted to something eh Rog:)
You paint a broad brush Snoopy.Ther are always exceptional circumstances and im sorry to see you using the example re the sickness beneficiary who died( i will take your word on that). So many issues there. Of course people die in casinos just like any where else, prob a few heart attacks .
The greens and labour will get your vote too if you believe what you say in your isolating way, well done.Im considering it too.
"There is no advantage long term for a casino to cajole more money out of a customer then they can afford to lose" You are trying to be funny i take it. Thats how they make their money Snoopy. Many people cant afford to lose it, they are desperately seeking away to pay off their credit cards their loan shark , their debts , bills, rent etc. Some know the odds are stacked against them but it doesn't stop their addiction. Heard of Gamblers Anonymous? When one is in a hole one does desperate things.
I know of a guy who blows most of his money at casinos. His parents live in an impoverished country but they send any paltry savings to their son in nz to make a better life for himself and maybe them later. he gets more and more desperate daily and tells them porkies re his restaurant is getting better and better and good times are just around the corner. He is just a chef not a business owner..
Biker. Winners and Losers eh , Black and White; yeah... right. Wisdom and compassion comes with seeing the many shades of gray.
Roger You're right ,the Brokers are the winners:)
One could invest in Rothmans and say "Hey nobody is making that person suck on a gasper".... Remember when they sponsored sports:t_up: . Whos got a familiar sitting out in the porch having a ciggy right now? They are rational and sensible and informed yet have re one chance in 2 of dying from it let alone the poor health. Some gamble. Many orgs trying to help them and many money making orgs as well.
You could also invest in a weapons company and say 'hey i didnt pull the trigger".
Ethics and morals and making money mmmhhhh.
Yes....its amazing how we can justify our decisions when money or self interest is at stake........But interesting twist to turn it around on the power co's just the same.
Yes....its amazing how we can justify our decisions when money or self interest is at stake........But interesting twist to turn it around on the power co's just the same.
We heard you the first time but some things are worth saying twice ;)
It is all part of a sliding scale and your own opinion. You could choose not to invest in Grumman, BAe et al. because they make arms, SKC because of gambling, BAT because of cancer, MOA because of drunkeness. Don't forget Cadburys/Kraft because of high fat, sugar and diabetes. Then you have car and plane manufacturers and oil companies and the consequences of pollution and global warming....etc.etc. Just where does one draw the line in the shifting sands? Do we also need warning notices on kitchen knives advising that they can cause death?
For Meridian Joshuatree, there is nothing 'exceptional' about charging very high prices relative to the cost of generation. They do it every day to every customer.
Having a business model based on emptying someone else's bank account is not sustainable Joshuatree. Once you take all someones money they are no longer a viable customer. How could any business survive on that kind of strategy?Quote:
"There is no advantage long term for a casino to cajole more money out of a customer then they can afford to lose"
You are trying to be funny i take it. That's how they make their money Snoopy.
If your argument is that all gambling should be banned then, well I accept the integrity of your position. However, if you accept that gambling is legal and for some people at least a little flutter counts as entertainment, then the argument shifts as to how gambling in NZ should be administered.Quote:
Many people cant afford to lose it, they are desperately seeking away to pay off their credit cards their loan shark , their debts , bills, rent etc. Some know the odds are stacked against them but it doesn't stop their addiction. Heard of Gamblers Anonymous? When one is in a hole one does desperate things.
Sky City has a program where problem gamblers can ban themselves and have it enforced by Sky City security. Sky City train their staff to watch for the signs of problem gamblers. There are now electronic aids on the pokies at Sky City, a pacific first I believe, so that customer have a visual record of how much they have fed into a given machine. I mean, short of providing a staff member to hold every customers hand, what more would you expect Sky City to do? I accept that there will always be problem gamblers that slip through the cracks. But surely the worst cracks are those uncontrolled pokie machines in pubs and clubs, the completely uncontrolled horse racing industry or dare I say it those lotto outlets accepting the last $20 that should have gone towards the power bill?
I believe there is a sinking lid policy on pokies in Auckland. So you may find that when the expanded casino is finished, you have less overall pokies in Auckland and more of those under the control of a responsible host like Sky City. Short of banning all casinos and pokies I know, but is this not a move in the right direction?
That just shows the foolishness of the parents don't you think? Sending a young person to a foreign country where they may be socially isolated? What sort of behaviour do they expect?Quote:
I know of a guy who blows most of his money at casinos. His parents live in an impoverished country but they send any paltry savings to their son in nz to make a better life for himself and maybe them later. he gets more and more desperate daily and tells them porkies re his restaurant is getting better and better and good times are just around the corner. He is just a chef not a business owner..
Not a fair comparison. Tobacco is both mentally and physically addictive. Gambling is not. Every cigarette has a negative consequence. Every bet does not.Quote:
One could invest in Rothmans and say "Hey nobody is making that person suck on a gasper".... Remember when they sponsored sports:t_up: . Whos got a familiar sitting out in the porch having a ciggy right now? They are rational and sensible and informed yet have re one chance in 2 of dying from it let alone the poor health.
SNOOPY
Gee they have already taken the money out of my account to pay for Meridian shares, I wasn't expecting it to be taken out until next Thursday. Perhaps they are worried people will change their mind.
I in no way wish to diminish the issue of suicide. Suicide is an absolute tragedy at a personal level that rises above any financial argument. I just don't think that closing down all casinos will 'solve' suicide.
Maybe people don't top themselves over a power bill. But the vulnerable can still freeze and disease to death in a cold house.
SNOOPY
Back to Meridian.Sounds like there has been a very strong take-up of Brokers allocations and public pool int. Some have completely allocated all shares. Just heard this a few minutes ago.
I wonder what effect the MRP sudden buyback is having on late decisions to invest in Meridian, and the expected final MEL price.
Much has been said, but are there any factual reports available yet?
See that near the close MRP has fallen back to 220, as before their buyback announcement.
Maybe the buy back has to happen first to see the share price promoted ? Until then...nothing has changed.
Comment from Joshuatree.
I know of a guy who blows most of his money at casinos. His parents live in an impoverished country but they send any paltry savings to their son in nz to make a better life for himself and maybe them later. he gets more and more desperate daily and tells them porkies re his restaurant is getting better and better and good times are just around the corner. He is just a chef not a business owner..
This is a major, major problem with Chinese and maybe other Asians too. My Amah in Hong Kong was a beautiful lady whom I tried to teach to drive. She was married with two beautiful girls. My wife and I used to take them out with us on trips to the New Territories. She never gambled, although everyone else did. Ah Jern told me her brother gambled away the family cow when her parents died. Real poverty, so she came over to Hong Kong. That is the truth behind gambling. It destroys lives and families. Plus, as a security chap for the Christchurch Casino told me, anyone frequently gambling at ten in the morning is a problem gambler.
Snapiti , Rog . CRAIGS have no more to offer you guys, sorry about that their firm allocations have been cleaned out.. Youll have to apply to the public pool if you hurry but you will likely be scaled. Definned , beheaded fried, sushimied , creamed ,rogered ,depending on what sorta cool cat fin fish you are:cool:
Thanks for sharing mouse.
Not all privatisation IPO's are flops.
http://www.theguardian.com/uk-news/2...-buyers-profit
I never mentioned winners. Only losers. Nothing gray, shaded or otherwise, about that. Given enough time and enough visits, everyone will leave a loser. Casinos are pure and simply designed to achieve that.
And they do.
And thats how SKC makes its money.
Wisdom and compassion? Interesting that these would be two qualities SKC would prefer not to be present in their Casinos or their Board Room.They tend to be counterproductive to gambling profits.
IMHO
Disc. No shares in SKC. Quite a few in Meridian. So I'm biased.
Cheers biker
If there is to be scaling to be done, the public pool will, IMO, be scaled the least as that is the 'mum and dad' sector they are so keen to have holding. The 'Firm allocation' pool, which has largely gone to 'seasoned investors', (and I understand it totalled 45% of the IPO), can be scaled to a maximum of 20%. This is likely to happen, as it carries the highest brokerage rate (from a cynical broker I deal with) This leaves the book builder insto's and 15% for offshore. IMO, these should be scaled the most, as if they want support for the price post-IPO, these are the guys who will do it.
Bjauck a good point re where do you draw the line? The important thing imo is to HAVE your boundaries, lines; and not pretend ignorance in worship of the $.We come to our own conclusions based on what we know and who we know who has suffered. I wouldn't say shifting sands(obliterating ones line/s). Life is constant change and we must adapt but we know for ex ; what a cigarette does for to peoples health; thats a line of truth. We know many people gamble not with surplus/ discretionary funds and they and people around them suffer. Snoopy believes people suffer with too high electricity charges from Meridian thats ok ;its his personal belief, line. As long as one has ones Lines (ethics and morals, personal beliefs, wellbeing to people etc) one can live with oneself with a little more authenticity and compassion..
Given it is Sunday, the perfect place for you guys to discuss ethics and morality would be church. Unless your discussion is in relation to whether a non monopolistic company that provides a 1st world necessity should maximise it profits, I suggest you use another thread.
Is that because you don't go to church CJ?;) I don't either but i wouldnt ever consider boxing up ethics and morals into just Religion. But yes another thread would be pertinent, cheers .
Seems that the American crisis is getting worse and negotiations between the White House and Republicans over the budget have broken down, leading Deutsche Bank executives to say markets will be down Sunday evening, when Asian markets open (if politicians don’t reach an agreement by then).
So, if markets do fall substantially this week is it possible for those already having applied to cancel their order?
CJ, your guess is better than that, it's correct
Sounds like the Yanks will do a deal at the last minute to sort things out as usual. Anyone got thoughts on the likely price set here - I'm going with $1.60
I don't see it being below $1.60 unless there is no scaling at all of retail buyers. I'll pick $1.70 and very little retail or broker scaling.
Small incentive for retail holders to retain
I am refer to the price of the share, not the instalment receipt so a price of $1.70 means retails investors who hold from IPO only have to pay 60c for the second installment but everyone else has to pay 70c.
I have no idea what that means for opening price for the installment receipts. In theory, at $1.70, anything above 90c is a profit for retail investors who hold on the 18 months (have I got this right?).
Surfer - Really need to see what the issue price is, and the level of scaling, to make a call on the price it hits on the first day.
I have bought in so dont expect the IR to go below $1 and definitely not to drop more than the amount of the retail discount.
Hi Surfersteve,
Sorry been away for a while. No I do not expect the price to be under $1 on day one. In fact I have bought to stag it. But I do not think it is the fact we get so called "high dividends" on the installment receipts that will be the driver for demand. What installment reciept holders conveniently forget is that they have borrowed the installment amount at an implied rate of interest.
Surfer - just simple time value of money. If you know what a share is worth, but dont have to paid the second installment for a year, you are willing to spend more on the first instalment as the rest of the money can sit in the bank earning interest.
Surfersteve.
I don't know what Meridian will list at.
I had $30,000 sitting in the bank earning me 4%.Rainny day fund.
Put $10,000 into ZEL as I thought their dividend would exceed 4%.Did not expect them to trade at 14% above issue price.
Meridian, I and my wife are buying $10,000 each.Again I am trying to beat the bank 4%. The huge initial dividends will greatly exceed the bank's 4%.On going dividends of 7% should mean there is upside to the share price.The 18 months before final instalment means I have control of $30,000 or more of Meridian shares for putting up only $20,000.In the meantime I can use that $10,000 for other investments.[Maybe more HNZ?]lol.
Both ZEL and MER are being brought with the idea of never selling.
The American situation is a genuine concern.
Most investors are expected to mail their applications either today or well before not knowing the outcome of these proceedings which look increasingly unlikely to be resolved by Thursday.
On the other hand institutions have the luxury of not having to express their interest until early next week in the book-build, (which would appear to possibly confer a material advantage as they may know one way or the other whether the American situation has been resolved by then), and on the other hand the Govt reserve the right to cancel the float, (investors cannot cancel their subscription), if they're not happy with its outcome, read a meltdown in the markets due to a collapse in the American negotiations.
Seems to me retail investors are at something of a disadvantage.