Contact Energy - CEN Chart

[Bobdn]

Thanks for those great links
After watching them since your posting it appears that renewables are generating twice that of thermal.
Mercury should be doing really well as the waikato is the main generator.
SI prices are much higher than NI so I wonder since most CEN customers are in the NI can they sell their hydro in the SI when spot prices are high-and they are still above minimum levels as far as I can tell-and buy NI electricity at lower prices for there NI customers?

Yes, I guess Mercury is doing well.

Over the last week the big four all had 22% generation market share, with Trust power 5% and other 6%.

See: https://www.energylink.co.nz/sites/d...Issue_1053.pdf

Generation share over all of 2014 in comparison was

• Meridian Energy – 35%
• Contact Energy – 23%
• Mighty River Power - 16%
• Genesis Energy - 14%
• TrustPower - 6%

(see: http://www.mbie.govt.nz/info-service...ity-generation)

Mercury and Genesis appear to be keeping busy this winter.

[fish]

Yes, I guess Mercury is doing well.

Over the last week the big four all had 22% generation market share, with Trust power 5% and other 6%.

See: https://www.energylink.co.nz/sites/d...Issue_1053.pdf

Generation share over all of 2014 in comparison was

• Meridian Energy – 35%
• Contact Energy – 23%
• Mighty River Power - 16%
• Genesis Energy - 14%
• TrustPower - 6%

(see: http://www.mbie.govt.nz/info-service...ity-generation)

Mercury and Genesis appear to be keeping busy this winter.

And meridian must be suffering.Trust power I am not sure but maybe as well if they are having to buy power.
Contact profit is the conundrum -I understand they have 21% of customers so may be selling -and prices are 50% up over previous week

[Bobdn]

I'd like to buy Meridian and Mercury just so I have a full set. Maybe I'll reinvest my next Contact and Genesis dividends into them.

[fish]

I'd like to buy Meridian and Mercury just so I have a full set. Maybe I'll reinvest my next Contact and Genesis dividends into them.

I understand why and your timing should be right-annual reports are out soon and they have a tendency to affect the sp if the profits are out of kilter with expectations.

[Hectorplains]

June op. report hasn't excited the market.

[fish]

June op. report hasn't excited the market.

quite right-significant fall-no improvement in profit for past 12 months as far as I can see after a quick scrutiny.
Extra cost of gas over past 12 months.
Futures are significantly up so next year should be a different story
We need a snoopy summary

[Hectorplains]

quite right-significant fall-no improvement in profit for past 12 months as far as I can see after a quick scrutiny.
Extra cost of gas over past 12 months.
Futures are significantly up so next year should be a different story
We need a snoopy summary

Gas numbers climbing but electricity customer numbers in freefall again. New fuel discount scheme must be a bit of a fizzer? Surprising too that they can't get more gas customers on a dual contract for power too.

[stoploss]

https://www.youtube.com/watch?v=TzFnYcIqj6I

http://www.stuff.co.nz/national/94874334

[Snoopy]

Actual FY2016 results are out, so time to update my valuation model.

First a few words for those who joined the Contact Energy (CEN) party late.

CEN operates in an industry where the weather plays a big part. No-one can predict for sure what the weather, and hence resultant rainfall, and consequently inspired power demand will be on the overall network. In addition there are competitive market pressures which see customers happy to flip flop between different retailers at regular intervals. However, Contact have been operating in volatile weather and consumer markets for many years. Furthermore, the energy market is relatively mature. Rather than try and guess what the weather and consumer market share for Contact in the future might be, I prefer to use 'actual data' from the last eight years, and superimpose the current forward dividend policy on that data. Because I am considering eight years of data, this will produce an 'averaging effect'. Thus, although I predicting a particular 'fair share value' for Contact, we can expect the market value of CEN shares to fluctuate both above and below that figure.

<snip>

In FY2016 the depreciation and amortisation charge was $201m, and the offsetting capital expenditure was $128m. There are currently 715.5m Contact shares on issue. So the 'windfall cashflow' per share in FY2016 amounts to:

($201m-$128m)/ 715.5m = 10cps

Of course not all of this is available to be paid out. Contact currently has a relatively high debt load. Management have indicated that they wish to use some of that cashflow to pay down debt. But add 10cps to last years earnings of 22cps and you get 32c. There is plenty of headroom there to indicate paying a cash dividend of 26cps per year going forwards will not be a problem.

<snip>

The expected average dividend per year, net of tax is therefore: 190.7 / 8 = 23.8cps (net)

Using a tax rate of 28c this is equivalent to a gross income of: 23.8cps /(1-0.28) = 33.0c

If we assume that a business cycle investment 'gross return' of 6% is required, then this equates to a CEN share price of:

33.0/0.06 = $5.50

So $5.50 is therefore 'fair value'. Naturally this valuation assumes no gross disruption to the market, i.e. Tiwai Point remains a going concern

quite right-significant fall-no improvement in profit for past 12 months as far as I can see after a quick scrutiny.
Extra cost of gas over past 12 months.
Futures are significantly up so next year should be a different story
We need a Snoopy summary.

I have decided to be extremely arrogant and not even bother to read the latest Contact quarterly operational results. There are more than enough diligent CEN shareholders on this forum to do this if they so desire. I can be arrogant like this because I am a 'big picture' Contact Energy investor. That means 'seasonal adjustments' over many years should even out. So it is best to divert my 'investing energy' to other things and just ignore them.

I don't think there is a risk to the current 26cps annual dividend payout, even if a lack of imputation credits reduces this dividend net value to less than 26cps. Therefore my valuation of Contact Energy remains largely unchanged. But if the dividend is not fully imputed in FY2017, then my $5.50 'fair value' will reduce a bit. Yet I don't expect that reduction be be significant because 'this year' will only provide 1/9 th of my company valuation data.

SNOOPY

[fish]

I have decided to be extremely arrogant and not even bother to read the latest Contact quarterly operational results. There are more than enough diligent CEN shareholders on this forum to do this if they so desire. I can be arrogant like this because I am a 'big picture' Contact Energy investor. That means 'seasonal adjustments' over many years should even out. So it is best to divert my 'investing energy' to other things and just ignore them.

I don't think there is a risk to the current 26cps annual dividend payout, even if a lack of imputation credits reduces this dividend net value to less than 26cps. Therefore my valuation of Contact Energy remains largely unchanged. But if the dividend is not fully imputed in FY2017, then my $5.50 'fair value' will reduce a bit. Yet I don't expect that reduction be be significant because 'this year' will only provide 1/9 th of my company valuation data.

SNOOPY

and buy for the long-term.


Much appreciated and thanks snoopy.
It is good to hear your assessment.
I always try to invest for the big picture as well.
But then life gets in the way and I have to try and over-think the market when I need money.
For instance the lull in the Auckland property market has amongst other things given my son the chance to buy his own home but based on his income the bank will not lend him enough.Through my margin lending account I can and would make up the substantial difference but this would leave me stretched and exposed and I have to decide what to sell and when to sell.
CEN is by far my biggest holding but I never sell if a stock is undervalued.
I will be holding CEN long-term but reduce my holding if the sp approaches fair value.
Hopefully a good annual report and the current rain may kick the sp.