Contact Energy - CEN Chart

[Harvey Specter]

Actual dividend 15cps, with no imputation credits at all! Not impressed. Contact are just giving me 15c of my own capital back , but with a tax bill. BUt they have no need for the cash! (though they did note high debt due to the special dividend so maybe they could pay that down a bit but at 5.9% average and probably not a lot they can repay early ...). Should have brought forward the share buyback instead?

[Harvey Specter]

watch the retail competition and margins. Flick electric has cut 20-30% of my bill and read what Phil Pryke said this morningWould consider them myself but they dont do dual fuel. The duel fuel discounts but the big Gentailers (and CEN in my case) the best provider to be with.

What will be interesting is whether people using Flick actually change their habits (to take advantage of time of use metering/billing) and what impact that has on prices if they (and others providers) sign up a lot to these types of plans.

[Snoopy]

But they have no need for the cash! (though they did note high debt due to the special dividend so maybe they could pay that down a bit but at 5.9% average and probably not a lot they can repay early ...).


I would have expected there to be one week of imputation credits available at least. The special dividend was paid on 23rd June, to all those on the register on 10th June. EOFY was 30th June.



Should have brought forward the share buyback instead?


That's what I would have done.

SNOOPY

[Harvey Specter]

I would have expected there to be one week of imputation credits available at least. The special dividend was paid on 23rd June, to all those on the register on 10th June. EOFY was 30th June.Not sure you completely understand imputation credits. IC's are only earned when you pay tax which is 3 times a year. The last payment they would have made was 28 July 2015. However, they would have lost any credit balance they had on 5 August when the change in ownership happened. Any tax payments now will relate to FY16 and given they are paying out based on FCF rather than taxable profit, there will probably be a shortfall gong forward as well (hence the sharebuy back).

[Jantar]

What do people make of the Otahuhu closure?Contact were always likely to close one of their 2 big CCGT plants once the Stratford Peakers and Te Mihi were completed. CCGTs are very efficient as far as using less gas than conventional thermal plants, but they are extremely expensive to maintain. The savings in fuel does not equate to the extra maintenance costs. Plus large CCGT's are not flexible enough in operations to meet New Zealand's needs.

This move should be positive for Contact, but may result in difficulties for Transpower in meeting Auckland's demand next winter.

[Snoopy]

Not sure you completely understand imputation credits.


I don't!



IC's are only earned when you pay tax which is 3 times a year. The last payment they would have made was 28 July 2015. However, they would have lost any credit balance they had on 5 August when the change in ownership happened. Any tax payments now will relate to FY16 and given they are paying out based on FCF rather than taxable profit, there will probably be a shortfall gong forward as well (hence the sharebuy back).


But is it possible to make an extra tax payment over and above the three normal payments to give your company a positive tax paid balance, for the benefit of shareholders (so they can harvest the accompanying imputation credits?)

SNOOPY

[Harvey Specter]

But is it possible to make an extra tax payment over and above the three normal payments to give your company a positive tax paid balance, for the benefit of shareholders (so they can harvest the accompanying imputation credits?)Yes, but you obviously only pay tax you expect to use. They have obviously done the modeling and decided they needed to skip imputation for one dividend as that would result in paying too much tax. Why they didn't skip the dividend entirely is obvously for marketing purposes, especially since they announced a bond issue at the same time - they are effectively borrowing money to return capital to existing shareholders.

[macduffy]

Indeed. This is how you borrow to pay a dividend without actually saying that!

"so the final dividend, payable on Sept. 15, is unimputed, and it increased the company's debt gearing by 7 percentage points to 35 percent."

;)

[PSE]

Indeed. This is how you borrow to pay a dividend without actually saying that!

"so the final dividend, payable on Sept. 15, is unimputed, and it increased the company's debt gearing by 7 percentage points to 35 percent."

;)
Ick, borrowing to pay dividends shouldn't be allowed.
Re the Otahuhu closure respect to the highly skilled people working there and all the best to them.
Unfortunately there was too much capacity in the system, a waste of capital disappointing for people and profits but perhaps necessary where we are now.

Re my previous comments about SAP - I note that this is mentioned in the release.
"The company also expects to improve its cost to serve retail customers following a four year project to implement a new SAS software-based customer support system. Cost to serve increased 11 percent to $13.14 per Megawatt hour of electricity in the last financial year, but the new system should deliver savings of about 10 percent."
So far the expenditure has increased the costs to serve customers on the retail side but it 'should deliver savings'.
An asset is a past expense which will generate future profits but SAP may only be a past expense if it was as poorly implemented in retail as it was on the sites.

[Snoopy]

Yes, but you obviously only pay tax you expect to use.


I was thinking that CEN could pay more provisional tax than they expect to use for this income year, then transfer any excess to last years terminal tax or the first installment of next years provisional tax. I could do that as a private person. But whether a company could do that, I am not sure.



They have obviously done the modeling and decided they needed to skip imputation for one dividend as that would result in paying too much tax. Why they didn't skip the dividend entirely is obvously for marketing purposes.

Yes I agree, skipping a final dividend would look bad on their multi year chart showing CEN as a 'steady dividend payer'. But why couldn't they have done a cash capital return of an equivalent amount to what the dividend would be? That would be much better for NZ shareholders from a tax perspective I think.

SNOOPY

[Harvey Specter]

I was thinking that CEN could pay more provisional tax than they expect to use for this income year, then transfer any excess to last years terminal tax or the first installment of next years provisional tax. I could do that as a private person. But whether a company could do that, I am not sure.

You can but!

Can't transfer back as that tax is already paid (and distributed as ICs)
Can transfer if forward but then you don't pay any tax then so have no ICs to attach to next years div.

I am sure they modelled all scenarios and determined they are likely to have IC shortfall in future so have to take hit now (and maybe in future too).

[Xerof]

Lets get real on these dividend policies - if they only pay tax on profits, but declare dividends as a high % of FCF, then these will always be at best partially imputed. The party was only ever going to last for the honeymoon period after the floats.

Remember, the largest shareholder in most of these companys has no interest in IC's. Still very good yields

Oh, this is CEN thread so second para not relevant to this particular company

[Snoopy]

Time to update my FY2015 earnings forecast, given today's news release from Contact.

1/ Take EBITDAF.

$525m

2/ Remove one off profit items.

$0m (nothing material declared)

3/ Remove Depreciation and Amortization

2x $101m = $202m (twice half year figure)

4/ Take off annual interest charge.

$77m (assume same as FY2014)

5/ Calculate tax payable at 28%

$69m

6/ Calculate NPAT (normalised estimate).

=$177m

From this the foreacst earnings per share are:

$177m / 733m = 24.1cps

An 11c interim dividend has already been paid. So it looks like the final dividend will be 13cps, down 2cps on last year.


I made the above estimate with the Contact Energy August market update. But now we have the actual figures it is time to tidy my estimate up.

1/ Take EBITDAF.

$525m

2/ Remove one off profit effects.

+0.72x$24m (Add back one off cost from retail transformation project)

3/ Less Depreciation and Amortization

-$204m

4/ Less annual interest charge.

-$98m

5/ Less tax payable at 28%

-$67m

6/ Calculate NPAT (normalised estimate).

=$173m

From this the actual normalised earnings per share are:

$173m / 733m = 23.6cps

To my surprise the final dividend of 15cps was retained from last year (albeit this time unimputed). Coupled with the 11cps interim dividend, the normal dividend from FY2015 of 26cps represents 110% of net profit.

SNOOPY

[Snoopy]

New dividend policy is to pay out 'eps' as 'dps'. Looking at the results from 2008 to date it looks like 2008 is an outlier. Further investigation leads me to believe that this particuarly good year was made possible due to limited capacity on the Cook Strait cable. This cable has now been enhanced and the infrastructure conditions that supported the 2008 result look unlikely to be repeated. So I will drop the 2008 result out of my alternative future scenarios for forecasting purposes.

Average eps (last 6 years): 25.7cps (NPAT)

=> Gross eps = 25.7/0.72= 35.6c

Valuation of CEN based on steady state earnings and an acceptacle gross dividend payment rate of 6%

35.6/ 0.06 = $5.94

That is a bit lower than I had before, due to my adjusting earnings downwards for FY2014. It is still well above the $4.65 placement price of today though!


My 'normalised' eps figures for the years following the GFC are like this:



Yeareps


200842.9c


200927.0c


201025.3c


201122.4c


201224.6c


201327.5c


201427.1c


201523.6c



As previously explained I am striking of the result from FY2008 as an outlier that is not indicative of future results. The seven year earnings average for the rest is now 25.4c (net) or 25.4c/0.72 = 35.2c (gross).

Using an indicative gross interest rate of 6%, my share price valuation is now:

35.2c/0.06 = $5.87

That is 7c down on the figure I had before, working with data only up until FY2014. It isn't surprising the value has reduced given the poor result from FY2015. Nevertheless it is still relatively stable, because the new data point is still only one data point out of seven.

SNOOPY

[Snoopy]

As previously explained I am striking of the result from FY2008 as an outlier that is not indicative of future results. The seven year earnings average for the rest is now 25.4c (net) or 25.4c/0.72 = 35.2c (gross).

Using an indicative gross interest rate of 6%, my share price valuation is now:

35.2c/0.06 = $5.87

That is 7c down on the figure I had before, working with data only up until FY2014. It isn't surprising teh value has reduced given the poor result from FY2015. Nevertheless it is still relatively stable, because the new data point is still only one data point out of seven.




FY2015Contact EnergyMighty River Power


No. Shares733.4m1,400m


Share Price$5.13$2.61


Normalised eps23.6c11.1c


Normalised PE21.723.5


Normalised NPAT Margin7.1%9.3%


ROE (Assets at Cost)10.5%117%


Bank Debt$1,750m$1,177m


Min. Debt Repayment Time10.1 years7.6 years


Snoopy's Fair Share Price Valuation$5.87$2.99


Market Discount to Fair Value-13%-13%



Notes:

1/ ROE for MRP of 117% not a misprint.
2/ CEN valuation does not contain an allowance for 'thin air capital', while MRP does. But now that CEN has closed down their baseload Otahuhu B station, the power stations that are left may start to develop 'thin air capital' as MRPs power stations do now. Nevertheless up until now it has been Contact policy not to create 'thin air capital'.
3/ Share prices taken from the middle of the afternoon in the market today. MRP share price reduced by 11c to allow for upcoming final dividend. (CEN is already ex the final dividend).
4/ Contact balance sheet is ex the payment of the 50c special dividend on June 23rd, but prior to payment of the 15c final dividend. This is why Contact is more indebted, as reflected in the 'minimum debt repayment time' ( Total bank debt/NPAT ).

With all that , in relative terms, each investment at this afternoon's price is equally as good as each other. It is possible to buy both at a 13% discount to Snoopy's fair value. In one way I am annoyed because I was hoping to figure out which was the better one to buy. In another way I am relieved because it shows that perhaps my valuation method is not too far out of whack with the view of Mr Market. IOW Mr Market is doing his job valuing these two shares appropriately!

SNOOPY

[Snoopy]

I have been a Contact Energy shareholder from way back, right from the public float. Starting with a modest holding I have built it up over the years, always buying never selling.

I reread the AGM addresses about all of that strong cashflow. Reading between the lines I think we shareholders could be looking at a modest lift in fully imputed dividends in the coming year, or possibly even a share buyback. At $5.20 we are on an historic gross dividend yield of some 6.7%.

Despite owning some CEN since the start, my median holding time is only 2.5 years. With today's buy, my average holding price is now $4.73. Roll in the two latest cash dividends and my compounding gross rate of return over those 2.5 years has been 7.9%. That could even be a little below market, but given the kind of investment CEN is, I am satisfied.

I did my cause no good by purchasing some shares on market during the 2011 rights issue. The rule of thumb of buying during a capital raising is that you are more likely to get a good deal because of the greater number of shares up for sale. I bought a reasonable tranche of shares at $5.92. That looked good at the time, because this was the first time in ages the CEN share price had slipped below $6. That same purchase doesn't look so clever today! The market has rerated much of the growth out of Contact since.

Nevertheless Contact remains a solid pillar in my overall portfolio, and a near 7% yield (hopefully rising through cost control) is a lot better than I would get at the bank. And on the potential downside from the single buyer electricity model, I still feel Contact has less to lose than the other listed power companies. Now that cash dividends have resumed, I look forward to my CEN dividends covering my power bills into the future.

SNOOPY

PS, Yes, I am fairly economical with my power use!


When going through my 'Contact' folder today I came across an extraordinary fact. I had thought of my self as a 'buy and hold' investor as regards Contact. It would be more truthful to say I am a 'buy and buy' investor. Incredibly I have now bought into Contact on 18 separate occasions and never sold any! Granted many of those buys were for very modest amounts when I was participating in the dividend reinvestment plan. So I am not quite the gazillionaire you might think. But it is an extraordinary record for me nevertheless.

My fifteen years with the company have had their (relative) highs and lows. Although I have been with Contact for 15 years, half of my purchases (in terms of the total number of shares bought) were over the last four and one quater years. IOW my median purchase timing was back in May 2011. So how have I done? A quick look at the historical chart would show that I made my time based theortical equivalent single purchase (median purchase) when the share price was at $5.92. The current share price is $5.11 - not good! But is this really a good measure of how I have done? Let's see.

SNOOPY

[newtrader]

Thanks for your in-depth analysis SNOOPY, much appreciated!

Have you calculated your "Market Discount to Fair Value" for MEL?

[Snoopy]

My fifteen years with the company have had their (relative) highs and lows. Although I have been with Contact for 15 years, half of my purchases (in terms of the total number of shares bought) were over the last four and one quater years. IOW my median purchase timing was back in May 2011. So how have I done? A quick look at the historical chart would show that I made my time based theortical equivalent single purchase (median purchase) when the share price was at $5.92. The current share price is $5.11 - not good! But is this really a good measure of how I have done? Let's see.


Looking back at my notes, my worst purchase of Contact Energy shares was made in November 2008 when I picked up a parcel for $6.63. That doesn't look very clever now. But the share price had within a short time of that been as high as $9. So it was easy to convince myself that $6.63 was a bargain. And so it might have been. Except that post GFC a lot of the 'growth premium' was let out of the energy market. Contact as a 'steady state' earner had a very different outlook to Contact as a 'growth company'. The truth is I took my eye off the ball and assumed energy growth was going to follow the historical trend, and it didn't. So I have no-one to blame but myself for this little episode.

By contrast my best purchase was when I bought a parcel for $2.80 in December 2000. What a millennium present that little purchase turned out to be! Contact had floated at $3.10 just over a year earlier. My memory isn't good enough to remember exactly why the price declined. But I do remember thinking about those shares I bought at float time, and reasoning that if I could pick up some more Contact shares at a 10% discount that sounded like a good thing. And so it was!

What we have here are two examples of 'catching a falling knife'. In the first case I got bloodied. In the second case I got a firm grip on the handle. Which proves nothing really. The big bandage I keep in the bottom of the doghouse meant the bloodied paw was a repairable effect.

SNOOPY

[Snoopy]

Thanks for your in-depth analysis SNOOPY, much appreciated!

Have you calculated your "Market Discount to Fair Value" for MEL?

No newtrader, because I don't own any MEL! How brattish is that? I sure that I have dropped enough hints on this Contact thread to allow others to do it though! I look forward to seeing your start on the MEL thread!

SNOOPY

[Snoopy]

My fifteen years with the company have had their (relative) highs and lows. Although I have been with Contact for 15 years, half of my purchases (in terms of the total number of shares bought) were over the last four and one quater years. IOW my median purchase timing was back in May 2011. So how have I done? A quick look at the historical chart would show that I made my time based theortical equivalent single purchase (median purchase) when the share price was at $5.92. The current share price is $5.11 - not good! But is this really a good measure of how I have done? Let's see.


The period from May 2011 accounts for the funding and construction of the Te Mihi Geothermal Power Station. In June 2011 there was a 1:9 rights issue priced at $5.05. This was quite a big discount to the market price in the high $5 range at the time. So of course I took up my rights. Over that time period and in the year that followed, I purchased more shares through the dividend reinvestment plan, at $5.35, $4.95 and $4.88 respectively.

At the end of FY2015 there were 733.309m Contact shares on issue, compared to 695.068m at the end of FY2011. There were no purchases of large assets external to the company over that time. That means the same 'company assets' were now spread over a larger number of shares. So I would argue that the share price start point comparison should be adjusted to reflect that

Much of this discount is that all shareholders on the register who bought shares at $5.92, also bought the rights to buy an extra share for every nine they already owned at $5.09. And that discount is not reflected in the direct share price comparison. The corrected price taking into account the rights issue was:

{$5.09 +$5.92(9)}/10 = $5.84

This sort of thing needs to be adjusted for in any 'raw chart information'

SNOOPY

[Snoopy]

When going through my 'Contact' folder today I came across an extraordinary fact. I had thought of my self as a 'buy and hold' investor as regards Contact. It would be more truthful to say I am a 'buy and buy' investor. Incredibly I have now bought into Contact on 18 separate occasions and never sold any! Granted many of those buys were for very modest amounts when I was participating in the dividend reinvestment plan. So I am not quite the gazillionaire you might think. But it is an extraordinary record for me nevertheless.


The main objective of the trader as I understand it, is to sell out at a profit. By contrast the main objective of an investor like me is to gain the lowest possible average entry price. For someone like me, that means I have no plan to ever sell out of CEN completely. So the idea of a particular share purcahse having a 'beginning' and an 'end' ceases to have meaning. As long as the good dividend flow remains I will ride the ups and downs. If along the way my share starts to look cheap I will buy some more to lower my average entry price. By contrast, if the price goes up above what I deem fair value, I may look at selling a few to lower my average entry price (hasn't happened yet!).

It is true that in theory I could have sold all of my CEN shares back in May 2011 at $5.84 equivalent. But as a long term investor I would never have done that. As it happens my average purchase price today is $4.82, and back then it was even less. As I did not judge $5.84 to be overpriced at the time, there was no reason for me to sell at the time. As you can see my current CEN fair valuation is $5.87. So I am very comfortable with not selling at $5.84, even all these years later.

Fixing on a particular price on a particular date is to me not significant. Sure people remember their first buy in price and some, like me, keep a record of their average buy in price. But when you have bought into a share eighteen times, a particular partial purchase at $5.84 (nominal) on a particular day ceases to have any relevance. Of course from a traders perspective I fully understand that they may have a different view!

SNOOPY

[sb9]

Thanks for your input Snoopy, well summed up.

The ASX listing shouldn't be too far way I think. They said 4 to 6 weeks at the time of Origin sell down, which was a month back...so should be getting pretty close.

[Snoopy]

My fifteen years with the company have had their (relative) highs and lows. Although I have been with Contact for 15 years, half of my purchases (in terms of the total number of shares bought) were over the last four and one quater years. IOW my median purchase timing was back in May 2011. So how have I done? A quick look at the historical chart would show that I made my time based theortical equivalent single purchase (median purchase) when the share price was at $5.92. The current share price is $5.11 - not good! But is this really a good measure of how I have done? Let's see.


Following my 'median' purchase of shares, I banked three more dividends through the dividend reinvestment plan. I did this at the time because I wanted to increase my CEN holding, but also for 'tax reasons'. I was able to get my DRP dividends completely tax free. Looking back this wan't a smart move overall. Invariably once my DRP shares came to me, the market share price had already declined below the price my new shares were issued at! I made a note to myself not to do stuff for tax reasons again! I suppose I will though, because I always fall for that! The IRD decided this Contact DRP was a rort as set up, so cash dividends soon resumed.

Here is the dividend stream I got:

11cps, 14cps, 11cps, 15cps, 11cps, 50cps (special), 15cps (unimputed due to special dividend clearing out all the imputation credits).

If I replace that last dividend of 15c with a tax paid equivalent:

15c x 0.72 = 10.8c

then the total net dividends add up to $1.228 over the median four and one quarter years holding period. At $5.10 (the CEN share price as I write this), my capital gain over my average purchase price is:

$5.10 - $4.82 = 28c

Add this to the net gain from dividends over the period of $1.228 and the total net gain per share is $1.508. $4.82+$1.508=$6.328. This gain is over 4.25 years. So we can work out the compounding annual return as follows:

$4.82(1+i)^4.25= $6.328 => i=6.6% (net) or 9.2% gross

9.2% is not a get rich quick scheme. But it is an excellent return for a utility type asset. However, if you were shallow enough to do no homework and just look at the chart over that four year period, you might convince yourself that I had made a significant loss over the same timeframe! This kind of thing is why I don't use charts when I make my high dividend yielding investments.

SNOOPY

[albundy29]

Finally read the writing on the wall.
The "independent" director doesn't have the support of the now departed majority owner.



CEN / Announcements



Phil Pryke announces retirement from Contact Board

12:48pm, 11 Sep 2015 | DIRECTOR

MEDIA RELEASE

For immediate release

Friday 11 September 2015

Phil Pryke announces retirement from Contact Board

Following the announcement today that Sir Ralph Norris will be joining the Board of Contact Energy Limited (Contact) as a new independent director and if successfully elected by shareholders will be appointed as Chairman, Phil Pryke has announced that he will be retiring from the Contact Board and not seeking re-election at the Annual Meeting.

Phil has been involved with Contact since its establishment in 1995 and was the Chairman of the Board until October 2004. Since then, Phil has been Deputy Chairman and the lead independent director and was instrumental in helping Contact prosper through its many challenges and opportunities. Phil has guided Contact through its recent $2bn investment programme which positions Contact well for the New Zealand energy market.

“It is with a great sense of pride, and, I’ll admit, a tinge of sadness that I have decided to retire from the Board of Contact and therefore not seek re-election at the Annual Meeting,” Phil said.

“In the 20 years I have been involved with Contact I have seen it develop and grow from a collection of ECNZ assets to the strong integrated energy company that it is today.

“As part of the process to find and appoint new directors and a Chairman, I have spoken with investors – large and small – to gather their input on the types of skills and expertise required to direct Contact in the future. While a large part of me would like to continue on as a director now is the time for Contact to benefit from different expertise and fresh perspectives.

“I am excited to be handing over the role of Chairman to Sir Ralph Norris, who has the experience and expertise for the next stage in Contact’s future. During the next few months I will work with Board, Management and Sir Ralph to assist in an orderly transition.”

Dennis Barnes, CEO of Contact said, “I’d like to thank Phil on behalf of Contact, his fellow Board members and our shareholders for his outstanding contribution to Contact over the last 20 years. During my time as CEO, Phil has provided me with invaluable guidance and advice and while he will no longer be on our Board I hope that I can continue to draw on his unparalleled experience in the New Zealand electricity market.”

 
Mr Pryke will stand down from his role as Interim Chairman and Independent Director at Contact Energy’s Annual Meeting later this year.

[sb9]

Very pleasing announcement, Sir Ralph will be breath of fresh air. Phil never had any support from Instos or fund managers, was only survived this long due to Origin.

Does anyone know how far is ASX listing away, not that long to go I think.

[pierre]

Hard to believe the departure of Phil and the appointment of Sir Ralph has been greeted by a drop in the SP.

I thought everyone would be delighted at not having a Pryke on the Board!

[IAK]

20 years what a joke.

[Jantar]

Hard to believe the departure of Phil and the appointment of Sir Ralph has been greeted by a drop in the SP.

I thought everyone would be delighted at not having a Pryke on the Board!
Great to see him gone. I'm sure Mr Market will see the positive side of this fairly soon.

[Snoopy]

I managed to buy a small parcel today at $5.50 to add to my holding. That was based on the gut feeling that investors wouldn't let it slip below $5.50, a feeling that has so far proved correct. Average price paid overall is now $4.81, with a steady stream of decent dividends to add to my return over the years. My original holding was bought at float time (1998)! I have added to that since both through buying more and the dividend reinvestment scheme as funds permitted. Have never sold any. Owning CEN shares today isn't a get rich quick scheme. But it has proved a great core portfolio investment.


That gut feeling came back today. Very disappointed to miss out on getting some CEN shares at the Origin sell down placement price. But when the share touched $5 today, I just had to buy some more. This is exactly equivalent to my end of April purchase, accounting for the fully imputed 50c special dividend paid during the year. Ok less cash inside Contact does make it a little weaker, and will add a bit to the interest bill. But the underlying yield story remains, and may be a little stronger than when I looked in April. It was a hard toss up between topping up with MRP or CEN. But with El Nino on the horizon, I feel Contact may just benefit with their gas peaker station at Stratford. That's what swung my investment choice today.

SNOOPY

[fish]

Agree-I topped up at 501
Well I really invested my latest dividend.

[sb9]

Starts ASX trading tomorrow 11AM AEST (1PM NZT) under ticker code "CEN".

[fish]

Starts ASX trading tomorrow 11AM AEST (1PM NZT) under ticker code "CEN".

I got the implications of that wrong.
Has caused massive selling.
Bought some more at 4.94 at close but will probably drop more tomorrow as lots of selling pressure.

[Hectorplains]

I got the implications of that wrong.
Has caused massive selling.
Bought some more at 4.94 at close but will probably drop more tomorrow as lots of selling pressure.

My assumption was the same! Why has it caused increased selling?

[Snoopy]

My assumption was the same! Why has it caused increased selling?

Remember those Ozzie institutions got their shares at $NZ4.65. At $NZ4.95 they are still booking a good profit and are freeing up cash to invest in the downtrodden Aus market, a market they understand. The question is, now they are selling at what seems to us such a bargain price, will they be prepared to keep selling all the way down to $NZ4.65 equivalent?

SNOOPY

[Jantar]

.... The question is, now they are selling at what seems to us such a bargain price, will they be prepared to keep selling all the way down to $NZ4.65 equivalent?

SNOOPY
I hope so. Then I shall get a few more at the right price. ;)

[Hectorplains]

Remember those Ozzie institutions got their shares at $NZ4.65. At $NZ4.95 they are still booking a good profit and are freeing up cash to invest in the downtrodden Aus market, a market they understand. The question is, now they are selling at what seems to us such a bargain price, will they be prepared to keep selling all the way down to $NZ4.65 equivalent?

SNOOPY

Ahhh, yeah they've banked the divy too. Cheers for that, Snoopy.

[troyvdh]

Gee I wonder if Sir Ralph perhaps regrets his new position....he does come highly recommended....

As snoopy says can "El Nino" be our saviour...

[sb9]

Well, seems as though Australian Super likes them going by the SSH notification.

[peat]

Well, seems as though Australian Super likes them going by the SSH notification.
it likes selling them at anything much over $5and it only has 34M left.


7653

[Coles Killer]

Will El Nino actually help Contact Energy sans Otahuhu B power station? Te Mihi makes 165MW whereas Otahuhu B is 370-400MW... so presumably Contact's ability to go long on their generation portfolio is reduced.

[fish]

Will El Nino actually help Contact Energy sans Otahuhu B power station? Te Mihi makes 165MW whereas Otahuhu B is 370-400MW... so presumably Contact's ability to go long on their generation portfolio is reduced.

CEN generates 25% of total nz electricity- more than it retails and since otahuhu B is costly to maintain and under-used closing it should help raise both long and spot prices-possibly giving windfall spot prices should we have a drought.Hydro inflows are currently less than average and North Island looks dry on next 10 days rain forcast.
TCC has 400mw combined cycle-high temperatures special metals- modern and highly efficient plus 200mw gas peaker.I believe they know what they are doing

[Jantar]

Will El Nino actually help Contact Energy sans Otahuhu B power station? Te Mihi makes 165MW whereas Otahuhu B is 370-400MW... so presumably Contact's ability to go long on their generation portfolio is reduced.
You also need to add 210 MW from the Stratford Peakers and 108 MW of hydro generation freed up with the change to Transpower's transmission pricing methodology. Meridian have also had around 40 MW of additional hydro freed up.

[Coles Killer]

CEN generates 25% of total nz electricity- more than it retails and since otahuhu B is costly to maintain and under-used closing it should help raise both long and spot prices-possibly giving windfall spot prices should we have a drought.Hydro inflows are currently less than average and North Island looks dry on next 10 days rain forcast.
TCC has 400mw combined cycle-high temperatures special metals- modern and highly efficient plus 200mw gas peaker.I believe they know what they are doing

TCC was commissioned in 98 / 99 or something wasn't it? That isn't exactly a spring chicken by gas turbine standards... and now you have a lot riding on that single shaft, you can't just fire up Otahuhu B when you need to do something on TCC. I just think their ability to take advantage of dry years is reduced, that's all I'm saying, but yes I agree I think they know what they're doing and its the right call.

But that's interesting about the transmission charges, 148MW of additional hydro capacity being available is very significant.

What will happen with the money from the Otahuhu land sale? Special divvy?

[fish]

The Taranaki Combined Cycle Power Station (TCC) is a large, efficient and modern plant, producing 377MW of electricity. The heart of TCC is one of the largest gas turbines in the world housed in a single building. Constructed from special metals and featuring advanced cooling systems, the Alstom turbine burns gas at a temperature of 1,200 degrees celsius. The exhausts heat the steam boiler at temperatures around 640 degrees celsius. Within the turbine, two separate combustion sections allow the plant to produce very low emissions – a trademark of the Alstom gas turbine.

Contact Energy commissioned its 200MW gas-fired peaking power station in early 2011. The facility plays an important role in providing New Zealand with a secure supply of electricity, while enabling the country to increase the level of electricity generated from renewable sources. The two fast-start gas turbine peaking units supply enough electricity for 200,000 average homes and can go from a cold start to full load in just 10 minutes. The gas turbine peaking units have been installed on the site of Contact's former Stratford power station, adjacent to the company's existing Taranaki Combined
However Cole Killer is correct about the TCC being commissioned in 98/99.
I don't know about its longevity -otahuhu b was a little younger!
I have the impression it is reliable and problem free but jantar will have better insight into this than I have

[troyvdh]

Some institutions buying in some getting out....fairly large gyrations daily.....I wonder when sellers have finally sold out....

[sb9]

Yeah, it began well on NZX this morning after crossing $5 and slowly drifted down as ASX opened. Guess most of the direction is coming from ASX.

[sb9]

https://www.nzx.com/companies/CEN/announcements/271815

Buy-back announced...

[Coles Killer]

https://www.nzx.com/companies/CEN/announcements/271815

Buy-back announced...

Seems relatively chunky too, $100 mill is decent.

[sb9]

Seems relatively chunky too, $100 mill is decent.

Certainly, this should retrace the sp back into $6 mark in the near term.

[Coles Killer]

Going to be interesting to see what happens without the influence of Origin on the board, will there be some blood letting in the board / management team, other than Mr Pryke?

[Jantar]

Going to be interesting to see what happens without the influence of Origin on the board, will there be some blood letting in the board / management team, other than Mr Pryke?
Certainly looks that way. I noticed that David Baldwin has sold all of his shares.

[fish]

Seems relatively chunky too, $100 mill is decent.

Agree
Their is great potential for a big lift in the sp in the next few months.
A drought and high spot prices looks on the cards.
Could soon be a drought of sellers soon-once those big aussie institutions stop trying to make big profits from their shares obtained from origin.

[Coles Killer]

Yeah those institutions selling out must be weighing on the sp somewhat, as its hard to understand why Contact is sitting stubbornly at $5 otherwise. I do enjoy your optimism fish! But I wouldn't hazard a guess as to what's going to happen with the hydrology just yet. Ok El Nino, but the national storage at the moment is looking average, inflows are slightly lower than average but they tend to fluctuate quite a bit anyway.
http://www.electricityinfo.co.nz/comitFta/ftaPage.hydrology (http://www.electricityinfo.co.nz/comitFta/ftaPage.hydrology)

[Harvey Specter]

Certainly, this should retrace the sp back into $6 mark in the near term.
Buybacks really do seem to be a transfer of wealth from shareholders who hold on to shareholders they sell out. Price just jumped 3% and the buying hasn't even started yet.

[fish]

Yeah those institutions selling out must be weighing on the sp somewhat, as its hard to understand why Contact is sitting stubbornly at $5 otherwise. I do enjoy your optimism fish! But I wouldn't hazard a guess as to what's going to happen with the hydrology just yet. Ok El Nino, but the national storage at the moment is looking average, inflows are slightly lower than average but they tend to fluctuate quite a bit anyway.
http://www.electricityinfo.co.nz/comitFta/ftaPage.hydrology (http://www.electricityinfo.co.nz/comitFta/ftaPage.hydrology)
Monthly operational report out today fuels my optimism
annual demand up 2% nationwide.
Cost of generation down nearly 10% !
average sales price up
They have lost customers though
They look well-positioned to improve profits-

[fish]

Yeah those institutions selling out must be weighing on the sp somewhat, as its hard to understand why Contact is sitting stubbornly at $5 otherwise. I do enjoy your optimism fish! But I wouldn't hazard a guess as to what's going to happen with the hydrology just yet. Ok El Nino, but the national storage at the moment is looking average, inflows are slightly lower than average but they tend to fluctuate quite a bit anyway.
http://www.electricityinfo.co.nz/comitFta/ftaPage.hydrology (http://www.electricityinfo.co.nz/comitFta/ftaPage.hydrology)
Monthly operational report out today fuels my optimism
annual demand up 2% nationwide.
Cost of generation down nearly 10% !
average sales price up
They have lost customers though
They look well-positioned to improve profits-

[Coles Killer]

yeah it is an all round better result really, although as you say, they've lost customers. Their cost to serve has gone up slightly though - I'm ignorant as to what this number actually reflects, but I thought they were trying to decrease this number by bringing in that SAP system.

But man, that is a lot more geothermal generation, 48GWh increase over Sep last year... less thermal but the less you run those thermal plants at the moment, the better I'd say.

Maybe your right fish, does seem to be shaping up to be a better year than last.

[sb9]

Love those two new appointments to the board they've announced today, Victoria Crone (Xero) and Rob Mcdonald (AIR). I think we're in good company with those two along with Sir Ralph as Chairman.

[Harvey Specter]

A lot of volume today? Someone big selling down into the buyback?

[sb9]

I reckon some of Aussies who got those cheap shares from Origin sell down might be booking in profit. Or else, why would you sell when the company is on buy back programme.

[macduffy]

I reckon some of Aussies who got those cheap shares from Origin sell down might be booking in profit. Or else, why would you sell when the company is on buy back programme.

Probably because a buy-back tends to give support to the shareprice. An opportunity to sell for anyone waiting for such an opportunity.

[Joshuatree]

Fantastic Craigs research on all the Electricity companies with buys on all. A few snippets on CEN
should enjoy c.10% or more above average SI inflows as result of El Nino

MEL and CEN control 64 % of country's hydro ; generation to be normal to slightly elevated. CEN's Hydro Clyde and Roxburgh

Geothermal Te Mihi up and running with take or pay contracts reduced to better match medium term usage expectations

We expect CEN to benefit from SAP system helping reduce customer churn.

Cen nearing the end of its capex cycle we see room for further Dividend growth in near term.

Clutha is at 79% of long run averages a slight risk

Reduced FY16 forecast from $566 mill to $560 mill

Target price $6.22 unchanged

Total expected 1 year return 26.3%

Contact showing early signs of improvement after a BAD july.

[xafalcon]

Fantastic Craigs research on all the Electricity companies with buys on all.

Any chance you could kindly post the Craigs report info on the other generators threads?

[workingdad]

Nice to see the SP climbing gradually. Really can't understand why so many sellers since the buyback was announced. 15% into the buyback means there's a lot more room for the SP price to increase yet and better gains.....

[sb9]

All I can say is that some of those Instos bought into Origin sell down are taking profit. Once that sell down settles we will see $6 plus I believe. ASX listing surely didn't help the sp.

[workingdad]

All I can say is that some of those Instos bought into Origin sell down are taking profit. Once that sell down settles we will see $6 plus I believe. ASX listing surely didn't help the sp.

Makes my wonder why they don't want to take a bigger profit though - doesn't take a genius to figure out 20million share buy back will increase the price significantly. I nearly bought more but was rather heavily leveraged with them already and didn't want to have too many eggs in the basket. I agree, I can see getting near the $6 mark which makes me rather happy having bought in sub $5.

[sb9]

True they could look taking at bigger profit, guess it depends on their investment/fund objectives.

[workingdad]

By my count they are 3.5 million shares into the buyback so just on 18% of the way there, had hoped the SP would have climbed a bit more but another way to look at it, the cheaper they get them the better the profitability and divvy's down the line. I am thinking of keeping a decent holding in the long term.

[sb9]

Bit frustrating isn't it, despite the buy-back sp sems to be moving sideways around that 5.10-5.15 range. Wonder who's doing all the selling?

[Snoopy]

Bit frustrating isn't it, despite the buy-back sp sems to be moving sideways around that 5.10-5.15 range. Wonder who's doing all the selling?

Did you see the 'Hunters Corner' article in the NBR last week? The short summary was normally unexcisable options became activated when Origin sold out. Unfortunately for those that had the options (senior managers) they are out of the money, but only just. By doing an on market buyback, managment can inch the share price higher into the $5.20 plus range, making the options viable. Of course, if the options were then exercised this would reverse much of the value of the on market buyback for Mum and Dad shareholders! Maybe some shareholders see this as a rort, indicative of future behaviour of the management of the company, and want out?

SNOOPY

[Harvey Specter]

Did you see the 'Hunters Corner' article in the NBR last week? The short summary was normally unexcisable options became activated when Origin sold out. Unfortunately for those that had the options (senior managers) they are out of the money, but only just. By doing an on market buyback, managment can inch the share price higher into the $5.20 plus range, making the options viable. Of course, if the options were then exercised this would reverse much of the value of the on market buyback for Mum and Dad shareholders! Maybe some shareholders see this as a rort, indicative of future behaviour of the management of the company, and want out?

SNOOPYThe problem with that article was the alternative that was proposed (pro-rata buyback) isn't possible under tax legislation (unless over 10% of market cap) as it would be treated as a dividend (taxable) for tax purposes.

[workingdad]

Missed that article, I have noticed that the majority of the share buy back has been well below 5.15 range and suspect some more today at less than 5.10 so not sure if there is evidence of them pushing the price over 5.20, from what I can see they have been buying on rather low share price days in comparison to the higher share price days where they haven't been buying back.

I would have thought an open market buy back would have pushed the price up considerably more than it has and figure there is some big selling off from the origin side and the NZ dollar is weak so a reasonable time to do it. Just keep thinking (rightly or wrongly) that with a considerable amount of shares being bought back to go it will have to have some improvement yet. I wont lose having bought in at very low prices (they had to be with me sitting on the fence for so long) so worst case scenario I break even. Rethinking hanging in there for the longer term though.

[workingdad]

CFO just bought 20,000 shares on market......

just a touch over 7million shares into the buy back, so about 12.5 million or thereabouts to go.

Wondering when what I presume to be the Origin sell off will finish, if the Origin sale of Contact included 200million dollars in shares and the buy back is 100million how many of those 200million will be sold? I haven't seen any change in substantial holdings so maybe barking up the wrong tree but not sure why the SP is still showing resistance. All things aside with the senior managers Contact still seems a decent bargain at the moment particularly bearing in mind the interest rates at present and other gentailers SP increasing over the last week or two.

Just trying to decide to keep CEN or sell towards the end of the buyback and see if I can get back in at an even more bargain price if the weakness continues.

Appreciate any further insight....

[sb9]

Understand your position completely workingdad, this is one stock in my portfolio that I'm frustrated with currently. Just doesn't seem to go anywhere, all other gentailers seem to be doing ok but this one just stuck in that 5-5.10ish range. When they announced buyback it crept up to 5.15 or so from memory and thought its on the way back to 6 dollar mark, but does not seem that way. They held few investor presentations in the past few weeks both here and Aus but not much impact on sp, looks as though instos are not that keen buy in.

Not saying happy to hold but will hold for now until HY results out in new year and may be there's is an element of surprise??

[workingdad]

I just keep reminding myself that they will still have surplus cash and should do well in dry summer and a reasonably safe bet in some challenging times for the stock market if the bear does take hold..... HY results I anticipate to be good with the monthly operational data of late.

Might end up keeping half of my holdings and hedging my bets on them but still deciding :confused:

[xafalcon]

Looks like another tough day for CEN. But a good opportunity for the buy-back to maximise effect

I didn't think the monthly report was really that bad

[BlackPeter]

Looks like another tough day for CEN. But a good opportunity for the buy-back to maximise effect

I didn't think the monthly report was really that bad

Agreed ... most of the sellers today probably pushed the SELL button after reading the summary on page 1, without looking at the rest of the report.

Improved cash flow, hydro storage (despite low inflow) still above 100% of mean and predicted earnings similar to last year don't sound like the end of the world to me.

Discl: holding - and might pick up some more, if the price keeps dropping ...

[xafalcon]

Yes, the pg1 summary was definitely written in the tone of "the glass half empty".

At current SP and buy-back underway it was too tempting, so I bought back in this morning

[RTM]

I wonder why they didn't wait until after this announcement to execute the buyback ? Was always going to make the shares cheaper, and therefore they would have got more bang for their buck. They must have known how it was trending.

[Crackity]

$4.73 looks pretty attractive to me.....

[workingdad]

$4.73 looks pretty attractive to me.....

Me too. starting to get a few more eggs in this basket than I wanted but hey, not feeling uncomfortable about it and regretted not buying more last time it was down this low. Year on Year up 1% on demand and I think they will do ok with a dry summer.

[BlackPeter]

Wow - 6% down on a release of operational data looking actually not too bad. Bought some more at $4.71 and hope for a rewarding long term relationship spiced with friendly divvies ...

[Snoopy]

Wow - 6% down on a release of operational data looking actually not too bad. Bought some more at $4.71 and hope for a rewarding long term relationship spiced with friendly divvies ...

Joining the party, or perhaps more correctly refilling my glass BlackPeter (I was already a holder before today). Paid $4.66 for my top up, but since then it has got even cheaper : $4.63 as I write this - even less than Origin sold out at! Was picking the Origin sale price of $4.65 as the local bottom and, who knows?, come end of trading today it still might be. But didn't want to risk not getting some shares if I was wrong, and $4.66 seems reasonable.

I see ACC bought in yesterday too BlackPeter, breaching that 5% disclosure limit. They seem to know what they are doing more often than not, so I'm happy to buy in for a bit less than ACC paid.

AGM tomorrow and time for some soothing words from Mr Norris. 'Ralph to stop the rout', when everyone realises things are not that bad. That's my pick. But if I'm wrong, I might just have to get out my cheque book again!

SNOOPY

discl: held CEN since inception: always added, never sold.

[jonu]

Got in at the close last night at $4.58. Happy with that as almost bid $4.62 just prior, and was surprised to see it dip further. Around 10% of the days volume went through after 5pm, including 500k shares at better than $4.61.

These after market shuffles bemuse me but am hopeful there was an over sell ahead of the meeting. Certainly big dip over the previous few days. One would expect that market disappointment is already built in (he says hopefully)

[cyclist]

Got in at the close last night at $4.58. Happy with that as almost bid $4.62 just prior, and was surprised to see it dip further. Around 10% of the days volume went through after 5pm, including 500k shares at better than $4.61.

These after market shuffles bemuse me but am hopeful there was an over sell ahead of the meeting. Certainly big dip over the previous few days. One would expect that market disappointment is already built in (he says hopefully)

Another bottom (???) fish-er here. I wasn't as smart, and went for the $4.62 before the close. Never picked a bottom yet, so no surprise that I missed this one. Happy to get a reasonable discount though.

[RTM]

Another bottom (???) fish-er here. I wasn't as smart, and went for the $4.62 before the close. Never picked a bottom yet, so no surprise that I missed this one. Happy to get a reasonable discount though.

Lets hope its a reasonable discount eh ! I just got a few more at $4.56. Craigs are saying buy. They haven't been this low for quite a while. Take away the special dividend and yield is > 5%. There might be another special as well. Fingers crossed. Unfortunately bought my first ones at 6.38...I guess I can take the 50c special off that tho.

[NZSilver]

What's there likely div come for 16 financial year?

[Joshuatree]

Craigs have reduced 1 year target to $6.03 from $6.22
Sales forecast down 1.7%
Ebit margin down 5.8%
Net profit down 10.4%
Net yield 2016 E 5%
net yield 2017 Est 5.7%

[winner69]

Did your illustrious Chairman (elect) forget which company he was Chairman of at the AGM?

[winner69]

Craigs have reduced 1 year target to $6.03 from $6.22
Sales forecast down 1.7%
Ebit margin down 5.8%
Net profit down 10.4%
Net yield 2016 E 5%
net yield 2017 Est 5.7%

Jeez, $6.03 is a long way from current $4.56

No wonder you guys are buying at the moment - if Craig's have got it right a 32% gain pending

JT - I'm sure many appreciate you sharing Craig's headlines


B

[jonu]

The big boys are certainly having fun with this one today. Massive volume going through off market at $4.55. Think I'll sit quietly trembling on the sideline

[BlackPeter]

pay-walled article in NBR: http://www.nbr.co.nz/article/analysts-question-timing-and-extent-contacts-earnings-downgrade-jr-p-182720

In a nutshell: analysts seem to think that Contacts latest forecast is too cautious - and they (analysts) working with better numbers:


Forsyth Barr analyst Andrew Harvey-Green is now forecasting $531m ebitdaf while Craigs Investment Partners analyst Grant Swanepoel is predicting $534m.

Question as well the timing of the downgrade (Contact released the monthly numbers never that early in the month) and assume this exercise was to create a "clean slate" for the new board and allow them to underpromise and overdeliver.

[BlackPeter]

Did your illustrious Chairman (elect) forget which company he was Chairman of at the AGM?

Ah well, these poor underpaid suckers seem to be in need to hold several jobs with many companies in order to make a living. It is hard if you need to work concurrently for many big companies - easy to get the name wrong, isn't it? Lets hope he doesn't mix up other things as well. Shareholders should probably decide to pay them a living wage ... than they could focus on just one job ...

Or do they get already more than that now;)?

[Harvey Specter]

$41m turnover today. An exodus of Australian funds who bought in 'cheap' off Origin?

[biker]

Often not a great idea buying in a down trend but never was good at perfect bottom picking. I'm taking more of these at around 4.55 and not too fussed if they go a bit lower.
If so, like snoopy, I may buy a few more.

[Arbroath]

I added a bit early at 4.72 but have an average of around 4.90 so pretty happy. Divs will be 80-100 imputed so yield will be near 5% net and that's in a year when things haven't gone their way. They'll be $6 again once the div is up to 30c and they get a favourable weather year.

[Joshuatree]

[QUOTE=winner69;600336]Jeez, $6.03 is a long way from current $4.56

No wonder you guys are buying at the moment - if Craig's have got it right a 32% gain pending

JT - I'm sure many appreciate you sharing Craig's headlines
----------------------------------------------

They value AIR higher than most too so who knows, heres hoping. 4 traders have consensus of $5.91, 4 buys ,2 outperforms. Morningstar have a new valn of $5.50 . Anyone got any other local broker valns ?

[Fisherking]

[QUOTE=winner69;600336]Jeez, $6.03 is a long way from current $4.56

No wonder you guys are buying at the moment - if Craig's have got it right a 32% gain pending

JT - I'm sure many appreciate you sharing Craig's headlines
----------------------------------------------

They value AIR higher than most too so who knows, heres hoping. 4 traders have consensus of $5.91, 4 buys ,2 outperforms. Morningstar have a new valn of $5.50 . Anyone got any other local broker valns ?

FNZC are over $6

[Joshuatree]

Cheers FK.Big crossover aftermarket? S/P finished 2 c up over 14 million thru.

[Master98]

Forsyth Barr Fy16 EBITDAF-$531m,target price $5.45.

[Fisherking]

Yes lots of action on and off market. Looks like a few insto's swapping views. Actually all of the Electricity sector hard hit this week. However provides a reasonable divi to keep us happy until sentiment recovers.

[macduffy]

I'm sure CEN will come right - once Ralph gets used to working for CEN and not Origin!

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11558438

[Bobdn]

Picked up 8500 @ 4.62 partially funded by selling some TME shares. I am now skint. The only way I'll be investing anymore in anything is if I get some sort of return on the $620 I have in bonus bonds. I have spent the last couple of days reading about my new company and it's cool geothermal assets. Wow, it cost $623M to build Te Mihi. What a beautiful looking machine it is - like solar or wind will EVER be able to compete with that.

[GR8DAY]

.........hearld quoting a 16.1% pa yield. Craigs quoting about 7%pa..............I somehow think the latter might be correct. Can't believe one party could get this so wrong. ( but which one)?? Not a shareholder so maybe someone can put this right.

[mfd]

.........hearld quoting a 16.1% pa yield. Craigs quoting about 7%pa..............I somehow think the latter might be correct. Can't believe one party could get this so wrong. ( but which one)?? Not a shareholder so maybe someone can put this right.

I assume one is counting the 50c special dividend and the other isn't. That won't be happening every year so Craig's is the more realistic figure if you're looking forwards

[GR8DAY]

I assume one is counting the 50c special dividend and the other isn't. That won't be happening every year so Craig's is the more realistic figure if you're looking forwards

hi MFD.....yes I thought as much. Poor old Joe Blogs will now be jumping in tomorrow buying CEN thinking they are going to pick up a 16.1% yield......if I was that reporter I'd be bringing my Xmas holiday forward and skipping the country.......pretty shocking really to print that without fully researching the facts!!

[LAC]

Quite a few buybacks, was this expected?

[xafalcon]

Quite a few buybacks, was this expected?

This is part of a capital return to shareholders through an on-market buy-back of up to $100M / 25M shares

[goldfish]

What would the sp be if they weren't buying. Insto's using the buyback as a good time to sell me thinks.

[workingdad]

be curious as to why they would think it was a good time to sell? I would have thought the exact opposite.

I do wonder how much of the selling pressure is still the ex origin aspect cashing up


What would the sp be if they weren't buying. Insto's using the buyback as a good time to sell me thinks.

[Snoopy]

My 'normalised' eps figures for the years following the GFC are like this:



Yeareps


200842.9c


200927.0c


201025.3c


201122.4c


201224.6c


201327.5c


201427.1c


201523.6c



As previously explained I am striking of the result from FY2008 as an outlier that is not indicative of future results. The seven year earnings average for the rest is now 25.4c (net) or 25.4c/0.72 = 35.2c (gross).

Using an indicative gross interest rate of 6%, my share price valuation is now:

35.2c/0.06 = $5.87

That is 7c down on the figure I had before, working with data only up until FY2014. It isn't surprising the value has reduced given the poor result from FY2015. Nevertheless it is still relatively stable, because the new data point is still only one data point out of seven.


Time to update my capitalised averaged eps valuation (excluding special dividends) for Contact, given the subdued outlook for FY2016 and the impending and current share buyback program.

Compared to last year, the special dividend ($367m total) has created an ongoing parcel of extra debt going forwards that must be serviced. Contact doesn't declare in their annual report the interest rate they pay over their whole debt portfolio. But we can:

1/ take last years total interest paid ($90m) AND
2/ divide this by the end of year term debt ($1,219m + $531m) LESS
3/ the capital paid out in the special dividend (because that payout only occurred just before the end of the financial year).

and calculate:

$90m / [($1,219m + $531m) - $367m] = 6.5%

So 6.5% is our indicative interest rate that Contact currently pays.

The extra interest bill because of the capital return is therefore: $367m x 0.065 = $24m

I am estimating that 20m Contact shares will be bought back and cancelled when the current share buyback program is finished.

Given EBITDA is forecast to be little changed from last year, we can now work out the expected NPAT for Contact for FY2016.



FY2016 Adjustments


EBITDA (normalised FY2015)$549m


less DA (FY2015)-$204m


less I-($98m+$24m)


Total EBT$233m


less Tax at 28%-$62m


NPAT forecast FY2016$161m



We can now divide that forecast profit figure by the reduced number of shares 'post buyback' to get a forecast eps figure.

$161m / (733m -20m) = 22.6c

And that eps figure can take its place in our multi year eps table below.



Yeareps


200927.0c


201025.3c


201122.4c


201224.6c


201327.5c


201427.1c


201524.3c


201622.6c



I get an average eps of 25.1c (net) over the eight year representative period.

25.1c (net) is equivalent to 25.1/0.72 = 34.9c (gross).

Using a target 6% gross return figure for 'fair value'.

34.9c/0.06 = $5.82

It is no wonder then that I have been buying in recent months and see today's closing price of $4.70 as a bargain. Even if you use this years forecast manic depressed profit on its own (ie assuming profits will never recover and remain low) I still get a valuation of:

[22.6/0.72]/0.06 = $5.23

Mr market can do what he likes as far as I am concerned. I have no problem taking advantage of him.

SNOOPY

[Fisherking]

Time to update my capitalised averaged eps valuation (excluding special dividends) for Contact, given the subdued outlook for FY2016 and the impending and current share buyback program.

Compared to last year, the special dividend ($367m total) has created an ongoing parcel of extra debt going forwards that must be serviced. Contact doesn't declare in their annual report the interest rate they pay over their whole debt portfolio. But we can:

1/ take last years total interest paid ($90m) AND
2/ divide this by the end of year term debt ($1,219m + $531m) LESS
3/ the capital paid out in the special dividend (because that payout only occurred just before the end of the financial year).

$90m / [($1,219m + $531m) - $367m] = 6.5%

So 6.5% is our indicative interest rate that Contact currently pays.

The extra interest bill because of the capital return is therefore: $367m x 0.065 = $24m

I am estimating that 20m Contact shares will be bought back and cancelled when the current share buyback program is finished.

Given EBITDA is forecast to be little changed from last year, we can now work out the expected NPAT for Contact for FY2016.




FY2016 Adjustments


EBITDA (normalised FY2015)
$549m


less DA (FY2015)
-$204m


less I
-($98m+$24m)


-$233





Year
eps


2009
27.0c


2010
25.3c


2011
22.4c


2012
24.6c


2013
27.5c


2014
27.1c


2015
24.3c


2016
22.6c



I get an average eps of 25.1c (net) over the eight year representative period.

25.1c (net) is equivalent to 25.1/0.72 = 34.9c (gross).

Using a target 6% gross return figure for 'fair value'.

34.9c/0.06 = $5.82

It is no wonder then that I have been buying and see today's closing price of $4.70 as a bargain. Mr market can do what he likes as far as I am concerned. I have no problem taking advantage of him.

SNOOPY

SNOOPY, your posts are interesting and always valuable, but it's past my bedtime before I've finished reading most of them. Could you give us the abbreviated version?

[jonu]

SNOOPY, your posts are interesting and always valuable, but it's past my bedtime before I've finished reading most of them. Could you give us the abbreviated version?

It's screaming BUYME. Brief enough FK?

DYOR; not intended as investment advice; conditions apply...etc, etc

[Snoopy]

SNOOPY, your posts are interesting and always valuable, but it's past my bedtime before I've finished reading most of them. Could you give us the abbreviated version?

My averaged business cycle valuation $5.82. Market close $4.70. Market discount on offer to fair valuation 19%.

SNOOPY

PS subject to all those assumptions laid out in my calculation of course

[LAC]

I enjoy the long detailed posted by Snoopy:)

[Snoopy]

I enjoy the long detailed posted by Snoopy:)

Happy to give both long and short versions. One size doesn't fit all. Just understand that the short version contains assumptions that I think you should know about (and you can find those in the long version!) :-)

SNOOPY

[workingdad]

I enjoy the long detailed posted by Snoopy:)

Me too :) thank you

[Baa_Baa]

SNOOPY, your posts are interesting and always valuable, but it's past my bedtime before I've finished reading most of them. Could you give us the abbreviated version?

Snoops posts are the most informative and insightful FA analysis around here imho. It's not about getting them read them before bedtime, it's about the days afterwards that it takes mere mortals like myself to work through understanding them, it's an education, we are being generously taught the finer points of FA. An archive of Snoops posts would form the basis of a curriculum on FA. I hope Snoops doesn't start abbreviating his analysis.

Respectfully, to Snoops.
BAA

[Snoopy]

It's screaming BUYME. Brief enough FK?

DYOR; not intended as investment advice; conditions apply...etc, etc


To be a 'screaming buy' I look for the future event where a total return of 40% (capital gain and dividends) is reasonably possible within two years. if you regard $4.60 as the likely bottom at $5.82 as a likely average cycle valuation, then this implies that at the very top of the cycle CEN might get to:

$5.82 + ($5.82-$4.60) = $7.04

Let's say $7 round figures. Personally, with the continuing uncertainty of Tiwai, I can't see that share price getting that high. But then again, I didn't expect the share price to get as low as $4.60 either.

So let's say that mid cycle valuation of $5.80 (round figures) is a reasonably possible two year target. Add in two annual dividends of 26.5c. Buy in at $4.75 today and you are looking at a reasonably possible return of:

($5.80-$4.75) + (2x $0.265)= $1.58

$1.58/$4.75 = 33% return (over two years).

Or put another way:

$4.75(1+r)^2= ($5.80 + $0.53)

Solve for 'r', and I get an annual compounding return rate of 15.4%

So not quite a 'screaming buy'. But certainly a 'buy' IMO as part of a balanced portfolio.

I can understand some investors being wary because of the on-going Tiwai point situation. But sizeable returns do require some risk. And it is to a large extent the ongoing Tiwai point uncertainty that has caused this investment opportunity. If Tiwai point came out tomorrow and committed themselves to another 15-20 years in business, then the share price of these gentailers would rocket overnight. And with such a very rapid gain in share price, the investment opportunity we have today disappears.

SNOOPY

discl: hold CEN

[Harvey Specter]

Does anyone have any research on which of the gentailers are long generation/short retail. If Huntly closes, these will be the ones that earn big profits. Until Tiwai closes, then those long retail will be the winners.

If I was a gambling man, I would put money on Tiwai being open 5 years from now.

[workingdad]

Aluminum prices over the last two months have had a gradual increase in prices from the lowest price in previous 52 weeks of .65us cents/lb to .69.

Still some way to go before tiwai will be happy but I suspect it will still be here in the long term also.

[Traderx]

Does anyone have any research on which of the gentailers are long generation/short retail. If Huntly closes, these will be the ones that earn big profits. Until Tiwai closes, then those long retail will be the winners.

If I was a gambling man, I would put money on Tiwai being open 5 years from now.

I don't have any research per se but my view is as follows

MEL - generally long in an average hydro inflows year (due to hydro uncertainty)
GNE - could choose to be long (i.e have enough optional coalstockpile/rankine capacity to be long but will be neutral when rankine units depart)
CEN- could choose to be long (i.e have enough optional ahuroa/gas plant/diesel peakers capacity to be long)
MRP - after southdown closure would expect to be slightly short
TPW- short without purchase contracts


So to answer your question in a post huntly rankine units closure scenario (which may not eventuate) I'd say MEL holds the cards in a moderate to wet year, and CEN holds the cards in a dry year.

Of course the gentailers have the ability to take fairly long dated positions in the markets to set up a variety of different exposures, it just a question of what price they can get that at. So I wouldn't expect to see a radical shiift in risk/p&L post rankines. However someone will need to build something, or tiwai to close, or a negotiated deal with GNE soon.

Disc small long GNE

[workingdad]

still only 3/4 of the way through the share buyback. Nothing so far this month but some bigger turnover again today so maybe.....

with MRP results showing highest quarter of national consumption and their sales falling 7% CEN is one of the remaining in line for perhaps a pick up.

not expecting a stunning half year results to Dec 15 but maybe things improving since then.

The market hasn't exactly been stellar this year and CEN caught up in that a bit but still seems good divvy's down the line if the share price holds up and even dare I say it increase :p

[xafalcon]

Are we expecting CEN to issue a summary of December 2015 operating performance today? It would be good to get a heads-up before they release interim results next month

[Cricketfan]

Are we expecting CEN to issue a summary of December 2015 operating performance today? It would be good to get a heads-up before they release interim results next month

Out now: https://nzx.com/companies/CEN/announcements/276979

[BlackPeter]

Are we expecting CEN to issue a summary of December 2015 operating performance today? It would be good to get a heads-up before they release interim results next month

Here we go:

https://www.nzx.com/files/attachments/229002.pdf

On a first look - I saw nothing too exciting: hydro levels quite average, demand (slowly) rising. Prices ok-ish.

[xafalcon]

Here we go:

https://www.nzx.com/files/attachments/229002.pdf

On a first look - I saw nothing too exciting: hydro levels quite average, demand (slowly) rising. Prices ok-ish.

I think shareholders got enough "excitement" from the November summary. Good to see a benign December summary. Makes me more confident about next months interim update and dividend

[fish]

sp falling-?due to fall in customer numbers and more significant drop in production
Cost of generation also falling
Will free cash flow be increasing or decreasing?

[sb9]

Does anyone know if the buy back of shares on market is finished or they still buying?

The last buy back notice that I could find was dated 22nd Dec 2015 on NZX website.

[Arbroath]

Does anyone know if the buy back of shares on market is finished or they still buying?

The last buy back notice that I could find was dated 22nd Dec 2015 on NZX website.

It wasn't finished....from memory about 2/3rds done...maybe as Interim is only 10 days or so away they will re-start after results are out.

[sb9]

It wasn't finished....from memory about 2/3rds done...maybe as Interim is only 10 days or so away they will re-start after results are out.

Thanks for that Arbroath.

Seriously contemplating topping at these levels, any thoughts around that from any of the members, thx.

[xafalcon]

In regards to the share buy-back, I am perplexed as to why they are not buying up large at these levels. The buy-back scheme was capital capped, so they would remove more shares from circulation at the current lower SP. It would also boost upcoming dividend payment on a per share basis.

Perhaps the imminent result announcement will be poor and they expect an even lower SP?

[fish]

In regards to the share buy-back, I am perplexed as to why they are not buying up large at these levels. The buy-back scheme was capital capped, so they would remove more shares from circulation at the current lower SP. It would also boost upcoming dividend payment on a per share basis.

Perhaps the imminent result announcement will be poor and they expect an even lower SP?

I would think the broker buying the shares would not be privy to the upcoming result.
The broker though could be expecting a poor result and hence not buying.
If one had the ability and time to analyse the monthly operational results it would enable a good prediction.
Snoopy has the ability to do this .

[Snoopy]

I would think the broker buying the shares would not be privy to the upcoming result.
The broker though could be expecting a poor result and hence not buying.
If one had the ability and time to analyse the monthly operational results it would enable a good prediction.
Snoopy has the ability to do this .

Thanks for the vote of confidence Fish. However, in line with my philosophy of doing as much work as required -but no more- to follow my investments, I don't think I will be getting down to the level of monthly operational reports.

As soon as Contact releases their interim result it will be historical. Given that the weather never behaves quite as you think in the future, I am not sure of the value of studying historical monthly reports. I prefer to stand back and look at a more overall picture. Contact has plenty of generation options. Short term an el niño dry summer would suit Contact fine. However with North Island storage at 116% of the mean as at 28th January (latest Contact monthly report), it looks like the previously expected cash pay off for Contact from running their combined cycle power station as a top up over winter could be limited.

Longer term, if the Rankine units are not retired by Genesis in a couple of years after all, that will create more thermal competition for Contact in the North Island. Both of these I believe are factors contributing to Contact share price weakness of late. Despite this though, I think the overall outlook for Contact going forwards is sound. I am annoyed to be -slightly- under water in capital terms on my purchases. But am happy to ride things out and soak up those dividends.

SNOOPY

[sb9]

Good points there Snoopy.

Looks like market has become bit indifferent to this puppy. Thought $4.50 is the bottom, however it may go lower by the looks.

I kinda puzzled by their buy-back programme with reference to xafalcon's point in post 1132 above, why would they not buy more at these lower levels unless there is any legal clause which prohibits them buying certain time before the results are due to be announced.

[xafalcon]

As the buy-back was notified some time ago, the fate of the shares being bought-back is cancellation (not investment), and there is no obligation for any shareholder to sell at a discount to the market, I can not see any reason why there would be any impediment to continuing the buy-back program

[nextbigthing]

Still appears to be in a solid downtrend. Could be worth looking into when it turns. Disc not holding but watching!
7866

[Sideshow Bob]

Looks like trading at the lowest price since October 2003! Eee Owwwh!

Disc: not a holder since selling out at $8+ in about 2008. One of my better calls.

[Rew]

Looks like trading at the lowest price since October 2003! Eee Owwwh!

Disc: not a holder since selling out at $8+ in about 2008. One of my better calls.

So everyone selling now are losing.... Why keep selling?

[Mickey]

So everyone selling now are losing.... Why keep selling?
That's what makes the market what it is Rew. Fear creates losses for some and bargains for others. I see CEN as an investor share rather than a trading share. The December '15 report didn't look too bad in my opinion. Sure, they've lost some market share to rival companies but customer churn is always going to be a facet of this industry - similar to Telcos. Overall, I still see this as a solid long term investment backed by a great dividend track record. I'll most likely add some more once the SP has found a support level.

[macduffy]

So everyone selling now are losing.... Why keep selling?

There's several reasons for selling. Expectations of bad news; better opportunities elsewhere for some; need to raise cash for -whatever. As Mickey says, that's the market, we all have different criteria for investments and make our own judgements on stocks.

[BlackPeter]

So everyone selling now are losing.... Why keep selling?

Maybe the fear of losing still more than they already have lost and the desire to preserve what is left?

Personally I do think that the markets are overreacting (as usual), which would offer a marvellous opportunity to buy in cheap. However difficult to say whether we reached already the bottom. Markets are nervous these days.

Discl: holding

[troyvdh]

Dear BP...agreed re overacting.But hold on ...if a company SP falls on small volumn ..perhaps an opportunity....But hey $30m...Instos must be selling yes.

This company probably will continue to pay 5 % (net ?)...not bad....so why the selling.......

Has the Clutha dam got a crack in it ?....cheers troy..

[pierre]

Dear BP...agreed re overacting.But hold on ...if a company SP falls on small volumn ..perhaps an opportunity....But hey $30m...Instos must be selling yes.

This company probably will continue to pay 5 % (net ?)...not bad....so why the selling.......

Has the Clutha dam got a crack in it ?....cheers troy..

I think the dam is OK - at least it was when I visited last Thursday while holidaying in the region. However, a leak could have appeared over the past few days while I wasn't available to stick my thumb in the hole!

[horus1]

Contact and Meridian down, not the other Generators. Looks like Tiwai reduction to me. Big sales of Contact.

[Joshuatree]

Very good re 40 page article on Craigs website titled "NZ Electricity Sector Curse or Cure"

"Why keep Tiwai around" it represents less than 7 % of current INDUSTRY revenue." "TIwai likely to stay meaning GNE'S yield looks attractive...... but if tiwai goes early then genesis faces the biggest risk"....."Is Tiwai a sector burden" etc
4 buys with Contact having t/p of $5.60.

[BlackPeter]

Dear BP...agreed re overacting.But hold on ...if a company SP falls on small volumn ..perhaps an opportunity....But hey $30m...Instos must be selling yes.

This company probably will continue to pay 5 % (net ?)...not bad....so why the selling.......

Has the Clutha dam got a crack in it ?....cheers troy..

Agreed - quite some volume yesterday. Maybe all the people who missed out on Monday trading desperately doubling up the Tuesday volume;)?

Not sure - a handful of reasons I could imagine:

* Overseas owners moving due to the perceived "higher" safety of US stocks back into the US$ ... and selling their NZD holdings;
* Maybe some people perceiving a negative outcome of the next stage of the Tiwai smelter saga - though this wouldn't be that bad for CEN, and according to Craig's not even that bad for the whole of the NZ electricity sector;
* Owners in need of money due to having problems in other areas (don't remember - does "Deutsche Bank" hold CEN shares, they seem to sell these days?)
* investors listening to horus doomsday stories (decentral solar generation taking over) and running for the hills ... (tongue firmly in cheek)

Not sure, whether this helps - and hey, my crystal ball is cloudy. However, if there is only one industry, where it might be appropriate to apply the value proposition, than this is in my view the Gentailers ...

DYOR and have a good chat with horus. I am sure he will convince you that the industry is doomed.

[BlackPeter]

Actually - looks like nice little recovery today - already 5 cents up on reasonable volume. Twice the number of bids than offers.

I guess the big seller yesterday might already start to regret their selling strategy of swamping the market with cheap shares ...

[sb9]

Not quite bp, given up all its gains from this morning due to the usual afternoon pressure from Asian markets.

disc - topped up more in the past hour, may drop further but can't ignore the fact that the results are due out on Monday.

[workingdad]

I am hanging in there with CEN. There has been some disappointment but I think they will have good cash flow with increased dividend of NPAT % as indicated by them already. The Otahuhu land sale will generate some $, they still have 25 million to spend on the share buy back and although I don't anticipate a stellar announcement on Monday I think it will have some benefit for the SP. I have been through the last 6 months operational data and it isn't great but sales and cost of generation are still looking reasonable despite customer numbers. One of the unknowns is the cost of the Origin split, perhaps a blowout??

My previous thoughts haven't exactly been right but a lot of the weakness comes down to the state of the market and perhaps those withdrawing their money in anticipation of a bear market. Either way I look at it, CEN seems a reasonably good buy if things come out smelling of roses Monday ;)

Results season about to kick in which will impact on the sentiment of the market even more.....

[trader_jackson]

My small input on CEN: although they have some good plants, dividend won't be rising anytime soon (unfortunately) and continued, high customer losses will continue... (they are the biggest loser by an absolute blue mile over the past few years with very little sign of this turning around)...

Disclosure: never touched

[sb9]

My small input on CEN: although they have some good plants, dividend won't be rising anytime soon (unfortunately) and continued, high customer losses will continue... (they are the biggest loser by an absolute blue mile over the past few years with very little sign of this turning around)...

Disclosure: never touched

Fair enough, I'm a glass half full kinda guy and feel it can only get better from here (hopefully).

I'm not picking a great result, however there'll be an element of surprise in their commentary, just my 2 cents worth.

[sb9]

https://nzx.com/companies/CEN/announcements/277564

Looks like Perpetual been accumulating since late Dec last year and they begin to have substantial holding of 6% from 9th Feb, same day when there was huge trading volume of close to 7mln shares.

I'm sure they better things....

[xafalcon]

https://nzx.com/companies/CEN/announcements/277620

[winner69]

https://nzx.com/companies/CEN/announcements/277620



What you think falcon - good or bad or just so so

Does heaps more cash flow this year mean bigger dividends?

[sb9]

The current period payout is 111% of underlying profit. And am sure we can expect bigger dividends in future based on CEO's commentary. In another announcement today they said to have sold the Otahuhu power station land to stonehill property.

https://nzx.com/companies/CEN/announcements/277600

I think we can expect better returns to shareholders as they become more leaner and efficient.

[xafalcon]

What you think falcon - good or bad or just so so

Does heaps more cash flow this year mean bigger dividends?

I am still reading the report, but I'm not liking it so far (not hating it either, say 4/10). Customer churn and switching incentives seems to be an ongoing feature of the retail consumer market. CEN did flag falling customers in November so not a surprise. But energy prices falling for 3 consecutive quarters isn't flash

[xafalcon]

IMO it's not a good report. FCF seems to be the only rising indicator. And a 7% reduction in C&I sales is a huge decrease

Potential flagged for capex if genesis doesn't keep their rankines burning beyond 2018.

But without knowing the long term situation with Tiwai Pt, there must be a significant element of uncertainty in forward projections

Interesting to note that Tiwai closure would not supress the need for more generation in the north island from 2019 due to HVDC link running at maximum. Perhaps it would make sense to add further transmission capacity into this vital link sooner rather than later

Disc - I hold this stock

[workingdad]

I think its pretty much in line with anticipations. I am happy to see the Otahuhu land sale deal and this will further increase FCF. The customer churn is an issue and they don't seem to be doing a lot about it, the other companies are offering tempting sweeteners and more aggressive marketing but at the end of the day many will be happy to move from one to another every year to get those deals. Perhaps CEN just realises on a cost vs benefit ratio its not advantageous?

Market doesn't seem too phased by it, be interesting to watch the SP in the next couple of days. Positive day mostly across the board so far so perhaps CEN caught up in that. I still think all in all they are a buy for now and have been oversold.

[sb9]

Talking to a colleague at work during lunch time who mentioned they've switched their power supply to Contact last week and did say they got good sweeteners with the deal.

While it may take time to gain more customers, I do think they're on right path and with last year's worst behind them (incl Origin sell down) they can focus on their core business.

[Mickey]

While it may take time to gain more customers, I do think they're on right path and with last year's worst behind them (incl Origin sell down) they can focus on their core business.

Agree sb9. With such a low barrier to churn, pricepoint is primarily the only thing they can compete on. Denis Barnes states in his report: "I remain confident that our focus on becoming a truly customer inspired business will deliver improvements in the next six months and the years ahead".

With the improvement of their CRM and Billing Systems then they should have better data, which will aid their ability to develop improved predictive churn models to identify at risk customers and put retention programmes in place. This combined with customer aquisition campaigns to winback old customers and acquire new customers should slow the rate of decline and hopefully translate into an increase in the customer base further on down the track.

Time will tell....

[horus1]

A firm called Flick energy is saving me 20%, and has been for 6 months. It has a lower , transparent cost structure not like the established , big retailers. That is hard to beat.

[fish]

[QUOTE=Mickey;607295]Agree sb9. With such a low barrier to churn, pricepoint is primarily the only thing they can compete on. Denis Barnes states in his report: "I remain confident that our focus on becoming a truly customer inspired business will deliver improvements in the next six months and the years ahead".



For sometime now they have been focusing on getting the right customer-those who spend big on electricity and pay their bills on time-ie companies and people who pay on time.So good price for these customers.
Their costs have fallen a lot more than anyone could have predicted.Cheaper fuel and cost to generate as well.The right action at time of low prices.

Hence increase in free cash flow which I really like.

I really dont feel they are getting the credit they deserve.

[Snoopy]

IMO it's not a good report. FCF seems to be the only rising indicator. And a 7% reduction in C&I sales is a huge decrease


From p20 of the powerpoint presentation.

"1H16 sales volume down 291GWh to 4,026 GWh" (down 7.2%).

This seems to be the decrease over all customers, (not just Commercial and Industrial).

"• M(ass) M(arket) volumes reasonably stable, although average customer numbers down 10,000. Average usage per customer increased 2%
• C&I sales down 276 GWh driven by decision not to re-sign some lower priced customers."

The above is what you are referring to xafalcon. It is the same as the total 291 GWh reduction in all sales further up on the same page.

Looking at the last monthly generation report. November 2015 C&I sales were 315GWh. November 2014 C&I sales were 380GWh. That is a 17% reduction for that one month YOY! However, given they are talking about lower priced customers, they may have been making very little money from these contracts.

"C&I electricity netback up $1/MWh reflecting expiry of lower priced contracts"

Underlying mass market sales volume is up 2%, which I found encouraging.

My main surprise in the report was the lack of imputation of the divdend. Dividend of 11cps, but only 7cps is imputed. In post tax terms, we are getting quite a big cut in the net dividend,

11cps (partially imputed)
= 7cps (fully imputed) +6cps (not imputed)
= 7cps + 0.72(4cps)
= 9.88cps

This is a net reduction of 10%, even as the 'headline' figure is unchanged.

Also there was a larger hit than I expected from the Otahuhu closure: $223m! Seems really high when they are trumpeting the sale of the Otahuhu prime Auckland development land to Stonehill Property Trust, an entity of Euroclass Design and Build for NZ$30 million!

As for
"taking an equal share in the proceeds of the sale of plant and equipment onsite",

What is that all about? What do Auckland property developers know about internationally marketing used gas turbines? Seems a really odd task to outsource!

SNOOPY

[xafalcon]

Page 20, top right "Electricity sales volume, down7% due to lower C&I sales". They are saying the drop is "due to lower C&I sales". That's how I read it anyway

Page 4 reads badly (all metrics deteriorate [compared with pcp?? hard to say since they don't note what the comparitor actually is]) with the exception of FCF

Imputation credits all used up for the special and final dividends, and perhaps some tax pre-paid to fully impute final dividend?? Partial imputation seems to be the way of the future for the generators. But yes, an effective reduction in dividend value to shareholders

Page 8 top slide is a worry for all generators, but I assume it incorporates the switching incentives being offered

Page 21 says Net 10,000 customers lost in 1H2016. Churn above market average (not sure if this is relative or absolute %). Cost to service rising. Bad and doubtful debt increased over pcp. So fewer customers, churning frequently, costing more to manage, and more bad debts. Not good at all

No idea why they weren't buying-back shares last week, when they were prepared to pay 10% higher price a month or two ago. Makes no sense at all

The outlook is crystal ball gazing until the situation with Tiwai Pt is resolved with a long therm contract.

It will be interesting to see the reports for the other generators to compare

[workingdad]

That's the negative..... on the flip side, expenses in IH are the lowest they have been in the last 5 years, FCF is the highest-

FCF last 5 IH years FCF cps 12.2, 17.6, 16.8, 22.2, 27.3

Generation costs are down over 10% from 37 to 33per MWh.

The Otahuhu land sale adds 30 million.

I'm not saying its great, just saying weighing it all up there is some good :)

[sb9]

https://nzx.com/companies/CEN/announcements/277702

There we've it guys, resumption of share buy back programme stating from today.

From the announcement:

Contact Energy Limited (Contact) announces that, as stated in its interim financial results, it will resume its share buyback programme from today. Contact has acquired 12.5 million shares for NZ$62 million since announcing an on-market share buyback on 15 October 2015. The announced buyback was for up to 25 million ordinary shares for an aggregate purchase price of up to NZ$100 million.

[macduffy]

Right. Suspension of the buy back recently would have been to remove any suggestion of "unfair trading" prior to the profit announcement.

[xafalcon]

I wasn't aware that their share buy-back programme had been suspended (no market announcement was made AFAIK), and I didn't see anywhere in their interim results presentation that it will resume from today either......

Or did I miss these two jems

[Hoop]

http://i458.photobucket.com/albums/qq306/Hoop_1/CEN%2015022016.png (http://s458.photobucket.com/user/Hoop_1/media/CEN%2015022016.png.html)

[horus1]

Great chart ,Thanks. The recent announcement didnt inspire me . Shouldnt have bought any.

[macduffy]

I wasn't aware that their share buy-back programme had been suspended (no market announcement was made AFAIK), and I didn't see anywhere in their interim results presentation that it will resume from today either......

Or did I miss these two jems

Mentions "continuing" the buy-back.

[xafalcon]

Mentions "continuing" the buy-back.

Quite right, I counted at least 3 mentions of "continuing" or "completing" the buy-back in the report

But "resumes" implies it had previously been stopped/paused/suspended. And I wasn't aware that this had happened. There doesn't appear to be any market announcement that it had been paused

Being an on-market buy-back, there should not have been any limitations around timing of the buys

[Joshuatree]

Craigs latest.result in line with expectations.retail discounting hurting performance.still too early to tell if new customer focused strategy is working. Keeping target price of $5.60 ,buy.

If tiwai wasnt an uncertain cloud hanging over the gentailers would not orgs like the canadian pension plan be lapping these up?

[macduffy]

Quite right, I counted at least 3 mentions of "continuing" or "completing" the buy-back in the report

But "resumes" implies it had previously been stopped/paused/suspended. And I wasn't aware that this had happened. There doesn't appear to be any market announcement that it had been paused

Being an on-market buy-back, there should not have been any limitations around timing of the buys

On-market, yes, but buying shortly before a profit announcement could be (mis?)construed as disadvantaging sellers through insider knowledge of what that announcement would contain. I don't know if there is any NZX rule on the matter but it seems to have at least been a convention not to buy-back when an announcement is imminent.

[sb9]

As mentioned before, I thought it might've been one of rules by NZX somewhere in their rule book for a company to forbid buy-back at a certain period before the results are due, similar to how directors and senior management are forbidden to buy few weeks before the results are due to be out.

However I agree on that point that there is no mention to that affect that the buy-back is suspended for a period of time, not sure if a company is obliged to make an announcement to that affect.

[horus1]

It usually does if it is keeping the market informed. They didn't.

[biker]

In a time of M&A how would a CEN/TPW merger fit?

[fish]

Craigs latest.result in line with expectations.retail discounting hurting performance.still too early to tell if new customer focused strategy is working. Keeping target price of $5.60 ,buy.

If tiwai wasnt an uncertain cloud hanging over the gentailers would not orgs like the canadian pension plan be lapping these up?

I have come to think of this as a red herring.

[Hoop]

I have come to think of this as a red herring.
Nice play on words, Fish:cool:.. you have brightened up my day :D

[Joshuatree]

Longterm maybe
This from Craigs

"Why keep Tiwai around? due to the fear of short term profit decline

We highlight that Tiwai represents less than 7% of current industry revenue, and that if we re move the thermal costs associated with “marginal load” then it is actually costing the industry so why does it remain? While one consideration are the costs associated withredirecting load if Tiwai closed, we believe that the core driver of behaviour is the short-term negative profit impact of the rebalancing of generation supply and retail share. This reconfiguration period will likely see profits fall materially , and, even though we would expect them to recover, the industry’s management and investors are never content to take short-termpain for longer-term certainty and gain. Not to be underestimated, there is the uncertainty of howan 84% renewable market pre closure moving to a 94% renewable market post closure willperform. "

[winner69]

There is a hand book somewhere. Just ask Contact for it I don't hint they have to say if hey have stopped/paused or whatever unless they decide to stop full stop and buy no more. After all they said they would buy $x during the remainder of the year - doesn't have to be every day or every week.

Here is what they said when announcing the buyback

The key principles under which the buyback will be executed are summarised
below:

o Shares purchased by Contact will be cancelled on acquisition, and the
number of shares on issue reduced accordingly.
o Contact will only buy shares through NZX's Clearing House during normal
trading hours (i.e. there will be no off-market transactions).
o Contact will adhere to an established set of principles that will ensure
the buyback does not distort the market price for shares.
o Contact will keep shareholders fully informed and monitor compliance with
its various information disclosure requirements throughout the buyback
period.

[xafalcon]

Unless the collective generators grasp the upcoming opportunity (where new capacity needs to come on-line in 2019) and either tie Rio Tinto into a long term contract at reasonable rates (10+ years, take or pay) or decline to supply the smelter from 2019, they will forever be held to ransom evry 1-2 years. This is a once a decade opportunity where the generators have the upper hand in negotiations with Rio

I am a shareholder in two generators, and feel the uncertainty surrounding the smelter has heavily influenced (depressed) SP's. The Tiwai electricity is the lowest priced in NZ, so must be returning the lowest margin. As a shareholder I could tolerate a suspension of dividend payment for (say) a year, as I believe the SP would increase and probably cover the lost dividend income

From the half year report, it seems that additional capacity is needed on the HVDC to move more power north. Why don't the generators start a very public combined upgrade/capacity increase feasibility study to really push Rio Tinto into a negotiating corner. If they close up shop, there is reportedly a $500M remediation bill waiting for their shareholders to cover - even more reason to accept a higher priced, longer term power supply contract

[troyvdh]

Did some really hi tech research today...after developing a sound Business plan..hired a PC Company et al about CEN.

Im lying...today in one of our rentals a sweaty self employed sparky arrived to connect the flat...to CEN...I asked (because he does this all day) which was the favourite company ..he said for at least the past 3 weeks virtually 95 % of folk were choosing/swapping to CEN because its cheaper.
His opinion was that no one liked Meridian ...cause it was mostly gummit owned and too expensive.
Great research eh.Cheers

[sb9]

Big turnover day, 3.4 mln shares traded so far.

[workingdad]

Big turnover day, 3.4 mln shares traded so far.

and only 300,000 shares were CEN buy back......

[sb9]

and only 300,000 shares were CEN buy back......

Yeah noticed that, looks like some instos accumulating before it goes ex-div in couple of days.

[sb9]

Goes ex-div Monday 29th, would expect bit of accumulation today from large players to get in the divvy...

[workingdad]

Goes ex-div Monday 29th, would expect bit of accumulation today from large players to get in the divvy...

Or a drop for those not keen on the divvy not being fully imputated....

[workingdad]

Ex divy and holding SP..... I had anticipated more weakness over the last few days trading than has happened.

The buy back picked up quite a few before going ex divy which is good, even 15 million shares at 10c a share is another $1.5million in the coffers. The Otahuhu land sale as well, perhaps a good year for CEN is on the cards.

[sb9]

Ex divy and holding SP..... I had anticipated more weakness over the last few days trading than has happened.

The buy back picked up quite a few before going ex divy which is good, even 15 million shares at 10c a share is another $1.5million in the coffers. The Otahuhu land sale as well, perhaps a good year for CEN is on the cards.

I'm picking the sp will break $5 in time for FY results due out in Jul/Aug.

[workingdad]

I'm not making predictions anymore having been proven wrong on more than one time over the last 6 months.

I do think a lot of that is dependent on extrinsic factors as well.

In saying that Tiwai doesn't worry me, even if it closes the SP has already been hammered over this and in my opinion won't have the negative impact many think.

I have bought a fair amount of CEN and I believe I will do well out of it this year but only time will tell ;)

[Joshuatree]

My ultra quick pass by of Craigs comprehensive research on Tiwai and its effects on the Gentailers is.... much ado about nothing in the medium /longer term."we highlight that Tiwai represents less than 7% of current industry revenue".... so i think you're onto a goodly zig whilst the mkt doth zaggeth. buto DYOROh

[workingdad]

About $17 million left to spend on the buy back.

They have purchased 4.7 million shares since the resumption of the buy back.

Maybe that explains why the SP has held since they went ex divvy at the start of the week.

[workingdad]

I have a question, does the share buyback need to be completed by the end of the financial year or do they even need to buy back the amount indicated ie if they have 17 million left to spend on buy backs this month alone I would predict a SP rise perhaps.

[BlackPeter]

I have a question, does the share buyback need to be completed by the end of the financial year or do they even need to buy back the amount indicated ie if they have 17 million left to spend on buy backs this month alone I would predict a SP rise perhaps.

No requirement for them to spend all the money they put aside for buy backs. Would be as well quite bad for share holders, if they would be required to buy (and at any price), but I suppose the current SP is sort of inviting ...

Discl: holding ... lots.

[Omega]

I have a question, does the share buyback need to be completed by the end of the financial year or do they even need to buy back the amount indicated ie if they have 17 million left to spend on buy backs this month alone I would predict a SP rise perhaps.

Contacts financial year is 30 June so they have plenty of time to make their $100m target. With the share price at current levels, I would prefer they throw more of their 2H free cashflow and increase the level of buyback for this FY.

[workingdad]

Thank you for that.

I'm holding a decent amount as well but mostly bought it at low levels. At least the divvy this month brings some joy :)

[sb9]

No on-market buy back y'day by the looks, as there was no notification issued.

The sp holding okay, just struggling to break through the 4.50 mark. Guess it'll be long time before drinks.

[sb9]

Another attempt to push through 4.50 mark has been squashed again.

[xafalcon]

Another attempt to push through 4.50 mark has been squashed again.

Wait for Tiwai Pt contract to finalise and all the generator stocks will get a lift

Market sentiment against CEN is disproportionately high IMO.

If CEN invested in a PR firm to review their market release text before publishing it, they would be half way there. Often the way something is said effects the way the message received. CEN have used some poor language over the past 3 months

[sb9]

Wait for Tiwai Pt contract to finalise and all the generator stocks will get a lift

Market sentiment against CEN is disproportionately high IMO.

If CEN invested in a PR firm to review their market release text before publishing it, they would be half way there. Often the way something is said effects the way the message received. CEN have used some poor language over the past 3 months

True, seem as though the Origin hangover is still haunting them both from selling pressure and old PR habits.

[sb9]

Punters warming upto this one in light of low interest environments perhaps?

Good push through today on back of large volume too...

[workingdad]

Punters warming upto this one in light of low interest environments perhaps?

Good push through today on back of large volume too...

problem is every time they show any increase in SP the profit takers sell out pushing it back down so I am not holding my breath....

[xafalcon]

problem is every time they show any increase in SP the profit takers sell out pushing it back down so I am not holding my breath....

I'm guessing you are a long term holder in CEN for the dividend stream by the way you refer to "profit takers", so SP is somewhat irrelevant for you. Remember you don't make a loss (or a profit) until you actually sell your shares - at which point you also become one of those "profit takers" you refer to......

[workingdad]

I'm guessing you are a long term holder in CEN for the dividend stream by the way you refer to "profit takers", so SP is somewhat irrelevant for you. Remember you don't make a loss (or a profit) until you actually sell your shares - at which point you also become one of those "profit takers" you refer to......

haha - indeed ;)

Not long term but have bought in at various levels increasing holdings substantially the last couple of months which I had anticipated to do better but the last couple of months have had good gains, preceding couple of months not so good.

Nothing wrong with the profit takers - buying in at the last bottom and selling at 4.60 with an 11c divvy is something to be happy about. Just stating the obvious and cant really see the SP rising much anytime soon without an announcement that bolsters it. Seen it be subject to some big volumes every time it starts looking like climbing but that's the game we play.

I am happy I held on to the last lot I bought in at particularly bearing in mind it has increased since going ex divvy.

[sb9]

Might see the 5 in front of sp sooner by the looks...:)

[workingdad]

Operational data out this morning - good to see they have actually added customer numbers, up 500 from last month. Overall volumes up but so was the generation costs.

[fish]

Operational data out this morning - good to see they have actually added customer numbers, up 500 from last month. Overall volumes up but so was the generation costs.

Demand nationally is creeping up so will be good for all power companies.
CEN having hydro and geothermal must be alow cost generator.
/sounds like the lakes are high for time of year and they could increase hydro at no extra cost.
Still very undervalued

[Harvey Specter]

Still very undervaluedBuy back must be nearing completion which must be supporting the shareprice to some extent?

[NZSilver]

Possible for another buy back. CEN is the black sheep at the moment in terms of generators. Most are well up in last 6 months. Seems to be moving now but as others have said - how long for?

[sb9]

Possible for another buy back. CEN is the black sheep at the moment in terms of generators. Most are well up in last 6 months. Seems to be moving now but as others have said - how long for?

Seems as though there are no buy-backs from Friday last week until y'day. Which only means that sp is holding on its own merit with possible increased interest from punters.

[sb9]

Few more days of gain of few more cents and bingo back into black and no more reds in my portfolio :t_up:

[sb9]

$5 soon here we come....

[workingdad]

Yay, some good news on CEN. :t_up:

I doubt many use a chart with only a couple of weeks of increase but the 10 day MA is above the 200 day MA, give it another 2 weeks for the 30day MA to go above it and perhaps there will be some added interest in it from the chartists. I have had some frustrations with CEN this year but it is great to see the tide turn and more green numbers on most of the levels I bought in at.

[sb9]

Yay, some good news on CEN. :t_up:

I doubt many use a chart with only a couple of weeks of increase but the 10 day MA is above the 200 day MA, give it another 2 weeks for the 30day MA to go above it and perhaps there will be some added interest in it from the chartists. I have had some frustrations with CEN this year but it is great to see the tide turn and more green numbers on most of the levels I bought in at.

In between those charting, lookout for the divvy coming our way tomorrow...

[workingdad]

$5 it is :t_up:

Lets see if it holds but either way its been a good few weeks.... finally

[sb9]

$5 it is :t_up:

Lets see if it holds but either way its been a good few weeks.... finally

Hoping it'll stay above that $5 mark this time. And this stock in my portfolio is back in black :t_up:

[workingdad]

I took a bit of a risk with more of my portfolio tied up in it than I was comfortable with when the SP got so low and its paid off - maybe an element of luck but there was some considered calculations in it but to be honest I hadn't expected the turnaround that CEN has had.

I put the sell order in that's within the current range not due to thinking it wont still have room to increase but more wanting to cash up before the next stage of a fickle market takes over after being bewildered at the battering the start of the year brought on, distant memory for many but I just wonder if another episode might be on the cards again and if so I can take advantage of it by coming back in at the right time. If I am wrong I miss out on some gains but having locked in gains of 10% of late I am happy to take a step back and see where the cards land.

[workingdad]

Counting up they must be into the last one million dollars to go on the share buyback.

Wonder how the price will hold up.

[troyvdh]

Giday ..I'm sure that this issue has been arisen before ...apologies...On the CEN website it states something along the lines that the share buyback will be monitored to ensure that same will not effect the SP of CEN.
I'm not complaining but how can you by back 12m (?) shares and dissolve same and not effect the SP....has anyone done the numbers..cheers troy

[Hectorplains]

Giday ..I'm sure that this issue has been arisen before ...apologies...On the CEN website it states something along the lines that the share buyback will be monitored to ensure that same will not effect the SP of CEN.
I'm not complaining but how can you by back 12m (?) shares and dissolve same and not effect the SP....has anyone done the numbers..cheers troy

" Contact will adhere to an established set of principles that will ensure the buyback does not distort the market price for shares."

Yes, the buyback should affect the share price, this has to be undertaken in a measured and reasonable manner.

[sb9]

Counting up they must be into the last one million dollars to go on the share buyback.

Wonder how the price will hold up.

https://nzx.com/companies/CEN/announcements/280326

There we've it, buyback finished. On that note, I'm out as well.

[workingdad]

Yep, I did too this week but more due to wanting to shed my buy and hold shares, might come back in but happy to sit back and see how things unfold. I still think that CEN is undervalued and looking ahead anticipate a good end of year report if they can increase customer base.

[sb9]

Yep, I did too this week but more due to wanting to shed my buy and hold shares, might come back in but happy to sit back and see how things unfold. I still think that CEN is undervalued and looking ahead anticipate a good end of year report if they can increase customer base.

For me, the return isn't commensurate with capital employed. Plus there is increased competition from small retailers who've lower costs compared to the big ones.

Its getting big overweight for my investment objectives, hence needed to release the capital.

[Hectorplains]

I still think that CEN is undervalued and looking ahead anticipate a good end of year report if they can increase customer base.

https://www.nzx.com/files/attachments/233927.pdf. Electricity numbers up by 1K on the month, still down 11K on the year. Heading the right way though! Gas customer base static. They've undertaken a heavy advertising load to pretty much hold the status quo.

Disc: Holding but thinking...

[sb9]

https://www.nzx.com/files/attachments/233927.pdf. Electricity numbers up by 1K on the month, still down 11K on the year. Heading the right way though! Gas customer base static. They've undertaken a heavy advertising load to pretty much hold the status quo.

Disc: Holding but thinking...

Not much happening here me thinks, the sp has stuck in that 4.95-5 range for a while now. I'm picking it might start to move on some positive announcement from the company now that buy back has ended.

[kelfy]

$5 it is :t_up:

Lets see if it holds but either way its been a good few weeks.... finally



Keep CALM
and
Stay Above
$5

[NZSilver]

Still undervalued in my books.

[Hectorplains]

Still undervalued in my books.

Someone's listening, up 10c /2% on the day. I doubt that this Indian Summer is doing them any favours.

[sb9]

Someone's listening, up 10c /2% on the day. I doubt that this Indian Summer is doing them any favours.

Looks like shore buying into all big names on NZX, they're are all up barring one or two.

[kelfy]

Still undervalued in my books.

Would be more reasonable at $6

[RTM]

Its good to see that Contact SP has held up well even though the company is not currently purchasing its own shares.
Hopefully it appreciates a bit more from around its current level.

[macduffy]

Interesting comment from Brian Gaynor on the merits - or otherwise - of share buybacks. Based on American research but with relevance to the NZ companies, including CEN, which have/are buying back.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11631082

[GTM 3442]

From the Brian Gaynor article:

"Last year Moody's downgraded McDonald's unsecured debt because of plans to increase its borrowings, partly to fund share buybacks."

That seems like a fairly clear-cut case of insanity to me. Could someone kindly explain (slowly) what I am not understanding.

[Hectorplains]

From the Brian Gaynor article:

"Last year Moody's downgraded McDonald's unsecured debt because of plans to increase its borrowings, partly to fund share buybacks."

That seems like a fairly clear-cut case of insanity to me. Could someone kindly explain (slowly) what I am not understanding.

The 'logic' is around share price being lower than the company feels is warranted (and it is therefore a good investment) and/ or that the cost of borrowing being so low currently that a buy back offers holders the best means of utilising free cash flows ( as opposed to un-imputed dividends etc.)

[Snoopy]

Interesting comment from Brian Gaynor on the merits - or otherwise - of share buybacks. Based on American research but with relevance to the NZ companies, including CEN, which have/are buying back.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11631082

I didn't quite understand the point of the article. Gaynor points out the companies in the US buyback a lot more shares in proportion than NZ companies do. Many of these buybacks benefit management in the near term, but could be detrimental to companies in the longer term due to raised gearing. But NZ companies do not buy back nearly so many shares and NZ management does not benefit in the way their US counterparts do. So buybacks are not an issue here?

Maybe I can complete the circle? Gaynor identifies Contact Energy as doing the most buybacking on the NZX. And the Tim Hunter article I reference below shows that Contact management are cynically looking to benefit themselves by doing so!

From my post 1070, on 10th November 2015 on this thread:



Did you see the 'Hunters Corner' article in the NBR? The short summary was normally unexcisable options became activated when Origin sold out. Unfortunately for those that had the options (senior managers) they are out of the money, but only just. By doing an on market buyback, managment can inch the share price higher into the $5.20 plus range, making the options viable. Of course, if the options were then exercised this would reverse much of the value of the on market buyback for Mum and Dad shareholders!


SNOOPY

[Hectorplains]

I didn't quite understand the point of the article. Gaynor points out the companies in the US buyback a lot more shares in proportion than NZ companies do. Many of these buybacks benefit management in the near term, but could be detrimental to companies in the longer term due to raised gearing. But NZ companies do not buy back nearly so many shares and NZ management does not benefit in the way their US counterparts do. So buybacks are not an issue here?

Maybe I can complete the circle? Gaynor identifies Contact Energy as doing the most buybacking on the NZX. And the Tim Hunter article I reference below shows that Contact management are cynically looking to benefit themselves by doing so!

From my post 1070, on 10th November 2015 on this thread:



SNOOPY

Althou' the SP isn't at $5.20 yet!

It's hard to see what impact, if any, that the buyback has had on the share price. Even in the midst of the buyback it retreated to a low of $4.38 (a 5 year low, at that.)

The share price has remained over $5 post buyback, and on good volumes. However; all the gentailers have enjoyed a run of late. It's not like Contact's share price has outperformed.

[macduffy]

I didn't quite understand the point of the article. Gaynor points out the companies in the US buyback a lot more shares in proportion than NZ companies do. Many of these buybacks benefit management in the near term, but could be detrimental to companies in the longer term due to raised gearing. But NZ companies do not buy back nearly so many shares and NZ management does not benefit in the way their US counterparts do. So buybacks are not an issue here?

Maybe I can complete the circle? Gaynor identifies Contact Energy as doing the most buybacking on the NZX. And the Tim Hunter article I reference below shows that Contact management are cynically looking to benefit themselves by doing so!

From my post 1070, on 10th November 2015 on this thread:



SNOOPY

I think the point of the article was that share buybacks can have a downside and that they don't all benefit all shareholders. A bit of a "caveat emptor" from one with a wealth of investment experience and still involved in the industry.

[percy]

In a perfect world we would see companies like Ebos, growing from acquisition after acquisition,making sure each acquisition is earnings accretive.
However there are too many companies such as FBU and WHS who go from one disastrous acquisition to the next.
So share buy backs are a good discipline for the undisciplined .
Instead of looking at the US, Brian Gaynor could have written a more relevant article had he quoted NZ companies.
HBY is a good example of what a company should be doing.Instead of making another poor acquisition, they would be better to do a decent share buy back,and sell off their non core businesses, and concentrate on their excellent motor/equipment divisions.The market would positively rerate them very quickly.

[Harvey Specter]

I think the point of the article was that share buybacks can have a downside and that they don't all benefit all shareholders. A bit of a "caveat emptor" from one with a wealth of investment experience and still involved in the industry.Yes. But at least CEN was very clear when they announced theres that they were generating excess cash and there were no suitable investments in the near term. I assume they have used all IC's so this is the most efficent.

On that basis, I think most would agree it was a reasonable course of action, if not the best. If they were increasing borrowing to do so, or forgoing investment opportunities, the situation would be different.

[Fisherking]

In a perfect world we would see companies like Ebos, growing from acquisition after acquisition,making sure each acquisition is earnings accretive.
However there are too many companies such as FBU and WHS who go from one disastrous acquisition to the next.
So share buy backs are a good discipline for the undisciplined .
Instead of looking at the US, Brian Gaynor could have written a more relevant article had he quoted NZ companies.
HBY is a good example of what a company should be doing.Instead of making another poor acquisition, they would be better to do a decent share buy back,and sell off their non core businesses, and concentrate on their excellent motor/equipment divisions.The market would positively rerate them very quickly.

I believe HBY are tryingto divest their shoe business

[Fisherking]

Yes. But at least CEN was very clear when they announced theres that they were generating excess cash and there were no suitable investments in the near term. I assume they have used all IC's so this is the most efficent.

On that basis, I think most would agree it was a reasonable course of action, if not the best. If they were increasing borrowing to do so, or forgoing investment opportunities, the situation would be different.

Yes, Also there's not as many opportunities for the utilities to grow their business as there is for others for example technology companies.

[Hectorplains]

Yes, Also there's not as many opportunities for the utilities to grow their business as there is for others for example technology companies.

Really? That's debatable.

[GTM 3442]

The 'logic' is around share price being lower than the company feels is warranted (and it is therefore a good investment) and/ or that the cost of borrowing being so low currently that a buy back offers holders the best means of utilising free cash flows ( as opposed to un-imputed dividends etc.)

Thanks Hector.

But, as a shareholder, I still find it strange that the company should pay someone else to stop being a shareholder, rather than just paying me!

No, scratch "strange", I stand by "insane".

[NZSilver]

Cen running up quick. Glad I bought for the first time for the yield at $4.60. Now I'm getting some nice capital gains. I believe this company should be sitting around $5.80- $6. Only worry has been loss of customers but that looks to be coming right.

[Jantar]

Nice lift in price today and at good volume. Even if most of the sales are off market.

[NZSilver]

Yeh really good volume. Possibly accumulation by a fund? Anyway I guess there is no point speculating - just enjoy the ride and divs

[NZSilver]

CEN is playing catch up!

[NZSilver]

Can someone give me a bit more knowledge and education around reading operational data? and what the factors mean etc?