CHI - Channel Infrastructure Ltd (NZR)

[golden city]

it is a indicative eps for next year i think more realisticly

[bunter]

Hi, sorry not too sure how you have calculated your EPS. The $8/bbl and exchange rate is only for the last 6 months of the year. The first part of the year ran at a loss due to major planned shutdown and poor margins.

I used the table on p 17 here,

http://www.refiningnz.com/media/92331/analyst_presentation_full_year_results_2013.pdf



Then divided by 330m shares on issue (though I see there seem to be only 312m on issue currently).

The '0' figures reflect a negative result underwritten by the major shareholders and written off annually.
But we seem to be well clear of that for now.

So yes, it's a forecast for a year's earnings if the figures were to apply for a year.

TMH, according to my notes on the report linked above (excerpt below), should boost earnings by 20cps - say 14c to the NPAT.

So if your estimates held for a year, and TMH goes as forecast, EPS would be 47cps.

And $5 share price?

"Increase in capacity of 3 million barrels p.a.
• Estimated uplift in margin of US$1.10 / bbl

through improved energy performance and
product yields
• The above leads to an increase in operating

cashflows of ~$60m p.a.; processing fee increase of~$70m less ~$10m operating cost "

[dingoNZ]

Upgraded guidance NPAT of $9.5-10.5m. Processed 700,000 more barrels more than expected and at favorable exchange rates, great stuff from NZR.

The Gross Refinery Margin1) (GRM) for the period was USD 9.98 per barrel with a throughput of 7.1 million barrels. This delivered a Processing Fee income of NZD 63.9 million, enabling the Fee Floor2) to be completely paid back to customers. The average exchange rate was USD/NZD 0.78.
For the full year we achieved a GRM of USD 4.96 per barrel with a throughput of 39.7 million barrels, ahead of the updated guidance of 39 million barrels given in the interim results announcement. Processing Fee income was NZD 168 million, 5% ahead of the 2013 Processing Fee.
Singapore complex margins were healthy and averaged USD 4.48 per barrel for November/December. Refining NZ’s margin uplift over Singapore complex margins of USD 5.50 per barrel for the period was again higher than the normal range of USD 3 - 4 per barrel, driven by the 2014 margin initiatives, excellent operational performance and favourable crude prices. The crude price movements included an ongoing narrow Brent-Dubai spread and reduced market premia for crude oil over the Brent and Dubai benchmark prices.
We saw crude prices decline further to end the year at around USD 50 per barrel. Lower crude prices improve our competitiveness against imported product due to lower inventory costs for our customers. At the current crude price of below USD 50 per barrel, Refining NZ is competitive at a GRM of USD 4.50 per barrel or better.
Appendix I shows further information on throughput, margin and refining income.
Historic Analysis
A five year history of Throughput, Margins and Processing Fees is attached as Appendix II and can also be found on the company’s website: www.refiningnz.com
1) Refining NZ’s Gross Refining Margin is defined as the typical market value of the products produced minus the typical market value of the feedstock used, expressed per barrel of feedstock used. The margin incorporates the cost of the hydrocarbon used for fuel and incurred as process losses.
2) The Fee Floor is the minimum Processing Fee due, for a calendar year, up to a maximum of NZD 126 million for 2014 (see Explanatory Notes for more detail).

[bull....]

Massive :t_up:

announement that is of the turn around in there business

https://www.nzx.com/companies/NZR/announcements/259880

[dodgy]

Massive :t_up:

announement that is of the turn around in there business

https://www.nzx.com/companies/NZR/announcements/259880


Its time to start concentrating on the reasons outlined in prior posts by various posters. This time next year or earlier circa $3+. Blue sky above.

[bull....]

full year EPS of 3.5cps and a PE of 70+ is hardly anything to crow about from a well established company

Its what the next yr looks like could be massive, work out what dec throughput is times 12 at the grm and you can get a simplistic picture of the upside - throughput should move much higher as it is better to refine here

[dodgy]

full year EPS of 3.5cps and a PE of 70+ is hardly anything to crow about from a well established company

I agree Snaps, but, all the factors point to improvement e.g exch rate and expansion etc. I suggest that when a div is reintroduced the sp will get a decent push. Maybe this won't happen this time but pretty confident next 6 monthly or at worst 2016 (Dec 15) release. Hence my optimism.

[Schrodinger]

This could go north of $3 for next earnings period as everything is in their direction atm. Based on historical earnings, oil price, exchange rates and performance improvements.

The downturn has helped them become more efficient and this should drive through to profitability and a reinstatement of dividends.

[bunter]

Thanks!

My eps matrix seems to indicate 33cps NPAT.
Add to that the impact of Te Mahi Hou, and all the improvements that seem to be happening under the new management.

Good recovery story (some, but not all of which has already been accounted for in the share price).





ex rate

EPS matrix


margin$/bbl
70
75
80
85


4
0
0
0
0


5
10
6.7
4.5
0


6
19
16
13
10


7
28
24
21
17


8
39
38
33
29


9
47
42
37
32




Wrong again, like with HLG ... too conservative
Updated table



ex rate

EPS matrix


margin$/bbl
70
75
80
85


4
0
0
0
0


5
10
6.7
4.5
0


6
19
16
13
10


7
28
24
21
17


8
39
38
33
29


9
47
42
37
32


10e
55
50

45

40



The $10 margin figures are just an extrapolation.


Looks like:

- 45-50 c eps after tax for a full year operating on current margins and exchange rate (bolded figures).
- 65-70c eps after tax once TMH comes on board (later this year?) based on NZR's projections for TMH.

Hmmm.

[cdonald]

Wrong again, like with HLG ... too conservative
Updated table



ex rate

EPS matrix


margin$/bbl
70
75
80
85


4
0
0
0
0


5
10
6.7
4.5
0


6
19
16
13
10


7
28
24
21
17


8
39
38
33
29


9
47
42
37
32


10e
55
50
45
40



The $10 margin figures are just an extrapolation.


Looks like:

- 45-50 c eps after tax for a full year operating on current margins and exchange rate (bolded figures).
- 65-70c eps after tax once TMH comes on board (later this year?) based on NZR's projections for TMH.

Hmmm.
And we all know that Oil companies are screaming for cash at the moment so they are not going to sit too long on a profit without paying dividends. I wouldnt be surprised if the final profit announcement this year includes a surprise final dividend of a couple of cents. For those of you looking for yeild stocks, you wont find better.

[golden city]

what is the profit for nov and dec.., how you guys calculate?

[bunter]

20% div next year; value $8+? (http://www.sharetrader.co.nz/showthread.php?10063-10-Dividend-payers-for-next-year&p=526679&viewfull=1#post526679)

[cdonald]

20% div next year; value $8+? (http://www.sharetrader.co.nz/showthread.php?10063-10-Dividend-payers-for-next-year&p=526679&viewfull=1#post526679)

For an easy comparison, you might want to have a look at the annual report for 2008. Things have changed a bit since then but it was a high margin year. I would imagine that 2015 will be producing similar if not better results so we might see turnover of 400m and a profit of $175m giving a pretty good EPS. 2008 was blessed by a good margin and a declining NZD in the later part of the year. 2008 and 2015 are both years without Hydrocracker shutdowns. Will be nice to see what influence the new project has (if any) in this financial year. Dont forget that the pipeline itself generates 35m in revenue. This share has been underpriced for too long and with an EPS of 50+ cents it will remain underpriced for some time yet!

[bunter]

Thanks again cdonald. You seem to know a lot about NZR.

Yes it does look like a comparable year.

Much better economy just now. Bear market then / bull now.
Also it seems Post & co have made the plant more efficient, plus TMH to come.

All in all you'd expect the price to be HIGHER this coming year than in 2008.


From http://www.refiningnz.com/media/44707/annualreport08.pdf

NZR 2008 summary:
EPS 52c

Margin $11.3
Ex rate .48-.78 - say .63

Share price $5-$8
NZX50 4,000 - 2700, falling through the year (NZR generally held up well).

I did a spot of 'panic buying' yesterday, hitting the sellers, and got a lousy price, 2.49.
Am more-or-less fully loaded now.

I'm surprised how little reaction there has been, here and in the share price.
Summary:

NZR - comparison 2008 / 2015




2015

2008


EPS c
48e
52


Div c
?

45


Margin $11.3
10
11.3


Ex rate

0.78
0.63


Share price
2.57
$5-$8


NZ50
5672
4,000-2700


Tone
Bull
Bear

[bull....]

roughly based on those 2008 results then at current prices pe would be 6.5
75% payout ratio would be 25c - 30c div giving a yield of 9 - 10%

at $4 share price pe 10 yield 6.25% very rough and quick but shows potential upside if the year goes good and the wildcard is they do a bumper div to make up for the last few yrs of hardly anything

If they can lift throughput that would bump up revenue and profit big time
I noticed Z operations update and there fuel sales are well up which is a big thing for a petrol company so i dont think they have got more market share and it is more likely demand is up because of lower petrol price - more driving being done so extrpolated across all petrol companies this extra demand could provide the extra through put at nz refining?

[bunter]

roughly based on those 2008 results then at current prices pe would be 6.5
75% payout ratio would be 25c - 30c div giving a yield of 9 - 10%

at $4 share price pe 10 yield 6.25% very rough and quick but shows potential upside if the year goes good and the wildcard is they do a bumper div to make up for the last few yrs of hardly anything

If they can lift throughput that would bump up revenue and profit big time

.75*50c (say) = 37.5c

37.5c / 2.50 = 15% net or 21% gross dividend yield.

[Schrodinger]

roughly based on those 2008 results then at current prices pe would be 6.5
75% payout ratio would be 25c - 30c div giving a yield of 9 - 10%

at $4 share price pe 10 yield 6.25% very rough and quick but shows potential upside if the year goes good and the wildcard is they do a bumper div to make up for the last few yrs of hardly anything

If they can lift throughput that would bump up revenue and profit big time
I noticed Z operations update and there fuel sales are well up which is a big thing for a petrol company so i dont think they have got more market share and it is more likely demand is up because of lower petrol price - more driving being done so extrpolated across all petrol companies this extra demand could provide the extra through put at nz refining?

High throughput is almost guaranteed because it is currently more efficient to refine here therefore they should be very near full capacity?

[golden city]

very happy to hold ..., my intial target is around 3.70 ...got in early ..so provide a very good safeguard at 1.80

[bull....]

big drop in nzd/usd after RBNZ announcement is good for company

[bunter]

big drop in nzd/usd after RBNZ announcement is good for company

See above tables; add 5c to eps if sustained (and the fall looks like a strong move)

As if NZR needed any more good news.
Massively undervalued, (system value 8.63 - :blush:)

My #1 pick now.

[dodgy]

See above tables; add 5c to eps if sustained (and the fall looks like a strong move)

As if NZR needed any more good news.
Massively undervalued, (system value 8.63 - :blush:)

My #1 pick now.

Agree Bunter

[golden city]

looks good like it..

[cdonald]

every 1c drop is worth about $3m on the bottom line. The new project should be comissioned at the beginning of December so it wont have any financial benifits for this year but will impact on next year.

[bull....]

another near 1c fall in the nzd/usd again last night

[bull....]

http://www.reuters.com/article/2015/01/30/us-chevron-results-idUSKBN0L31IQ20150130?feedType=RSS&feedName=businessNews&rpc=408

Another oil major posted a nearly fourfold increase in there refining profits division

[bunter]

I posted this on the '10% plus dividend payers' thread a week or two ago (as a 20% plus payer) but have decided to revise for the 5c fall in exchange rate since, and post here.


Expected profit for the y.e. 31/12/14 is 3 cps.

Using the profit matrix here (http://www.refiningnz.com/media/92331/analyst_presentation_full_year_results_2013.pdf), and dividing by shares on issue gives the following EPS-AT table



ex rate

EPS matrix


margin $/bbl
70
75
80
85


4
0
0
0
0


5
10
6.7
4.5
0


6
19
16
13
10


7
28
24
21
17


8
39
38
33
29


9
47
42
37
32


10e
55
50
45
40




The bolded figures are the current ones.
Tailwinds for NZR include low oil prices, increased petrol consumption, high refining margins, low exchange rates, Te Mahi Hou expansion, and active management bringing in many efficiencies.
As noted above, Chevron's refining division just announced a fourfold increase in profits in the most recent quarter.

The expansion Te Mahi Hou supposedly comes online in Dec 2015 and by NZR estimates will add 14cps to NPAT.

Given current margin and exchange rates, and 5% inherent growth in earnings:





30/12/14
15
16
17
18
19
20
21
22
23















EPS-AT
0.0
52.0
54.6
57.3
60.2
63.2
66.4
69.7
73.2
76.8


epsAT, TMH
0.0
0.0
14.0
14.7
15.4
16.2
17.0
17.9
18.8
19.7


total EPS-AT
0.0
52.0
68.6
72.0
75.6
79.4
83.4
87.6
91.9
96.5


DPS, net
0.0
39.0
51.5
54.0
56.7
59.6
62.5
65.7
68.9
72.4


Gross div yield
0%
22%
29%
30%
32%
33%
35%
36%
38%
40%















Growth rate
5%











Div pmt rate
75%











Sh price
$ 2.50












Notes:
NZR might not pay such a high percentage in dividends, given that it's spending so much on TMH.
This report (http://www.refiningnz.com/media/80573/refining_nz_growth_project_shareholder_presentatio n.pdf) forecast debt to peak at 240m in 2015.
TMH would almost pay for itself by 2018 - still leaves 50c gross for dividends.

NZR planned to pay off all debt by 2020, but maybe they'll run with some debt, given interest rates are low.

These figures seem too good to be true. My dividend flow model gives a value of 9.21
As a double check, Benjamin Graham’s valuation method, V=eps*(8.5+2Growth), gives a valuation of 52*(8.5+10) = $9.62

Even if the market is skeptical, seems more likely that the price will go up than down.

[samdaman]

Hey Bunter,

Just a couple questions on your valuation.

- what discount rate did you use?
- Oil is low now but do you still expect Dividends to be 50c+ when oil creeps back up in the upcoming years?

Cheers
Sam

[bunter]

Hi Sam,
I use the current 5 yr deposit rate from interest.co.nz as the discount rate and update that periodically - it's about 5%.

I'm no kind of expert on the refining business but I get the feeling others on this thread are. NZR itself said low oil prices helped its customers and therefore helped NZR.

My guess is oil price changes will have less effect on NZR than on oil producers and explorers.

And much less effect than the exchange rate and refining margin.

To answer your question - if the ER and RM stay the same, and Te Mahi Hou expansion works out, then yes I do expect divs to be 50c plus IC, if any, even if oil prices do go up.

I'm also going to guess that current conditions are abnormally favourable for NZR - the exchange rate is nearly off the scale used on the company's profit matrix, and the refining margin IS off the scale. It seems like a perfect storm of goodness for NZR.

Bought more today.

[bull....]

the singapore crack touched a new high in january:)

http://www.platts.com/latest-news/oil/singapore/singapore-cracking-margins-peak-to-two-year-highs-27021832

2.55 someone keeps selling into so once they are gone should move higher

[cdonald]

Hey Bunter,

Just a couple questions on your valuation.

- what discount rate did you use?
- Oil is low now but do you still expect Dividends to be 50c+ when oil creeps back up in the upcoming years?

Cheers
Sam

To answer the part of the question on the price of oil creeping up. If refined products creep up at the same rate then the price of oil will have no impact on the profits. Yesterday oil went up 2% but refined products went up 4% effectivly making the margin higher. The refining margins are however calculated on a 2 month average so daily fluctions; whilst being interesting, are irrelevant.

[golden city]

2.55 seller is gone i think..., looks brighter

[bull....]

NZD just fallen another 1.5c after aust reserve bank drops interest rates - good for NZR

[dodgy]

NZD just fallen another 1.5c after aust reserve bank drops interest rates - good for NZR

Hi all
The Kiwis fall is going to improve NZR's result next 1/2 year - probably not in the latest report coming shortly, what with margins quoted in $US and from memory most of the new upgraded kit already being paid for - also in US $. Predictions for next year are looking very achievable.
-d

[cdonald]

I posted this on the '10% plus dividend payers' thread a week or two ago (as a 20% plus payer) but have decided to revise for the 5c fall in exchange rate since, and post here.


Expected profit for the y.e. 31/12/14 is 3 cps.

Using the profit matrix here (http://www.refiningnz.com/media/92331/analyst_presentation_full_year_results_2013.pdf), and dividing by shares on issue gives the following EPS-AT table



ex rate

EPS matrix


margin $/bbl
70
75
80
85


4
0
0
0
0


5
10
6.7
4.5
0


6
19
16
13
10


7
28
24
21
17


8
39
38
33
29


9
47
42
37
32


10e
55
50
45
40




The bolded figures are the current ones.
Tailwinds for NZR include low oil prices, increased petrol consumption, high refining margins, low exchange rates, Te Mahi Hou expansion, and active management bringing in many efficiencies.
As noted above, Chevron's refining division just announced a fourfold increase in profits in the most recent quarter.

The expansion Te Mahi Hou supposedly comes online in Dec 2015 and by NZR estimates will add 14cps to NPAT.

Given current margin and exchange rates, and 5% inherent growth in earnings:





30/12/14
15
16
17
18
19
20
21
22
23















EPS-AT
0.0
52.0
54.6
57.3
60.2
63.2
66.4
69.7
73.2
76.8


epsAT, TMH
0.0
0.0
14.0
14.7
15.4
16.2
17.0
17.9
18.8
19.7


total EPS-AT
0.0
52.0
68.6
72.0
75.6
79.4
83.4
87.6
91.9
96.5


DPS, net
0.0
39.0
51.5
54.0
56.7
59.6
62.5
65.7
68.9
72.4


Gross div yield
0%
22%
29%
30%
32%
33%
35%
36%
38%
40%















Growth rate
5%











Div pmt rate
75%











Sh price
$ 2.50












Notes:
NZR might not pay such a high percentage in dividends, given that it's spending so much on TMH.
This report (http://www.refiningnz.com/media/80573/refining_nz_growth_project_shareholder_presentatio n.pdf) forecast debt to peak at 240m in 2015.
TMH would almost pay for itself by 2018 - still leaves 50c gross for dividends.

NZR planned to pay off all debt by 2020, but maybe they'll run with some debt, given interest rates are low.

These figures seem too good to be true. My dividend flow model gives a value of 9.21
As a double check, Benjamin Graham’s valuation method, V=eps*(8.5+2Growth), gives a valuation of 52*(8.5+10) = $9.62

Even if the market is skeptical, seems more likely that the price will go up than down.


Bunter, The highest average margin that the refinery can have over the period of 12 months is $9USD/bbl due to the CAP in the processing agreements. In saying that, if you do a rough calc of 1.2mbbl per day at $9USD divided by the exchange rate of .72 and then multiply the whole lot by .7 (processing agreement) you get refining income of 473m NZD. Add on the pipeline and you get about 510m in income for the year.

The cap goes hand in hand with the floor (floor came into play in first six months of the last financial year) so if the first 2 months of the year the margins are over $9USD bbl, that money is "banked" for later in case margins drop below the $9usd bbl.

Just something to build into your spreadsheet.

[bunter]

Bunter, The highest average margin that the refinery can have over the period of 12 months is $9USD/bbl due to the CAP in the processing agreements. In saying that, if you do a rough calc of 1.2mbbl per day at $9USD divided by the exchange rate of .72 and then multiply the whole lot by .7 (processing agreement) you get refining income of 473m NZD. Add on the pipeline and you get about 510m in income for the year.

The cap goes hand in hand with the floor (floor came into play in first six months of the last financial year) so if the first 2 months of the year the margins are over $9USD bbl, that money is "banked" for later in case margins drop below the $9usd bbl.

Just something to build into your spreadsheet.

Thanks - my valuation is too high then - will revise.

Also, as you pointed out, the assumption that NZR will pay tax could be wrong - i.e. their 'NPAT' matrix could be based on no tax.
In previous years they certainly paid tax, and fully imputed dividends - I'm still unclear on whether their 2015 dividends (if any) will be carry ICs.

[golden city]

waiting for the 2.60 breakout....which i guess will be soon

[dodgy]

Thanks - my valuation is too high then - will revise.

Also, as you pointed out, the assumption that NZR will pay tax could be wrong - i.e. their 'NPAT' matrix could be based on no tax.
In previous years they certainly paid tax, and fully imputed dividends - I'm still unclear on whether their 2015 dividends (if any) will be carry ICs.

Hi Bunter and all
Happy NZ/Waitangi Day,
The best way to firm up your valuations re tax etc. for NZR is to contact the company secretary. As a shareholder (owner) they are bound to provide you with this type of info but if not a shareholder then you will probably be given this anyway. Facts are the best remedy for doubts.
-d
I still hold to my guestimate share price of north of $3 by March 2016 - 15.4% on current price $2.60 without any divs. which should give all up a return of 18% for a year - worth a dip in?

[bunter]

Have reworked NZR profit estimates taking account of:

1) Cap at $9 for processing fee
2) 3m barrel / yr increase from Te Mahi Hou from 2016 on - http://www.refiningnz.com/media/80576/explanatory_notes.pdf
3) 0% growth thereafter - with plant at capacity and cap in place (as assumed)
4) Retained earning pay off debt
5) Minimal capex for the next few years.



NPAT 15e - source post NZR:555








15 e

16 e
17
18
19
20
21


MBPD 4

0.117
0.125
0.1249
0.125
0.125
0.1249
0.125


PF $USD
9
9
9
9
9
9
9


ER
0.72
0.72
0.72
0.72
0.72
0.72
0.72


Op. days/yr 5)
365
365
365
365
365
365
365


Scale factor
0.7
0.7
0.7
0.7
0.7
0.7
0.7


RefiningRev
372.75
399
399
399
399
399
399


Pipeline
57
57
57
57
57
57
57


Total rev
430
456
456
456
456
456
456












Income
430
456
456
456
456
456
456


exp 1
229
229
229
229
229
229
229


int 2
17.4
15.4
13.1
10.8
8.5
6.1
3.7


EBT
183.35
211.6
213.87
216.2
218.5
220.87
223.3


tax
51
59
60
61
61
62
63


NPAT
132
152
154
156
157
159
161












eps after tax
0.422
0.487
0.492
0.497
0.503
0.508
0.514


eps before tax
0.586
0.676
0.683
0.691
0.698
0.706
0.713


div payout %
75%
80%
85%
90%
90%
90%
90%


div cps
0.316
0.389
0.418
0.448
0.452
0.457
0.462


ret. Earns
33.0
38.1
38.5
38.9
39.3
39.8
40.2


debt 3
290
257.0
218.9
180.4
141.5
102.2
62.4












Notes









1) Expenses were only 100.5m in H12014; is $201m/a possible?



2) 290m assumed at 6%








3) Capex not estimated; assumed added to debt.





4) Nov/Dec 7.1 mbbl = .117mbbl/day







5) Shutdowns not known.











Gross yield
17%
21%
22%
24%
24%
24%
25%



Dividend flow valuation now $6.66
Benjamin valuation v = eps*(8.5+2g) - let's say 50*(8.5+0) = $4.25

Expenses savings could add $20m to profit before tax.

[BlackPeter]

Hmm - so this is the "everything turns out perfect for shareholders over the next 7 years" scenario, though even for that would I think is it highly unlikely that they manage to run their operation for 7 years without any shutdown. How many shutdowns did we have last year - 2 or 3?

I guess to make this a bit more realistic - I'd assume at least 2 to 3 weeks of shutdown every year - and a 5 to 7 year cycle looking at the refining margin. Say 2 years running into the ceiling, 3 years at "medium" rates and 2 years scratching the bottom.

Don't forget either that it might be next time around more difficult to satisfy the unions. They just love to dig their teeth into large profits (meaning either higher staff cost or longer downtimes times, probably both).

Haven't worked out the resulting "fair" SP, but I reckon that this would bring us reasonably close to what it currently is.

Still - holding and expecting an outrageously good 2015 (and hoping for a good 2016 as well), but what comes after that - who knows?

[bunter]

Te Mahi Hou will lift current processing fees by $1.10 - i.e. today's $10 becomes $11.10 - and so can still fall $2.10 before hit hits the cap.
As I understand it.

So maybe 2015 and 2016 look good.

Ex rates - who knows?

As for shutdowns - were there any in Nov or Dec 2014? I used those figures to give the daily throughput, so if there were shutdowns the daily figure needs to be increased,

IME the market seems to give undue weight to present-day conditions; so prices overshoot and undershoot.

Here's what my spreadsheet gives for div flow valuation if the PF is constant for 10 years.
The present PF is effectively $11, post TMH.




PF
Value



11
6.66


10
6.66


9
6.66


8
5.24


7
3.82


6
2.4


5
0.99

[dodgy]

Te Mahi Hou will lift current processing fees by $1.10 - i.e. today's $10 becomes $11.10 - and so can still fall $2.10 before hit hits the cap.
As I understand it.

So maybe 2015 and 2016 look good.

Ex rates - who knows?

As for shutdowns - were there any in Nov or Dec 2014? I used those figures to give the daily throughput, so if there were shutdowns the daily figure needs to be increased,

IME the market seems to give undue weight to present-day conditions; so prices overshoot and undershoot.

Here's what my spreadsheet gives for div flow valuation if the PF is constant for 10 years.
The present PF is effectively $11, post TMH.




PF
Value


11
6.66


10
6.66


9
6.66


8
5.24


7
3.82


6
2.4


5
0.99




Darn good effort Bunter ! I guess there will always be shutdowns / time to transfer production to new more efficient and trouble free kit , scheduled maintenance etc. At a guess you would be having to allow 2 weeks or more downtime per year or thereabouts. Have you factored the new profit stream for the co2 conversion plant, and the lease arrangement for the stored platinum, converter material ?
-d

[bunter]

At a guess you would be having to allow 2 weeks or more downtime per year or thereabouts. Have you factored the new profit stream for the co2 conversion plant, and the lease arrangement for the stored platinum, converter material ?
-d

Platinum effect was small, 500k p.a., but have added it.
Couldn't find any projections on CO2 revenue (anyone know?) but non-refining income seems important for growth, as refining income is capped.

More significantly, I just noticed that NZR forecasts $16m reduction in expenses in 2014 - so have changed my 229m to 213m (with 2% growth per annum for 2016 et seq).

Sadly with fixed income and rising expenses, the profit will come under pressure eventually, and the s/s shows this. Expenses are going down for now but I have assumed conservatively (for once) that they'll grow.

NZR seem to be looking under every rock for efficiencies and extra income with about 20 initiatives in progress. The company seems pretty well managed and I'm wondering if it might do better than expected.





15 e
16 e
17
18
19
20
21


MBPD 4
0.117
0.125
0.1249
0.125
0.125
0.1249
0.125


PF $USD
9
9
9
9
9
9
9


ER
0.72
0.72
0.72
0.72
0.72
0.72
0.72


Op. days/yr 5)
365
365
365
365
365
365
365


Scale factor
0.7
0.7
0.7
0.7
0.7
0.7
0.7


RefiningRev
372.8
399.0
399
399
399
399
399


Pipeline
57
57
57
57
57
57
57


Total rev
430
456.0
456
456
456
456
456












Income
430
456
456
456
456
456
456


exp 1
213
217.26
221.61
226
230.6
235.17
239.9


int 2
16.9
14.7
12.3
9.9
7.5
5.2
2.9


EBT
199.85
223.998
222.07
220
217.9
215.64
213.3


tax
56
63
62
62
61
60
60


NPAT
144
161
160
158
157
155
154












eps after tax
0.460
0.515
0.511
0.506
0.501
0.496
0.491


eps before tax
0.638
0.716
0.709
0.703
0.696
0.689
0.681


div payout %
75%
80%
85%
90%
90%
90%
90%


div cps
0.345
0.412
0.434
0.456
0.451
0.446
0.442


ret. Earns
36.0
40.3
40.0
39.6
39.2
38.8
38.4


debt 3
290
254.0
213.7
173.7
134.1
94.9
56.1












Gross yield
18%
22%
23%
24%
24%
24%
24%





Net effect of all the above is a similar valuation - 6.67 max - with rising expenses balancing out the positive changes.

[dodgy]

Thanks Bunter
Time will tell.
-d

[bull....]

Lets hope the company starts paying a div when it reports a modest 2 - 3 cps should be affordable and welcomed by long suffering shareholders on a 10mil profit

[golden city]

slim hope for a dividend i think.., but a good forecast go with the report ..will boost the share price with a dividends forecast ahead

[dodgy]

slim hope for a dividend i think.., but a good forecast go with the report ..will boost the share price with a dividends forecast ahead


Agree GC, dividend should probably not be reinstated until after expansion is commissioned ie late Feb 2016 . Funds better spend paying down borrowings for balance of calender 2015. Share price still should be north of $3 by March 16.
-d
Discl: Holding above 50k shares and happy to sit tight

[Joshuatree]

Thanks bunter for sharing all your research.

[NZSilver]

Hi bunter and others I'm just looking at your numbers/posts and have been following this thread. A few questions you and others may be able to help me with;

1. In your numbers above are the $9 margins likely to continue? And what is the main variable driving this? Exchange rate?
2. How does exchange rate effect refineries profits in different countries? Low nzd to usd mean nz becomes very good place refine?
3. Is the marsden point refinery world class? Or would it be considered not the most efficient and lacking the latest technology eelative to other refinearies around the world. Or is it a bit like nz aluminium smelter (now outdated and inefficient compared to world standards) I do note the upgrade which will make things more efficient
4. What are the major industry impacts that would substantially change your above estimates (ie not a complete blow out like a world war or something crazy). As looking above this stock seems dirt cheap and a great yield play based on low interest rates and possible divs

I know these questions may seem rather simple, however I'm just trying to understand an industry I know little about. Thanks for all the good info you have shared everyone.

Cheers

[BlackPeter]

Hi bunter and others I'm just looking at your numbers/posts and have been following this thread. A few questions you and others may be able to help me with;

1. In your numbers above are the $9 margins likely to continue? And what is the main variable driving this? Exchange rate?
2. How does exchange rate effect refineries profits in different countries? Low nzd to usd mean nz becomes very good place refine?
3. Is the marsden point refinery world class? Or would it be considered not the most efficient and lacking the latest technology eelative to other refinearies around the world. Or is it a bit like nz aluminium smelter (now outdated and inefficient compared to world standards) I do note the upgrade which will make things more efficient
4. What are the major industry impacts that would substantially change your above estimates (ie not a complete blow out like a world war or something crazy). As looking above this stock seems dirt cheap and a great yield play based on low interest rates and possible divs

I know these questions may seem rather simple, however I'm just trying to understand an industry I know little about. Thanks for all the good info you have shared everyone.

Cheers

OK - looks like nobody wants to pick this up, so I will give it a go. Firstly - outstanding questions ... and hey - I am no oil expert and my crystal ball is cloudy, so please take my response with a grain of salt ... and as usual: Do Your Own Research! Hope others can fill the gaps & correct me where I am wrong.

Re 1):
If we look at the last 15 years, than it looks like NZR is sort of moving in a 10 year cycle. SP (and I suppose margin) was low / average between 2000 and 2005, high between 2005 and 2010 and average / low between 2010 and 2015. Not a statistically relevant data sample, but maybe its now again 5 good years?

Drivers for the refining margin are mainly the laws of supply and demand. If refineries have spare capacity, the margins go down, if they haven't, the margin goes up. Due to the low margin over the last 5 years there have been a number of closures of refineries - read recently something along these lines about Australia, but am sure, that the rest of the world did the same thing. Remember - we had rather high oil prices and everybody was trying to save oil and petrol ... no reason for building additional refining capacity.

Thanks to first the US going shale oil and than the Saudis starting to pump we have now low oil prices and increasing demand. Takes a number of years (say in average five - this would confirm the cycle above?) from noticing increased demand to having a new refinery up and running.

So I guess - if the oil price stays down, than we probably could expect refining margins to stay high ... until new refineries come on line. If we (or better the people building refineries) however believe that oil is now in the end game (and the Saudis keep pumping cheap oil until nobody wants it anymore), than it is likely that not too many want to invest now into a new refinery, which could keep the refining margins up for longer (well, until the world changed completely to electrical cars, trucks, planes and trains).

Re 2) yes - low USD compared to local currency is good for local refinery (as long as the USD is the benchmark for the margin)

Re 3) Don't know, but would assume that (after the upgrade) it is quite modern.

Re 4) Anything reducing the global oil consumption and / or increasing refinery capacity would be bad for NZR's earnings;

[bunter]

Hi bunter and others I'm just looking at your numbers/posts and have been following this thread. A few questions you and others may be able to help me with;

1. In your numbers above are the $9 margins likely to continue? And what is the main variable driving this? Exchange rate?
2. How does exchange rate effect refineries profits in different countries? Low nzd to usd mean nz becomes very good place refine?
3. Is the marsden point refinery world class? Or would it be considered not the most efficient and lacking the latest technology eelative to other refinearies around the world. Or is it a bit like nz aluminium smelter (now outdated and inefficient compared to world standards) I do note the upgrade which will make things more efficient
4. What are the major industry impacts that would substantially change your above estimates (ie not a complete blow out like a world war or something crazy). As looking above this stock seems dirt cheap and a great yield play based on low interest rates and possible divs
I know these questions may seem rather simple, however I'm just trying to understand an industry I know little about. Thanks for all the good info you have shared everyone.
Cheers

I'm just guessing.
1) There seems to be a $2 buffer on refining margin now - see prev posts - so I'm hoping the capped margin of $9 will last for at least a year.
Margins can change very quickly.
As BlackPeter and NZR both say - refining is a long cycle business. I'd expect margins to go under the cap at some point.

What's a good guess at average margins for the next 7 years - $7.5?

2), 3) Don't know.
4) Will be watching the refining margin, exchange rates, and also NZR's non-refining revenue - which is its big hope, along with cutting expenses, for growth.

[Beagle]

The rise of the mega Asian and middle east refineries forced margins down and effectively curtailed / closed many of the smaller refineries in Australia.
With scale comes cost benefits. Future margins are in my opinion anyone's guess which makes forecasting essentially a futile exercise IMHO.
http://gulfnews.com/business/opinion/kuwait-aims-big-for-its-mega-refineries-1.1291537 My 2 cents. (Disc, don't own any)

[bunter]

Future margins are in my opinion anyone's guess which makes forecasting essentially a futile exercise IMHO.

Future anything is hard to guess. Maybe looking at the past can help.

This chart looks at highest and lowest prices for each year since 2006, and compares them with that year's eps.

The 2015 figure of 45c for eps is my guess - workings above.
The 2015 high and low are the figures for the first five weeks.

The chart indicates that if 2015 eps is 45c, then a typical highest price for 2015 would be $7.


6755

[bull....]

6757

JPM source

Bunter here some valuations of refiners if you want to compare NZR against

[bunter]

6757
JPM source Bunter here some valuations of refiners if you want to compare NZR against

Thanks.

Using median 2015 PE, NZR's worth 9.7*45 = 4.37
Don't know if those div figures are gross or not, so can't compare.

The change in refining margin has been very sudden.
Maybe valuations of overseas refineries are lagging.

The NZR valuations vary a lot. The outlier is the present market value of $2.6

[bull....]

6758

Asian refiners only

Yes figures probably been upgraded by now as margins are still strong and most analysts had weak margins forecast for the yr

[bunter]

Median PE of 12.65 there so value of about $6.

Thought nzr2.jpg (http://www.sharetrader.co.nz/attachment.php?attachmentid=6755&d=1423463921) was interesting.
The blue line has always been above the grey one... so if the price DOESN'T reach $7 in 2015 it'll be the first time in ten years that the highest price has been so low relative to eps.

[bull....]

interesting graph -based on history you would assume the same should happen but I see it fluctuated below and above probably on the different factors which affect there margins

[bull....]

Hi bunter and others I'm just looking at your numbers/posts and have been following this thread. A few questions you and others may be able to help me with;

1. In your numbers above are the $9 margins likely to continue? And what is the main variable driving this? Exchange rate?

The crack spread and refiner stocks
Investors who are thinking of buying refiner stocks should know that one of the primary indicators of refiners’ earnings is the crack spread.
Essentially, refiners take crude oil (which generally can’t be used in its raw form) and turn it into refined products such as gasoline, diesel, and jet fuel. The crack spread represents the price difference between the finished, refined products (which translate into refiner revenues) and the price of crude oil (one of the primary factors in refiner costs). Because commodity prices can be incredibly volatile, refiners’ margins can too

NZ Refining mitigates this to some degree with the 70/30 processing fee

[/QUOTE]2. How does exchange rate effect refineries profits in different countries? Low nzd to usd mean nz becomes very good place refine?[/QUOTE]

depends on there base currency lower nzd/usd good for NZR but does not necessarily mean a better place to refine as this is based on many factors such as refinery setup and what oil they refine etc

[/QUOTE]3. Is the marsden point refinery world class? Or would it be considered not the most efficient and lacking the latest technology eelative to other refinearies around the world. Or is it a bit like nz aluminium smelter (now outdated and inefficient compared to world standards) I do note the upgrade which will make things more efficient [/QUOTE]

http://www.refiningnz.com/our-investors/growth/ccr-project.aspx tells you about modernisation of the plant if they didn't do it it would probably close.

[/QUOTE]4. What are the major industry impacts that would substantially change your above estimates (ie not a complete blow out like a world war or something crazy). As looking above this stock seems dirt cheap and a great yield play based on low interest rates and possible divs[/QUOTE]




Issue


Typically Affects


Crack Spread Effect




1. Geopolitical issues
— politics, geography, demography, economics and foreign policy

Crude oil supply


Crack weakens initially
— higher crude oil prices relative to refined products.
Crack strengthens later,
as refineries respond to tighter crude oil supply and reduce product outputs.



2. Winter seasonality


Increase in distillate demand


Crack strength




3. Slower economic growth


Decline in refined products demand


Crack weakness




4. Strong sustained product demand


High refinery utilization


Crack strength




5. Environmental regulation on tighter product specifications


Tightening of product supply


Crack strength




6. Expiration of trading month


Cash market realities — long or short products


Cracks values can vary due to closing of positions




7. Tax increase after certain date


Increased sales in front of tax deadlines


Crack weakens in front of tax deadline and strengthens post deadline




8. Summer seasonality


Increase in gasoline demand


Crack strength




9. Refinery maintenance


Decline in product production


Crack strength




10. Currency weakness


Crude oil strength


Crack weakness

[bunter]

Thanks bull.....

Just thought of another risk... failure of some sort in TMH implementation.

[bull....]

nz refining sits in the grp of refiners known as complex refiners instead of a simple refiner in my opinion which means they enjoy a higher margin over a simple refiner, I believe it enjoys the advantage of supplying most of nz petrol,diesel, jet fuel needs so is not nesscessarily effected by oversupply in refining capacity unless other refiners are discounting there product which is why important to know are they competitive against imports this is why they introduced the 70/30 processing fee to stay competitive against the imports from mega refiners.
because they supply most nz the expansion should provide growth in local market as nz is growing unlike other parts of the world,migration and also low petrol price will encourage more sunday drives - more demand for petrol where they want to grow there market share anyway while conditions are now very favourable for refiners they can be very volitile as 2013 show thats why i make hay why the sun shine and not put in my bottom draw and forget about it

[NZSilver]

Hi posters - thanks for your responses, very good stuff

[Pumice]

http://www.thebull.com.au/articles/a/51982-caltex-margins-soar-on-oil's-fall.html

Caltex Australia refining margins up strongly

Caltex margins soar on oil's fall


By AAP | 10.02.2015 04:33 PM


Caltex Australia is continuing to benefit from weak oil prices, with a 40 per cent bump in its refining margins.
Caltex's refiner margins - the profit it makes turning crude oil into fuels such as petrol and diesel - averaged $US25.10 a barrel in December, up from $US17.99 in November.
The increase from a year earlier was much greater - more than four times the margin of $US6.18 a barrel.
Margins over the course of 2014 were up 33 per cent to $US12.42.
The benefits are due to the oil price more than halving in 12 months to below $US50 a barrel, meaning Caltex is paying much less for its base refining product.
That prompted Caltex to forecast in December a lift in full year profit by more than 40 per cent to between $450 and $470 million.
Its marketing business is still expected to drive the result, with the refining business getting back into the black after a $65 million loss in the first half.
Caltex closed its Sydney refinery during the year but still operates one in Brisbane.

Caltex shares gained 12 cents to $34.43.

[dodgy]

http://www.thebull.com.au/articles/a/51982-caltex-margins-soar-on-oil's-fall.html

Caltex Australia refining margins up strongly

Caltex margins soar on oil's fall


By AAP | 10.02.2015 04:33 PM


Caltex Australia is continuing to benefit from weak oil prices, with a 40 per cent bump in its refining margins.
Caltex's refiner margins - the profit it makes turning crude oil into fuels such as petrol and diesel - averaged $US25.10 a barrel in December, up from $US17.99 in November.
The increase from a year earlier was much greater - more than four times the margin of $US6.18 a barrel.
Margins over the course of 2014 were up 33 per cent to $US12.42.
The benefits are due to the oil price more than halving in 12 months to below $US50 a barrel, meaning Caltex is paying much less for its base refining product.
That prompted Caltex to forecast in December a lift in full year profit by more than 40 per cent to between $450 and $470 million.
Its marketing business is still expected to drive the result, with the refining business getting back into the black after a $65 million loss in the first half.
Caltex closed its Sydney refinery during the year but still operates one in Brisbane.

Caltex shares gained 12 cents to $34.43.

Hi all
I think the difference here is that Caltex is a vertically integrated refiner , ie refines the oil they have either produced or purchased. Whereas NZR is purely a tolling operation, gets paid per the product throughput without owning the feedstock . Note for Bunter, spoke to public relations NZR yesterday, seems the co2 benefits, except for the capture of the carbon emissions (which is significant in itself and may be worth something in carbon credits further down the track - about 50000 tonne per annum from memory.) have not been released as commercially sensitive but I am guessing will not impact bottom line too much except positively.
-d

[cdonald]

http://www.brecorder.com/markets/energy/asia/221862-asia-pacific-crude-steady-on-healthy-refining-margins.html

Singapore complex refining margins sitting at $8 for the last 3 weeks. I am picking income of about 73m for the first 2 months but 13m of that being kept back as CAP. Nice position to be in!

[bunter]

http://www.brecorder.com/markets/energy/asia/221862-asia-pacific-crude-steady-on-healthy-refining-margins.html

Singapore complex refining margins sitting at $8 for the last 3 weeks. I am picking income of about 73m for the first 2 months but 13m of that being kept back as CAP. Nice position to be in!

Good news from 'Pakistan's premier financial daily' (where do you find these links?!)

Is that 73m refining income only?

Also- have been wondering who benefits from the cap - is it the major shareholders?
Or, in a competitive market, does it just result in lower fuel prices?

[cdonald]

Good news from 'Pakistan's premier financial daily' (where do you find these links?!)

Is that 73m refining income only?

Also- have been wondering who benefits from the cap - is it the major shareholders?
Or, in a competitive market, does it just result in lower fuel prices?

News is news I guess. Just use google to do Singapore complex Refining margins and search on news. Cap benefits the major users of the refinery some of which are shareholders. From what I understand, if margins fall below cap later on in the year, the users will have to refund some of the money to the refinery to make it up to cap again. Think of it as income smoothing.

[golden city]

looking forward to next fridays statement., share price will crack 3 dollar i think

[golden city]

will be on fire this week nzr

[bull....]

http://www.odt.co.nz/news/business/320080/z-energy-poised-reap-benefit-recovery-nz-refinings-margins

[bunter]

I looked at Z last week and also tried to work out how much NZR might affect Z. Have pasted on the Z thread.
Old link BTW - Oct 14.

[bull....]

whats the dividend policy, i note some disgrunted major s/h about the capital structure and divs and that 2 of the majors were not happy about the expansion going ahead so will they need some payout to keep them happy

[bunter]

Just over 100% payout % in 2007 and 2008 when they were last earning good money.

They said earlier they expected TMH to pay for itself.
Suppose div policy will depend on how much debt they want to pay back and how fast.

I guessed 75% payout % for the y.e. 31/12/15 rising to 90% over four years.

SP on fire today GC - assuming that was what you meant.

[golden city]

good will keep going towards end of the week

[dodgy]

good will keep going towards end of the week

Hi Gc
I will stick by my earlier post being
probably no div on these results although I now think that if the profit is right up the top end as alluded to on the thread, then a small div 1-3 cents may result. Otherwise all the well canvased fundamentals still exist and north of $3 by next year with a good March 2016 div remains my prediction. The money is best spent reducing debt until the completion of though put expansion/kit replacement.
-d

Discl - current hold 50k and will buy on dips.

[bull....]

the price should go over 3 easliy this yr dont you think if current conditions continue, i think margins have risen again as at end of last week over 10 in europe i read

check out valero in the us VLO the stock price has gone vertical since jan a reflection of how good these margins are at the moment

[dodgy]

the price should go over 3 easliy this yr dont you think if current conditions continue, i think margins have risen again as at end of last week over 10 in europe i read

check out valero in the us VLO the stock price has gone vertical since jan a reflection of how good these margins are at the moment

Bull
I agree with your sentiment that there is this prospect, but I have seen many false dawns and "over exuberant" plays in the past, and would be more than happy to see anything north of $3 and sustainable in 2016. The variables are large and prediction is a dodgy game - dodgy being the operative word. Financial analysts and the like remain in the same camp as soothsayers, and they have been at it since time began - human nature too hope in my opinion. Time alone will tell.
-d

[golden city]

i see nzr will at least up to 3.60 this year..,

[BlackPeter]

i see nzr will at least up to 3.60 this year..,

It depends ...

IF the oil price stays roundabout where it is today and IF the world economy keeps growing and IF the refining margins stay where they are at present (which is sort of correlated with the first 2 conditions) and IF we have no earth shattering event or accident in the refinery, THAN I agree. In this case your prediction would be probably still quite conservative. I would see a target price of somewhere between $5.50 and $6 in this case (say by March / April 2016).

However:
IF the oil price jumps later this year as quickly up as it came down late last year, THAN the target price is everybody's best guess ... would assume that it stops climbing as soon as the oil price jumps (which it may or may not).
IF we have later in 2015 the next stock crash, than its difficult to make any predictions (though NZR did quite well in the 2008 crash).

So - lets wait and see ... however I am rather optimistic on this stock as well.

Discl: holding (lots) - and obviously: DYOR

[dodgy]

It depends ...

IF the oil price stays roundabout where it is today and IF the world economy keeps growing and IF the refining margins stay where they are at present (which is sort of correlated with the first 2 conditions) and IF we have no earth shattering event or accident in the refinery, THAN I agree. In this case your prediction would be probably still quite conservative. I would see a target price of somewhere between $5.50 and $6 in this case (say by March / April 2016).

However:
IF the oil price jumps later this year as quickly up as it came down late last year, THAN the target price is everybody's best guess ... would assume that it stops climbing as soon as the oil price jumps (which it may or may not).
IF we have later in 2015 the next stock crash, than its difficult to make any predictions (though NZR did quite well in the 2008 crash).

So - lets wait and see ... however I am rather optimistic on this stock as well.

Discl: holding (lots) - and obviously: DYOR

BP (get the pun)
I believe the price of oil is not hugely relevant to NZR - the main benefit accrues to the oil retailers / govt. tax take. The only downside would be if the price of oil got back to where we were then demand just may be influenced, but at present and supposedly the economy strength should have the opposite effect. Prime drivers margin/exchange rate/ efficiency . I agree that the variables are endless when encompassing all external events.
-d

[BlackPeter]

BP (get the pun)
I believe the price of oil is not hugely relevant to NZR - the main benefit accrues to the oil retailers / govt. tax take. The only downside would be if the price of oil got back to where we were then demand just may be influenced, but at present and supposedly the economy strength should have the opposite effect. Prime drivers margin/exchange rate/ efficiency . I agree that the variables are endless when encompassing all external events.
-d

I see what you mean. Not sure, whether I can point to a direct 1-to-1 dependency. However ... just a few observations:

Over the last 15 years (that's all the data I checked) NZR made much more money while the (inflation adjusted) oil price was (relatively) low. As well - the refining margins more than doubled in the same 2 months in which the oil price dropped. Admittedly - haven't checked against other dependencies as well.

NZR stated itself recently that a low oil price is good for their business (must have been in one of the recent announcements). I think they mentioned less capital cost for storage - and while that's true I have not checked, how material this impact would be.

And obviously (as stated by you) mean lower oil prices higher consumption, which means more volume for NZR.

But yes, agree ... I don't think that $60 per barrel would impact on NZR's current home run. $120 per barrel in my view would.

What I forgot to mention in the previous post is obviously the dependency on the USD. Lower NZD compared to USD is obviously good for NZR.

Discl: In no way related to the well known oil company using the same abbreviation ....

[bunter]

lower oil prices higher consumption, which means more volume for NZR.

I think NZ uses all NZR's output, in which case more NZ consumption doesn't help NZR.

Te Mahi Hou is forecast to increase NZR's output (by 3m bpa - 7%).

That will help. All built into my model - see prior posts.

[dodgy]

I think NZ uses all NZR's output, in which case more NZ consumption doesn't help NZR.

Te Mahi Hou is forecast to increase NZR's output (by 3m bpa - 7%).

That will help. All built into my model - see prior posts.

As usual - you are onto it Bunter. My reference to consumption was the increase that will elvove from the end of this year after TMH commissioned. This will change the output value and product mix and handle different more profitable crude grades. The break point will always be if the oil co's (as with Gull) can import out of the asian mega refineries or wherever cheaper.
BP - moniker reference withdrawn.
-d

[golden city]

finally the day comes.., tomorrow we will know more of nzr's future..

[golden city]

looking for a spark

[BlackPeter]

looking for a spark

No spark, please. Too dangerous with all the petrol around!:sleep:

[cdonald]

http://www.refiningnz.com/media/96834/fy_2014_results_announcement__nzx_.pdf

No final dividend this year, paying down debt, looks like they are doing very well! Nice report guys.

[bull....]

no div, lived in hope of a surprise but i see gearing has to be 10-20% before divs are considered.
paid of nearly 30mil of debt in just last 6mths ...fast
bigger than forecast uplift in margin improvement
record margins maintained in jan- feb
good result if all this maintained next yr result will be wicked

[cdonald]

http://www.refiningnz.com/media/96856/analyst_presentation_full_year_results_2014.pdf

Pg 20 makes for some interesting reading.

[couta1]

will be on fire this week nzr
The fire on Monday has turned into a dim flame, not even a sale gone through yet?

[golden city]

presentation looks good., surprised share price barely move

[golden city]

at some point it will have to go up.., be patient i think

[bull....]

http://www.refiningnz.com/media/96856/analyst_presentation_full_year_results_2014.pdf

Pg 20 makes for some interesting reading.

yes and combined with pg14 make some assumptions - good presentation

[bull....]

if we go low oil environment for years , some calcs of there presentation show if things stay like now very cheap now compared to what they look like in 2016 - 17

[Pumice]

I posted this on the '10% plus dividend payers' thread a week or two ago (as a 20% plus payer) but have decided to revise for the 5c fall in exchange rate since, and post here.


Expected profit for the y.e. 31/12/14 is 3 cps.

Using the profit matrix here (http://www.refiningnz.com/media/92331/analyst_presentation_full_year_results_2013.pdf), and dividing by shares on issue gives the following EPS-AT table



ex rate

EPS matrix


margin $/bbl
70
75
80
85


4
0
0
0
0


5
10
6.7
4.5
0


6
19
16
13
10


7
28
24
21
17


8
39
38
33
29


9
47
42
37
32


10e
55
50
45
40




The bolded figures are the current ones.
Tailwinds for NZR include low oil prices, increased petrol consumption, high refining margins, low exchange rates, Te Mahi Hou expansion, and active management bringing in many efficiencies.
As noted above, Chevron's refining division just announced a fourfold increase in profits in the most recent quarter.

The expansion Te Mahi Hou supposedly comes online in Dec 2015 and by NZR estimates will add 14cps to NPAT.

Given current margin and exchange rates, and 5% inherent growth in earnings:





30/12/14
15
16
17
18
19
20
21
22
23















EPS-AT
0.0
52.0
54.6
57.3
60.2
63.2
66.4
69.7
73.2
76.8


epsAT, TMH
0.0
0.0
14.0
14.7
15.4
16.2
17.0
17.9
18.8
19.7


total EPS-AT
0.0
52.0
68.6
72.0
75.6
79.4
83.4
87.6
91.9
96.5


DPS, net
0.0
39.0
51.5
54.0
56.7
59.6
62.5
65.7
68.9
72.4


Gross div yield
0%
22%
29%
30%
32%
33%
35%
36%
38%
40%















Growth rate
5%











Div pmt rate
75%











Sh price
$ 2.50












Notes:
NZR might not pay such a high percentage in dividends, given that it's spending so much on TMH.
This report (http://www.refiningnz.com/media/80573/refining_nz_growth_project_shareholder_presentatio n.pdf) forecast debt to peak at 240m in 2015.
TMH would almost pay for itself by 2018 - still leaves 50c gross for dividends.

NZR planned to pay off all debt by 2020, but maybe they'll run with some debt, given interest rates are low.

These figures seem too good to be true. My dividend flow model gives a value of 9.21
As a double check, Benjamin Graham’s valuation method, V=eps*(8.5+2Growth), gives a valuation of 52*(8.5+10) = $9.62

Even if the market is skeptical, seems more likely that the price will go up than down.


Any reason why the 2014 profit matrix is better than the 2015 given the same metrics?

here (http://www.refiningnz.com/media/92331/analyst_presentation_full_year_results_2013.pdf), (2014, Pg17)
http://www.refiningnz.com/media/96856/analyst_presentation_full_year_results_2014.pdf (2015, pg20)

[dodgy]

Hi guys
Don't give up on this one incl GC - north of $3 by March next year has been reinforced by the fundamentals, remember that the improvements to oil/exchange etc has been in the latter part of this year so should reflect on the 6 months and the shut down has concluded for the moment (it is cyclic). Meanwhile business as usual, a great annual AGM and spread, and developments / expansion completed by late this year. Buy into the dips.
Discl: current hold 42k
-d

[golden city]

will certainly increase my holding if share price stay like this....i am a patient investor.., as long as the fundamentals click.., i am more than happy to wait

[dodgy]

will certainly increase my holding if share price stay like this....i am a patient investor.., as long as the fundamentals click.., i am more than happy to wait

Hi GC
You are on to it. The secret to any trading, coffee , to yak poo, is what you buy for determines your ultimate profit. At present a tad high for serious investment in my opinion. Only time will be the judge.

Hold: 42k

[golden city]

has accumulated over 400k of shares at 2 dollar mark so ..i am safe and happy to wait

[dodgy]

has accumulated over 400k of shares at 2 dollar mark so ..i am safe and happy to wait

Good on you, smart buying, and the very best for the future.
-d

[YoungBuck]

Hey guys, I've been reading ShareTrader for a few months now and have only just registered. Just want to let you know that I really appreciate the depth and insight you guys have given. Its really helped me get my bearings in the sharemarket (I have only been investing for half a year now).

Just wanting to ask if you use or know of any other good websites/resources/books that I can use to help me research further on my own?

Cheers

(also wondering why the market didn't react well to NZR's announcement on Friday?)

[barleeni]

Hey guys, I've been reading ShareTrader for a few months now and have only just registered. Just want to let you know that I really appreciate the depth and insight you guys have given. Its really helped me get my bearings in the sharemarket (I have only been investing for half a year now).

Just wanting to ask if you use or know of any other good websites/resources/books that I can use to help me research further on my own?

Cheers

(also wondering why the market didn't react well to NZR's announcement on Friday?)

I think the market didn't really react as everything that was presented on Friday had already been fully priced in / anticipated, in fact people may have been hoping for more? Part of me now thinks NZR is possibly overpriced (which is a bugger as I brought some more on Thursday at $2.69).

Dividends for 2015 from there presentation could be circa 20cps? which in my mind doesn't justify the s/p going any higher than it is given the risk in the share???? maybe too high already.

[BlackPeter]

I think the market didn't really react as everything that was presented on Friday had already been fully priced in / anticipated, in fact people may have been hoping for more? Part of me now thinks NZR is possibly overpriced (which is a bugger as I brought some more on Thursday at $2.69).

Dividends for 2015 from there presentation could be circa 20cps? which in my mind doesn't justify the s/p going any higher than it is given the risk in the share???? maybe too high already.

Agree with your assessment re the lack of movement - exactly the result the market expected (I had them with 3 cts EPS in my books, and this was what they achieved).

Not sure about your concerns they might be already overvalued. Obviously - things can change swiftly in this industry, and then everybody's guess is as good as mine. However, if we assume that oil price, refining margins and USD/NZD exchange rate hang around where they are at current, than I would expect NZR to deliver in 2015 an EPS of 40 cents plus. And a share earning 40 cents pa is at $2.60 not overvalued!

Discl: holding & no intention to sell anytime soon. DYOR

[golden city]

it is no way overvalued.., it is a mile away from the real potential with the new project on track

[golden city]

i think it takes time for investor to analyze and absorb the full report...before they jump in again..

[Schrodinger]

Hey guys, I've been reading ShareTrader for a few months now and have only just registered. Just want to let you know that I really appreciate the depth and insight you guys have given. Its really helped me get my bearings in the sharemarket (I have only been investing for half a year now).

Just wanting to ask if you use or know of any other good websites/resources/books that I can use to help me research further on my own?

Cheers

(also wondering why the market didn't react well to NZR's announcement on Friday?)

Just a word of advice a stock that has had a recent good run (NZR) has most of the good news factored into the price. This is where you need to DYOR and figure out if the good times will continue i.e to $3 and beyond. I don't recommend letting others persuade you to buy/sell

There are many good books Intelligent Investor would be a good start.

[samdaman]

Ive done some preliminary analysis on this one here. Considering putting some dosh in here. From a fundamental viewpoint a lot of people seem to believe a 20c dividend is on the way next year. I factored in some safety, i think it was a 15c dividend (im not with my model currently) and used a cost of equity of 7.1% (found with my capital structure spreadsheet). Using modest growth numbers the stock came out decently undervalued.

I see risk here in the fact that they've got a quite high debt to equity ratio (36ish% iirc) so even with optimal results they may choose to pay down their debt. This coupled with the chance of not actually achieving said strong dividends could push down the valuation considerably.

So how confident are we on a 15-20c divvy next year?

On the technical side. The moving averages were diverging last i remember indicating a possible uptrend in the making.

What do yall make of it?

[Schrodinger]

Ive done some preliminary analysis on this one here. Considering putting some dosh in here. From a fundamental viewpoint a lot of people seem to believe a 20c dividend is on the way next year. I factored in some safety, i think it was a 15c dividend (im not with my model currently) and used a cost of equity of 7.1% (found with my capital structure spreadsheet). Using modest growth numbers the stock came out decently undervalued.

I see risk here in the fact that they've got a quite high debt to equity ratio (36ish% iirc) so even with optimal results they may choose to pay down their debt. This coupled with the chance of not actually achieving said strong dividends could push down the valuation considerably.

So how confident are we on a 15-20c divvy next year?

On the technical side. The moving averages were diverging last i remember indicating a possible uptrend in the making.

What do yall make of it?

I think the company indicated they will review. They maybe under the impression the depressed oil prices are temporary and this will squeeze margins. I assume they will wait until the next results to assess. Either way a good performance from the company will give them options. I am under the impression the large capital investments have been completed so this could be a drive for efficiency.

[bull....]

Im going on the assumption now of no dividend this current yr, all debt repaymt.
2016/17 dividends resume
2017/18 onwards massive dividends start, like they say top tier nzx50 divs

If current conditions maintained in my senario ( modeling assumes low oil environment which I believe will become the norm )

I dont normally invest long term but ill give this a go because it could be the bargain of the century in my humble opinion under current conditions.
my model can change without notice under the million variables which were inputed for this company lol.

[samdaman]

Its looking good tbh. Im just concerned about how confident we are of these earnings in the upcoming years? How much risk is there that they wont make these future earnings we've all assumed?

[BlackPeter]

Its looking good tbh. Im just concerned about how confident we are of these earnings in the upcoming years? How much risk is there that they wont make these future earnings we've all assumed?

Quite easy - have a look at their recent investor presentation (https://www.nzx.com/files/attachments/208345.pdf). As long as the USD/NZD exchange rate and refining margin stay where they are (or improve) and nothing else unexpected happens, everything should be honky dory.

BTW - don't understand the discussion re the 2015 divvie. NZR's latest dividend policy is that they will pay out 40 to 60% of EPS as long as they still have major capital expenses (which they have this year with MTH). If we look at the earnings spreadsheet (slide 20 of the investor presentation), than they should deliver in 2015 something like at least 30 to 40 cts plus in EPS, which would mean a roughly 15 to 20 cents divvie.

Based on above I do expect a divvie for the 2015 year (with payments starting either 2nd HY 2015, or early 2016).

Again - the golden times might go on for years, or they might end next month or anytime in between - depending on exchange rate, oil price (slide 13 of the presentation is quite telling) and refining margin. The only thing which is sure is - they won't continue for ever ....

However - not sure whether anybody can tell you how big the risk is that any of the above mentioned parameters change soon. How long is a piece of string?

[samdaman]

Twice the distance to the middle haha. Well as its looking now im liking the look of the future prospects of NZR. Compared to a lot of other companies on the nzx its actually looking undervalued :)

[golden city]

somehow.., nzr still dropping .wonder why

[BlackPeter]

somehow.., nzr still dropping .wonder why

Looks so far like an unbroken uptrend to me - didn't even touch the MA30 yet.

[samdaman]

somehow.., nzr still dropping .wonder why
I reckon it could come down a wee bit more. As BP said it hasn't even touched the typical MA's stocks bounce off so with the whole end of feb reporting coming out we could just be seeing some rebalancing/technical pressure on the stock for a little while. I'm waiting with bated breath on this one. I reckon a really nice entry point is on the horizon.

[golden city]

i think so too...,once next report come out.., it will start uptrend again

[dodgy]

i think so too...,once next report come out.., it will start uptrend again

Seems as like the Chairman may agree with my assessment of North of $3 per share March 2016 - he was happy to buy on market a decent number at $2.63/s ?
-d

[golden city]

good entry point now

[samdaman]

good entry point now

If we think its going above 3 dollars in the next year these are all good prices to get in at :). I still think it may get a bit closer to the 50 EMA being it sees another leg up. Could be tomorrow, could be next week or month. Just a guess really :D

[bull....]

probably be a panic soon at this rate, normally makes nice entries

[bull....]

directors buying is a good sign, also price of oil big fall last night down like 5% petrol prices are not falling margin bigger for nzr?

[cdonald]

http://www.tradearabia.com/news/OGN_276396.html

article mentions that Singapore Complex refining margins are $9 for the month of Feb. NZR uplift is 3 to $5 on that. should be lots of safety net put into the Cap in Jan/Feb. Might be an interesting announcement on thruput coming out Mid March! Directors must have hated the embargo period for not buying shares.

[golden city]

looking good..., have accumulated more on nzr

[golden city]

consolidating now..can't wait for new report comming out

[cdonald]

http://www.platts.com/latest-news/oil/singapore/singapore-cracking-margin-at-two-year-high-on-27159977

And to finish off the Jan/Feb period, refining margins at a 2 year high.

[bull....]

Am expecting one of there best margin reports for a long time

[Schrodinger]

can everyone start talking negative....I have not finished buying @ 2.50 ish.

Obviously a terrible company with poor prospects. That do?

[Ninefingers]

Wouldn't touch this one, it has disaster written all over it.

[dodgy]

should be sub $3 March 2016. Yeah right !!!!
-d

[YoungBuck]

What report is that GoldenCity? forgive my ignorance...

[cdonald]

What report is that GoldenCity? forgive my ignorance...

more than likely reffering to the thruput report that is due out last week of March for Jan/Feb

[golden city]

nzr going life again..

[bull....]

oil and nz dollar down again at the moment, all positive

[bull....]

oil and nz dollar down again at the moment, all positive

same again, report coming soon should show them in the 70-75c / 9+ margin of the matrix

[golden city]

probably after next week.., will top 3 bucks

[bull....]

interesting to note what the chart say about the oil price.
History and the charts show us every time oil has fallen off a cliff it has recovered very rapidly.
This time seems to be distinctly different giving weight to the true supply and demand issue's that are currently effecting the price rather than just the traders.
After a brief rally which saw nynex oil climb 28% above the lows we have fallen back to be 7-8% above the lows.......this is technically very bearish and a good sign that low oil prices are here to stay for sometime......which is very good news for NZR.

history shows the long term price of oil is under $40, $100 oil was an anomaly

[cdonald]

Might actually head lower in the short term with limited floating storage now available and USA stockpiles increasing. At some stage the oil stored by the chinese will hit the market and drive the price down a bit. Again, I think that the price of oil is a very small part to play in the profit that NZR make and other factors such as the rolling refinery strikes in the USA have got a lot bigger part to play.

Of interesting note, good to see the Commercial Manager of the refinery buying shares, was a bit shocked to see that it was the first disclosure notice for him as it looks like he has been buying for a while. Might be that he has now accumulated over 10k of them.

[bull....]

big falls again in oil - refiners going gang busters my favourites - VLO,NZR

http://247wallst.com/energy-business/2015/03/09/oil-refining-stocks-rise-on-swelling-margins/

[dodgy]

Dubai spot price basically follows the nymex price or very close to.
Does anyone know if NZR buy using hedging or is spot price only.
Due to 40% of NZR oil being paid based on the BRENT price it is essential for maximising of profits that the spread between Brent and Dubai is as little as possible.
Currently the spread has widened from $4 in NOV/DEC to about $7 now.
What this basically means is NZR currently pays a premium of $7 per barrel for 40% of it's oil supplies........
In saying that Brent is a superior product to Dubai oil.
However many refineries around the world are 75% Brent.
The spread has average between $8-$10 when Oil was trading at $100
In the last 2 months the spread has been very volatile ranging from $0-13
Watch this spread closely as it has a lot to do with NZR's profit margins.

Hi Snaps
My understanding is NZR is purely a tolling operation getting paid $US per barrel processed. The only advantage in decreased oil, is storage costs to the oils owners, the oil companies.
Regards
-dodgy

Discl: Current holding 60k

[bull....]

http://www.cmegroup.com/trading/energy/crude-oil/brent-dubai-swap-futures.html

think this is the spread $2.43 very small, if im wrong please correct

[dodgy]

http://www.cmegroup.com/trading/energy/crude-oil/brent-dubai-swap-futures.html

think this is the spread $2.43 very small, if im wrong please correct

Hi Bull
I don't remember any mention of NZR having any percentage draw down of Dubai, Brent etc crude for the refinery but that the reconfiguration will enable the use of a wider range of crude feed stocks , e.g differing viscosity and sulphur contents etc. This would enhance profitability due to differing product production eg more fertilizer raw material or whatever. Even NZ oil from Maari/Tui etc. priced on Tapis I think, can be processed if considered desirable (low viscosity?).
Regards
-d

[bull....]

Hi Bull
I don't remember any mention of NZR having any percentage draw down of Dubai, Brent etc crude for the refinery but that the reconfiguration will enable the use of a wider range of crude feed stocks , e.g differing viscosity and sulphur contents etc. This would enhance profitability due to differing product production eg more fertilizer raw material or whatever. Even NZ oil from Maari/Tui etc. priced on Tapis I think, can be processed if considered desirable (low viscosity?).
Regards
-d

Hi D

40/60 is the correct figure from my understanding like snapiti mentioned
You are also correct feedstock can be changed to maximise profit as they see fit.

[dodgy]

Hi D

40/60 is the correct figure from my understanding like snapiti mentioned
You are also correct feedstock can be changed to maximise profit as they see fit.

Hi Bull
I can clarify that at the AGM in April which I will attend. If you or any other owner/shareholder wishes to ask anything I will be happy to oblige within reason.
-d

[dodgy]

not the spread I was referring to.....perhaps I should of used the word differential.

Page 9 of their latest presentation illustrates it much better.
Page 17 also mentions that the lower brent premium to Dubai is very positive to the company.
I am sure this is because they can make a higher % of quality/higher margin products from the Brent crude so the less premium the more profit.
They certainly are in a great position but given all the head winds the company has faced over the last 3 years it was certainly overdue........ looks like the sweet spot is here to stay.
Great stock to be holding for the foreseeable future.
As a very basic tool to know how well NZR are doing just look at how much the raw product (oil) has dropped in the last 4-5 months(about 50%) then have a look at the price the finished product has declined....only about 25%


Hi Snaps
We seem to both agree on one thing - this company is solid and improving - natural disasters excepted. However my belief is that the price of oil input or motor spirits output has no bearing on profit except for 3rd party holding costs and to the NZR the company very minimal processing flexiblity. The ability to process different oil blends into more value added finished product is of benefit to us , greatly assisted by the current upgrade. As I said to Bull if you are not going to the AGM fire me any questions for clarification.
Regards and profitable holding.
-d (owner/shareholder)

[dodgy]

have they announced a venue for the AGM...THANKS

Snaps
Always at the refinery and you may well get a bus tour thrown in and GOOD catering. Oil industry you know.
-d

[dodgy]

jeez they would be hard to beat the catering in my home.....do they do a webinar.
I have only taken a shareholding in the company from october last year........taken a much bigger one of late

Snaps
They recently have recording for broadcast at the meeting, so I think they probably will. The refinery tour is well worth a go to appreciate the mechanics of this beast.
-d

[golden city]

looking good

[cdonald]

Nice announcement. Hit the cap and banked 6m and high margins are continuing. Great work shifting the shutdown into the end of April to max the higher margins. Well done guys. You cant really control the margins but you can influence plant availability. Thinking on their feet.

[bull....]

great report, also glad to see them defer maintenance to get more margin ( lot of refiners doing this) anyway guess if margins stay high doesn't really matter then in retrospect.

[dodgy]

I read the throughput with interest - particularly the reference to the Dubai spread? I can't get my head around this so will raise after the AGM as to the quantum and effect on profitability. If someone who knows more about this - please enlighten me .
Thanks
dodgy

[bull....]

hey d

if a refinery can balance consignment sourcing and stockpiles supply in advance, a later increase in Brent over WTI allows an improved margin?

Would like to hear your understanding after the agm on the spread thx

[golden city]

consolidating again..,can't wait to break the 3 dollar point..

[dodgy]

consolidating again..,can't wait to break the 3 dollar point..

Hi GC
Slow and steady beats a sprinter any day.
$3+ sustainable by next March.
-dodgy (not a hare)

[bull....]

Hi D,

Could you ask at there AGM why the throughput is not being maximised? I notice they have historically been able to run at higher throughputs.
Do they have storage limits? or is it an operational thing?

It makes sense for them to max out throughput I believe to improve there profits if they are limited by the processing fee?

I have current crack at nearly $9 at end of feb

[dodgy]

Hi D,

Could you ask at there AGM why the throughput is not being maximised? I notice they have historically been able to run at higher throughputs.
Do they have storage limits? or is it an operational thing?

It makes sense for them to max out throughput I believe to improve there profits if they are limited by the processing fee?

I have current crack at nearly $9 at end of feb

Hi Bull
Will do. I guess the maximisation or otherwise of throughput is currently being restricted by work associated with the expansion / conversion.
-d (owner/shareholder)

[cdonald]

http://www.brecorder.com/markets/energy/asia/233969-middle-east-crude-dme-oman-weakens-against-dubai.html
Refining margins still holding up at $9.50USB/bbl. With NZR uplift on this it means more money into the CAP bank and a lot of debt paid off. Looks like another 60m pay cheque at end of April with a further 10m going against CAP. Looking like a record year for NZR.

[golden city]

a surprise drop again..,

[Nasi Goreng]

I think this drop will be related to CTX in Aus which dropped 9% today. Re-balancing after Chevron dumped stock.

[bull....]

consolidating, all healthy

[BlackPeter]

Nice announcement from NZR: they expect to complete their new "Patrol Factory" now four to six weeks early (and on budget). I guess this means the promised benefits (increased margin and throughput) should flow through earlier as well.

https://www.nzx.com/files/attachments/210716.pdf

Great stuff - might give the SP again a wee push upwards ...:t_up:

[dodgy]

Nice announcement from NZR: they expect to complete their new "Patrol Factory" now four to six weeks early (and on budget). I guess this means the promised benefits (increased margin and throughput) should flow through earlier as well.

https://www.nzx.com/files/attachments/210716.pdf

Great stuff - might give the SP again a wee push upwards ...:t_up:

BlackPeter
Add while you can - this may not push the share price, but will once online, then - dividends are on full time. I am still expecting $3 by next March - +16.27% on current.
Regards
dodgy - owner/shareholder

[Nasi Goreng]

I sold my NZR shares after the recent earnings announcement for $2.60. After digesting the numbers, it looked to me to be over priced and quite a risky investment.

Even if they have a stellar year and deliver NPAT of $70M, this would be a PE multiple of about 10 which seems alright but you have to ask yourself, are these kind of earnings sustainable for the next 10 years?

Its a great story and its good to see them returning to profit but I can't quite see how current price is going to provide me with a decent dividend or gain in share price over the next 2-3 years.

From a TA point of view, there is nothing too scary in the chart and it looks like there will be more upside. I just don't understand how earnings are going to grow to justify price in the $3-4 range. What earnings do you guys forecast they will deliver this year, and then next?

[BlackPeter]

I sold my NZR shares after the recent earnings announcement for $2.60. After digesting the numbers, it looked to me to be over priced and quite a risky investment.

Even if they have a stellar year and deliver NPAT of $70M, this would be a PE multiple of about 10 which seems alright but you have to ask yourself, are these kind of earnings sustainable for the next 10 years?

Its a great story and its good to see them returning to profit but I can't quite see how current price is going to provide me with a decent dividend or gain in share price over the next 2-3 years.

From a TA point of view, there is nothing too scary in the chart and it looks like there will be more upside. I just don't understand how earnings are going to grow to justify price in the $3-4 range. What earnings do you guys forecast they will deliver this year, and then next?

I guess it all depends on the oil price trend and NZD/USD exchange rate. Have a look through this thread - there is a relevant discussion (around mid February, I think). If oil stays low, NZD/USD stays as it is and refining margins stay high, than we could be in this year for EPS of 40 to 50 cents - and this should improve next year with the completion of Te Mahi Hou.

Obviously - your guess re the development of oil price, exchange rate and refining margin is as good as mine, so make your own decisions.

Discl: Holding (lots);

[dodgy]

I sold my NZR shares after the recent earnings announcement for $2.60. After digesting the numbers, it looked to me to be over priced and quite a risky investment.

Even if they have a stellar year and deliver NPAT of $70M, this would be a PE multiple of about 10 which seems alright but you have to ask yourself, are these kind of earnings sustainable for the next 10 years?

Its a great story and its good to see them returning to profit but I can't quite see how current price is going to provide me with a decent dividend or gain in share price over the next 2-3 years.

From a TA point of view, there is nothing too scary in the chart and it looks like there will be more upside. I just don't understand how earnings are going to grow to justify price in the $3-4 range. What earnings do you guys forecast they will deliver this year, and then next?

Hi Nasi Goreng

Follow BlackPeters' advice and read back on this thread as all views have been canvassed. Then apply your own spin to this wheel of fortune. Don't follow my view, it is just that, a viewpoint. I think based on your current assessment and your PE of around 10 this would not be out of order.
Regards
-d

[bull....]

consensus analyst target price is 3.39 as 1/4/15 with 4 buy recommendations next 2yr forecasts

380m/403 revenue, 10cps / 23cps div and debt 239/144

[iceman]

I'm with you on this one snapiti. Outlook on margins, NPAT and dividends for the near and medium term look very healthy as far as I can see it. Have been buying a few in the last couple of weeks and look forward to watching this progress

[

QUOTE=snapiti;566972]I think you should read page 20 of the latest company forecast/outlook.
www.nzx.com/files/attachments/208345.pdf (http://www.nzx.com/files/attachments/208345.pdf)
The matrix on this page indicates that if current trading margins remain, even decline a bit, and the nzd stays around 75 the company is on target to achieve NPAT of 127m. Far ahead(almost double) your so called stellar result of 70m NPAT.
Have you made a mistake in your research or have I missed something.
The current share price is yet to price in the better margins and higher volumes of the coming new plant.[/QUOTE]

[Nasi Goreng]

Hi Snapiti

I've followed this thread for a few months and read the attached pdf when it came out. The table provided in the report is very handy for us to project where profits may be in the short term.

Yes at current margins, profits could be 127m, maybe even a bit more if the margins were consistently in the $9-10 range and kiwi stays where it is. An avg of $7 over 12 months would give you around $70m and based on results from the last few years, would indeed be stellar.

This all looks to me like its best case scenario, no cost blowouts or shutdowns that go overtime, and consistent high margins. I guess that could be why the market hasn't bought into these promises just yet. A case of show me the money!

A share price of $3-4 to me would suggest the market is pricing in very healthy profits of $70m+ per year for the next 5-6 years in an industry that proves to be consistently volatile. Right now, we can only guess where margins may be 2 years from now and in 2 years we could be looking at massive returns or a business that is struggling to turn a profit.

[iceman]

I agree with the Directors intention of prioratising paying down debt during the next year but can see fast growing dividends beyond that, all dependand on good operations in this volatile industry. I have recently been looking for companies that are likely to significantly increase dividends in the next 1-3 years and NZR is one of those plays for me. Time will tell :-)




Iceman you raise a good point about the dividend as NZR has been considered a dividend stock as long as I care to remember........apart from the last 2 years when it has paid little in dividends so would of had many divi investors sell out because of this.
However divi investors will have to be patient as management have openly said paying of a portion of debt has priority over a divi in the next 12 months.

[waikare]

I agree with the Directors intention of prioratising paying down debt during the next year but can see fast growing dividends beyond that, all dependand on good operations in this volatile industry. I have recently been looking for companies that are likely to significantly increase dividends in the next 1-3 years and NZR is one of those plays for me. Time will tell :-)


Their last dividend was 2 cents paid in Sept 2013, if they intend to square off some of their debt, it could mean 4 - 5 years between drinks

[dodgy]

Their last dividend was 2 cents paid in Sept 2013, if they intend to square off some of their debt, it could mean 4 - 5 years between drinks

Hi Waikere
I would put a token divi on the table just before 31/3/16 supporting $3 sp at that time.
Regards
-dodgy (owner/shareholder)

[BlackPeter]

Hi Waikere
I would put a token divi on the table just before 31/3/16 supporting $3 sp at that time.
Regards
-dodgy (owner/shareholder)

Actually - if this is really turning out such a stellar year, than I would expect in March 2016 more than just a token as dividend. Have a look at their dividend policy (slide 14 of their latest investor presentation):

The aspiration is to pay top quartile NZX50 dividend returns over the investment cycle, specifically:

During periods leading up to and including major capital expenditure the dividend pay-out expressed as a percentage of NPAT will be in the 40-60% range unless otherwise advised by the Directors.
During periods of modest capital expenditure and optimum debt levels, the dividend pay-out percentage will be above 60% unless otherwise advised by the Directors.




Based on that ... sure the directors can still do whatever they deem sensible, but I would expect a payout closer to the 40% of EPS (with the reminder going to debt repayment). This means if things keep ticking as they do at the moment and we end up with an EPS between 40 to 50 cents, than this would amount to something like 16 to 20 cents final divvie.

Obviously - things can turn fast on the oil market - i.e. DYOR

[bull....]

current crack has fallen from highs to around 7.50 I believe

[bull....]

Is my information correct....that is NZR consistently beats international crack prices by US $2.50-3.50 a barrel

in the last margin throughput report

Singapore complex margins remained healthy and averaged USD 5.40 per barrel for the period. Refining NZ’s margin uplift over Singapore complex margins of USD 4.50 per barrel for the period was again higher than the normal range of USD 3 - 4 per barrel, driven by excellent operational performance and ongoing favourable crude price spreads against the Dubai benchmark.

so should still be on track for a good 2mths again

[dodgy]

Actually - if this is really turning out such a stellar year, than I would expect in March 2016 more than just a token as dividend. Have a look at their dividend policy (slide 14 of their latest investor presentation):

The aspiration is to pay top quartile NZX50 dividend returns over the investment cycle, specifically:

During periods leading up to and including major capital expenditure the dividend pay-out expressed as a percentage of NPAT will be in the 40-60% range unless otherwise advised by the Directors.
During periods of modest capital expenditure and optimum debt levels, the dividend pay-out percentage will be above 60% unless otherwise advised by the Directors.


Based on that ... sure the directors can still do whatever they deem sensible, but I would expect a payout closer to the 40% of EPS (with the reminder going to debt repayment). This means if things keep ticking as they do at the moment and we end up with an EPS between 40 to 50 cents, than this would amount to something like 16 to 20 cents final divvie.

Obviously - things can turn fast on the oil market - i.e. DYOR

Hi BlackPeter
What I hope for ( $3++), and what I believe are two separate issues. The directors have stated a capital return for the future, all things being equal. Therefore order is, repay debt to comfortable level, resume dives "token" and return capital. Hence my 2016 prediction.
Regards
-dodgy (owner/shareholder)

[iceman]

That is pretty much the same take on it as I have BP. I certainly am expecting a divie in that range for the near and medium term future and significant reduction of debt at the same time. Time will tell.


Actually - if this is really turning out such a stellar year, than I would expect in March 2016 more than just a token as dividend. Have a look at their dividend policy (slide 14 of their latest investor presentation):

The aspiration is to pay top quartile NZX50 dividend returns over the investment cycle, specifically:

During periods leading up to and including major capital expenditure the dividend pay-out expressed as a percentage of NPAT will be in the 40-60% range unless otherwise advised by the Directors.
During periods of modest capital expenditure and optimum debt levels, the dividend pay-out percentage will be above 60% unless otherwise advised by the Directors.




Based on that ... sure the directors can still do whatever they deem sensible, but I would expect a payout closer to the 40% of EPS (with the reminder going to debt repayment). This means if things keep ticking as they do at the moment and we end up with an EPS between 40 to 50 cents, than this would amount to something like 16 to 20 cents final divvie.

Obviously - things can turn fast on the oil market - i.e. DYOR

[dodgy]

Hi all
It appears that the NZR AGM will be in Auckland this year - 1400 29/4/15 - Pullman hotel. Please check your admission slip when received next week .
Regards
-dodgy (owner/shareholder)

[barleeni]

Hi all, everyone seems very bullish at the moment but I still have the opinion that there is more downside than upside perhaps? (which I don't like to say as it is my largest holding at present) i.e. to me it feels as though the current s/p reflects the best case scenario playing out in the next 12-24 months. Predictions are for say $120mil profit FY15, which going by consensus would raise the possibility of 20 cents in divi's...... which for a share with a current price of circa $2.60 about a 7% return.. and this is best case scenario? hoping that oil prices and exchange rates don't go the wrong way?

Thoughts? I am happy to hold, as my average buy price is $1.90, but I think we might be in a holding pattern here at $2.60 for quite a while?

[Nasi Goreng]

I'm in your camp barleeni. After earnings the price stalled and I felt like it could be a potential slow walk up to $3 with the risk of it falling back. I would be tempted back in again if it fell back to $2.20.

[Nasi Goreng]

Well OGC is currently a PE of 6. There are quite a few similarities between both companies. I don't think NZR is in the same league as most infrastructure companies as far as sustainable returns for the future go.

[barleeni]

I don't understand your reasoning...... how can $2.60 have priced in the best case scenario.
Your best case scenario, $127m profit, would give the company a PE of just 6......please tell me where you can find an infrastructure company on the nzx that trades anywhere near this multiple. Most are 12-15.
You are using a divi return as the only way of valuing the company.......thats weird
Your scenario indicates if they payed all profits out as a dividend, say 50cps, the company would be worth more than if they choose to pay 20 cps of the 50 cps profits in a divi and used the other 30cps to pay back debt. Thats very weird.
hmmmmmmmm me thinks you should look past the divi percentage per share and pay more attention to EPS.

I consider return based on the dividend only primarily because I don't consider this as a growth company in any way shape or form. I haven't got figures in front of me but I recall throughput as being very flat for the last 4-5 years, which I guess is limited by the plant capacity. So for me EPS is dividend driven only.

My thoughts are a) there is no opportunity to increase throughput and hence there is zero growth opportunity b) profitability of the company is largely dictated by factors outside of the companies control (i.e. no matter how good management is it cant really influence profit/loss) and c) no one can really foresee how the company will be performing in 24 months. Hence I am only looking at this short term, and certainly im not envisaging 'sustainable returns' like you would with a typical infrastructure company as Nasi Goreng puts it.

[dodgy]

I think you should do some more research on the company as the new plant which will be operational offers an increase in throughput.
Average 10 year historical PE for NZR is between 12&13


Morning Snaps and all
All views have been well canvassed in prior posts, especially my own. We all know about soothsaying, time and time alone will be the judge.
My preference for now is for owner/shareholders to attend the AGM in a few weeks and make their views known, ask the questions and seek the answers. The company wants and needs its owners feedback. If you can, help steer your company. your hard earned money where ever . It's your constitutional right - not only NZR but every co. you put money into.
_dodgy (owner/shareholder)

[iceman]

I would have liked to join you dodgy but will be overseas. I would very much appreciate a few comments from you after the meeting, if you can be bothered.


Morning Snaps and all
All views have been well canvassed in prior posts, especially my own. We all know about soothsaying, time and time alone will be the judge.
My preference for now is for owner/shareholders to attend the AGM in a few weeks and make their views known, ask the questions and seek the answers. The company wants and needs its owners feedback. If you can, help steer your company. your hard earned money where ever . It's your constitutional right - not only NZR but every co. you put money into.
_dodgy (owner/shareholder)

[Nasi Goreng]

Well both industries profits are dependent on uncontrollable factors and both are highly volatile. Both carry significant debt and I would also say investors in both companies have been wounded over the last few years and may be a little cautious about throwing the farm at them.

In the last 10 years, there has been increased capacity of mega refiners so looking at history of what the share price was based on 10 years ago doesn't stack up. Looking at forecast profit level of $120m and then suggesting that is the new PE and then using that as forward PE for the next few years is risky.

No one is suggesting current share price is over valued. There is upside potential but also downside and that needs to be priced in and even if profits are right up there at the end of the year.

On a side note, funnily enough the share price of both is $2.60 range and OGC's profit for 2014 is where you would like NZR's profit to be for 2015. You asked for an NZ infrastructure company with multiple of 6, well most are in boring industries and deliver similar results year on year... unlike NZR who's results could be like that of a miner.

[bull....]

I read the throughput with interest - particularly the reference to the Dubai spread? I can't get my head around this so will raise after the AGM as to the quantum and effect on profitability. If someone who knows more about this - please enlighten me .
Thanks
dodgy

hey d If you look at analyst presentation pg 9 crude differentials vrs Dubai if this is a basket of oil they buy then the average difference in the spread of the oils against Dubai as represented by the second picture pg 9 then look at pg10 the 1.30 is the margin they make as displayed on pg 9 so then 1.30 + .68+.4+.6+.5 = there nzr margin of 3.48 so the closer the spreads of the basket to Dubai means lower cost for them more margin being the 1.30.

I also think we have been using the wrong margin for Singapore as often quoted in news source as this did not match what they are reporting in throughput reports.
so I believe the correct way would be the margins of the basket of oil they buy quoted in us dollars at Singapore then converted to nzd at nz using there basket of oils gave roughly the margin they quote in the throughput report -- so if I am correct in my thinking ( anyone correct if im wrong ) as of today the Singapore complex is 7.7 + 4.5 ( nzr margin) = 12.2 margin for the day of course each day is different that's why you get the average

[bull....]

I think you should do some more research on the company as the new plant which will be operational offers an increase in throughput.
Average 10 year historical PE for NZR is between 12&13

there matrix on the new plant doesn't take account of oil under $60 from what I can see and they stated a falling oil price decreases the margin they make from the upgrade?
anyway how much of the extra 3mil throughput flows thru to net profit, is the extra throughput guaranteed from customers? with the dynamics of low oil environment the upgrade may not be warranted if comparred to irr vrs the other option all in hindsight of course

[bull....]

z energy report says nz refining made a grm of 13.31 in march - wow huge shame they only get 9, but I guess they are banking plenty of reserve if margin falls

[freddagg]

z energy report says nz refining made a grm of 13.31 in march - wow huge shame they only get 9, but I guess they are banking plenty of reserve if margin falls

Thanks for posting that. Interesting that it comes from Z before NZR

[golden city]

that is good news

[dodgy]

banking plenty of reserve's to make sure they make a $127m profit.
$4 by christmas


Afternoon Snaps
I will stick with the $3 March, your projection gives me a Turkey and a holiday this Christmas. Beats dog for a change.
Have a happy weekend.
-dodgy (owner/shareholder - unlimited patience).

[dodgy]

snaps had the time to review his research this morning(always good to do in case you miss something)
Last 10 years ave P/E has been 14(better than I thought)
Current plant supplies 55% of NZ fuel requirements.
When the new plant is online it will supply 65% of NZ fuel requirements and creating an uplift in margin per barrel of about 95 cents per barrel.
Many on this thread think the current share price has all the good completely priced in.........I say absolutely no way.
Currently with the old plant they are way ahead of target to make an NPAT of $127m.
With low returns coming from most investments and most utility and infrastructure firms trading with PE multiples of 16-18 it is fair to assume, given NZR history, they will eventually trade at a PE of 12-14 again.
So not taking into account the added benefits of the new plant and using a historically low PE of 12 this is what should happen.
$70M NPAT x 12 PE = $2.60 ps
$80m NPAT x 12 PE = $3.10 ps
$90m NPAT x 12 PE = $3.60 ps
$127m NPTA x 12 PE =$4.94 ps

Hi Snaps
I don't disagree with your bullish stance - just the timing and quantum of the share price uplift. !0%+ between now and March isn't to be sneezed at - you can borrow sub 7%p.a. on secured. Bring on the Turkey for Christmas.
Have a sunny weekend.
Regards
-dodgy (owner/shareholder - 90k and looking to increase on dips)

[barleeni]

Currently with the old plant they are way ahead of target to make an NPAT of $127m.

I would say that yes they are on track to make NPAT of circa $127m for the year to date.......... but what makes you think it will be well ahead of $127m? The only variable I can think that would do this is the exchange rate, (the forecast of $127m NPAT is based on an average rate of NZ:USD of $0.75......... which is about right for the year to date, but if anything is showing signs of trending against NZR (?)).

By the way can anyone tell me what happens to / or how long these 'çeiling' credits can be held for? do they lapse at all after a certain period?

[BlackPeter]

I would say that yes they are on track to make NPAT of circa $127m for the year to date.......... but what makes you think it will be well ahead of $127m? The only variable I can think that would do this is the exchange rate, (the forecast of $127m NPAT is based on an average rate of NZ:USD of $0.75......... which is about right for the year to date, but if anything is showing signs of trending against NZR (?)).

By the way can anyone tell me what happens to / or how long these 'çeiling' credits can be held for? do they lapse at all after a certain period?

"ceiling credits" as well as "floor payments" are only good for the year in which they occurred. I.e. if they don't need to use them up in 2015, they are gone ...
Still - I wouldn't be too worried if they stay for a handful of years above the ceiling ... (just day-dreaming, but than - who knows?):)

[barleeni]

cheers for the clarification blackpeter / snapiti. bit of a shame that the ceiling credits don't last too long, but good news that the discussion is having to be had. They must have a heap of credits in the bank by now, which you would think means it is almost a foregone conclusion that they will average the year out at $9. Slight weakness in share price... related to todays exchange rate movement im guessing?

[bull....]

the stock price is moving around in its sideways channel has been since jan really

[Nasi Goreng]

Hi Snaps
I don't disagree with your bullish stance - just the timing and quantum of the share price uplift. !0%+ between now and March isn't to be sneezed at - you can borrow sub 7%p.a. on secured. Bring on the Turkey for Christmas.
Have a sunny weekend.
Regards
-dodgy (owner/shareholder - 90k and looking to increase on dips)

Maybe its my risk appetite but I wouldn't dream of borrowing for NZR shares. While very unlikely, imagine how much shares would be worth if there was an incident on site.

[Nasi Goreng]

Yes I am. If I was to borrow to buy shares in NZR, this would have to be one of the risks I would need to assess. While like I said it would be very unlikely, I would want to make sure I didn't have too many eggs in one basket so to speak.

If NZR is 5-10% of my portfolio, different story. The risk of something serious wouldn't worry me one bit as it is unlikely.

http://abc7.com/news/exxon-mobil-refinery-in-torrance-damaged-after-explosion/523467/

[dodgy]

are you serious

Hi Snaps
Can you enlighten me on your comment please.
Regards
-d (owner/shareholder - added 20k and happy with that at the moment)

[skid]

more likely to have a breakout of foot and mouth disease....would that stop you investing in Fonterra or Synlait.
Personally would not borrow money to buy any shares.

Would you borrow money to buy shares in any company.
If so which ones and why.

I would get a short term loan (if needed )to put the minimum amount in Kiwisaver (for the gov contribution) if i was over 60:):)

But thats about it:)

[BlackPeter]

Funny release this morning:


In light of ongoing shareholder queries about Refining NZ’s processing arrangements with its
customers, the Company has today posted a letter from independent auditor, BDO,
summarising the findings of their audit of the Company’s processing fee calculations, to the
Company’s website.

https://www.nzx.com/files/attachments/211805.pdf

They are referring shareholders to a letter on their website, but don't bother to give a link. Anybody managed to find the referred to letter on their website? At the time of writing this post they either didn't yet upload the letter or they managed to hide it really well on their webpage.

Anybody more success than me in finding it?

[bull....]

bp

http://www.refiningnz.com/our-investors/reports--releases/processing-fee-reviews.aspx

[BlackPeter]

cheers ...

[psychic]

Has Brian Halliwell's motion for the AGM been discussed on here before? Proxies close 2pm Mon, I assume someone will be there to receive them..
I need to make time to read it thoroughly and to also consider RNZ's stance. Think his efforts over the years deserve shareholder consideration.

http://www.refiningnz.com/media/98266/notice_of_meeting_-_2015.pdf

[BlackPeter]

O.K. - I'll take the bait:

While I am not sure whether Bryan's motion will make any measurable difference, and in my view won't change the quite poor treatment of minority shareholders at NZR, it is still chipping the stonewall of the four majority shareholders. I do admire (and want to support) his fight for the minority shareholders against the big boys who clearly cream the milk before the rest (in times something is left) is distributed between all shareholders.

This is one of the reasons I intend to sell NZR earlier than later (though not now - things look just too good at the moment so that even the creamed off milk looks like a good income) - and this is one of the reasons I supported his motion.

[bull....]

probably as mentioned by other posters the bad treatment in the past of minority holders, why the price could take a while to move higher as company probably needs to rebuild the faith.

[psychic]

Okay, well I wasn't aware of the background, but this piece written a year ago by Gaynor probably sums up the history well.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11252520

I'll be voting in support of Halliwell's motion. Agree with you BlackPeter.

[golden city]

what happen to the share price .not moving forward

[couta1]

what happen to the share price .not moving forward
Its called shares not doing what YOU want them to, a common disease with no known antidote.

[dodgy]

what happen to the share price .not moving forward
golden city
You know better than that. You know whats ahead, patience - March 2016 $3 - then decent divi and maybe, just maybe a small capital return .
Have a reflectful weekend.
Regards
-dodgy (owner/shareholder - constantly hopeful)

[golden city]

yes..maybe i am ahead of my self .., expecting too much.., sit on big profit already

[bull....]

huge margins at Caltex refining $20
http://www.thebull.com.au/articles/a/53692-caltex-margins-soar-on-low-oil-price.html

[golden city]

looks all good..., beside the market not reacting too much

[bull....]

maybe someone has some thoughts on this -

the processing fee arrangement incentivises nzr customers to process more oil thru nzr because they are rebated the margin above $9 so the higher the margin the bigger the rebate right?

So why is the throughput never reflect this so called incentive?

[bull....]

please explain bull........how much lower than maximum throughput does NZR run on a yearly basis.

do nzr have a max throughput?

[psychic]

don't forget that we are in extremely low yield and overall returns territory in world markets.
So given this I believe NZR price will settle with a p/e of 15-16 and a divi yield of 6%.
Do the maths and see where this puts the share price.
The timing of this sweet margin spot could not have been better for NZR.........they will be able to pay down some of the new debt very quickly and only 6 more months for the benefits of the new plant to kick in for all shareholders.
Have done some good research on the deal between NZR and it's major costumers/ shareholders and whilst on the face of it you could argue that it is a great deal for the share holder/ costumers it is also a deal that insures NZR can run at full capacity and all the off take is going to be taken up.
Further more given how many smaller refineries have closed in the last 2-3 years around the world because they can not compete with the mega refineries and cheaper imported product the value of this deal to NZR has become very evident.
Biggest threat to NZR profit is now the kiwi $ but it very much looks like the reserve bank is going to be accommodating

Yes, 100% is great. So long as we are happy that us minority shareholders are the only losers here. Did you come across any data that estimated how much more the Oil Companies might have bought from alternative sources had the kick-back not been in place? I'm guessing international prices would need too have been cheaper than the NZR discount (minority shareholder contribution) at say $10 per barrel...?

And we are expanding? Cool. We increase our share of the NZ petrol market from 55 - 65%. More cheap fuel for the boys, at our expense?

[dodgy]

Hi bull....
Some time back you requested I ask the NZR management "why the refinery didn't run at max capacity at all times", because you were unable to attend GM at Marsden Point. However the venue this week is in Auckland - are you attending? If not, what exactly do you wish to know based on what maximum throughput?
Regards
-dodgy (owner/shareholder - expectant of future s/p appreciation)

[bull....]

hi D,

no need to ask now thanks, I am going to go to the meeting now it is in Auckland so will ask the question over a club sandwich unless someone asks during the meeting or its addressed during there presentation.

[bull....]

does the wiri pipeline have annual fee negoiations?

[bull....]

I think the crack today is over 13 so it appears to be getting bigger each mth

[psychic]

yes but the information is readily available and has been for years so you should be well aware of this when investing in the company so surely it should be bought into your calculations before you choose to invest.
Seems to be a few on here grumpy about the status quo of the company.....there is a simple answer to that.
I think we all know the share price and dividend has been hit by other factors some of which have moved significantly in a more positive direction in the last 6 months.

This refinery was built with Govt insistance that Joe Public had a stake, a fair and equitable stake. It was never intended that minority shareholders should subsidise the the oil companies, nor accept whatever these guys handed down to them. The kickbacks were never approved by minority shareholders, but if you feel inclined to side with the big guys on this well good luck to you. You may be a little disappointed later if current and future profits get diluted by further back handers but you will have no reason to complain eh.

I would urge other Shareholders to take the time to consider Halliwells motion and support it

[macduffy]

A question for the techies:

NZR's RSI is weaker than it's been for 12 months although the shareprice is about a dollar higher than it was 12 months ago. Lots of factors involved here - currency, margin, profitability, market sentiment etc but would it be reasonable to conclude that the market anticipates further shareprice weakness?

[bull....]

A question for the techies:

NZR's RSI is weaker than it's been for 12 months although the shareprice is about a dollar higher than it was 12 months ago. Lots of factors involved here - currency, margin, profitability, market sentiment etc but would it be reasonable to conclude that the market anticipates further shareprice weakness?

I wouldn't think rsi reflects anything other than it falling from a previous overbrought situation

[dodgy]

hi D,

no need to ask now thanks, I am going to go to the meeting now it is in Auckland so will ask the question over a club sandwich unless someone asks during the meeting or its addressed during there presentation.

Hi bull....
As you wish. Usually theirs is an upgrade on clubs, so you should come away happy on all fronts.
Regards
-dodgy (owner/shareholder - very interested party)

[bull....]

international freight ccosts are falling so if they can get bigger ships with more load nzr should add a bit of margin, although some of there ships come in under loaded at the moment I believe weight restrictions maybe?

[bull....]

on throughputs again I would have thought with big immigration into Auckland rap throughput should be up significantly?

[psychic]

you are crying over spilt milk that was spilt decades ago.
minority shareholders are wasting time and effort trying to change what benefits 70% of share holders.
Anyone invested in the company has done so knowing the share holding structure and being aware of the financial benefits to the majority shareholders whether you voted for, against or did not vote at all.......get over it or get out but please stop whining about something that you or anybody else can not change.... sounds like you are Mr Halliwell.
Your argument is not pointless but is a complete waste of time and effort.
If you hold the stock I really do not understand why.

What, do you always roll over? This is about chipping away at the bastards. Support for Halliwell's campaign rose from 1.5m votes at the 2013 AGM to 14.8m 2014. He would like double that this year. This is about gaining the support of the minority shareholders. Obviously the majors are never going to vote for it but that does not mean we should just accept this ongoing rort. But it is hopeless if apathetic new shareholders stupidly follow the majority vote just because it is what it is.

The Gross refining Margin formula was set in 95 - it cannot be changed without the approval of the non-user shareholders. There is a reason for this. But from 2009 the boys secretly introduced this "allocations" back hander. $4 of profit has been diverted from every share since, (and you wonder why the SP is cheap?)

It is ongoing and it affects you.

[bull....]

What, do you always roll over? This is about chipping away at the bastards. Support for Halliwell's campaign rose from 1.5m votes at the 2013 AGM to 14.8m 2014. He would like double that this year. This is about gaining the support of the minority shareholders. Obviously the majors are never going to vote for it but that does not mean we should just accept this ongoing rort. But it is hopeless if apathetic new shareholders stupidly follow the majority vote just because it is what it is.

The Gross refining Margin was set in 95 - it cannot be changed without the approval of the non-user shareholders. There is a reason for this. But from 2009 the boys secretly introduced this "allocations" back hander. $4 of profit has been diverted from every share since, (and you wonder why the SP is cheap?)

It is ongoing and it affects you.

If this is the case I would have thought the nz shareholders assoc would have been all over them?

[golden city]

hopefully more good news comming tomorrow agm

[dodgy]

What, do you always roll over? This is about chipping away at the bastards. Support for Halliwell's campaign rose from 1.5m votes at the 2013 AGM to 14.8m 2014. He would like double that this year. This is about gaining the support of the minority shareholders. Obviously the majors are never going to vote for it but that does not mean we should just accept this ongoing rort. But it is hopeless if apathetic new shareholders stupidly follow the majority vote just because it is what it is.

The Gross refining Margin formula was set in 95 - it cannot be changed without the approval of the non-user shareholders. There is a reason for this. But from 2009 the boys secretly introduced this "allocations" back hander. $4 of profit has been diverted from every share since, (and you wonder why the SP is cheap?)

It is ongoing and it affects you.

Hi psychic
Well said - agree entirely.

-dodgy (OWNER/shareholder - will support Halliwell as in the past - 120k)

[dodgy]

Hi bull...
NZSA - pull the other one - I think they normally maintain a foot in both camps and progress in none.
Have a great night and hopefully a more than decent meeting.
Regards
-d

[psychic]

pretty poor keep secret.... pass me a tui
snaps never rolls over but is clever enough to put his energy and efforts into battles that can be won.

lol

We all know what happens to those who turn up to fight a battle they will never win.

Oh, and what happens when you just, ahh, bend over?

Your posts indicate you believe it is the large shareholders to blame for the very low share price....may I suggest you look at other refinery businesses performance around the world..... I think you will find they have all been struggling until recently.

Sure. Over 2014, the Users costed their NZRC-refined products, into the markets, on the basis that they paid processing fees, of
$US9.92 per barrel. However, their discounts diverted $US6.45 per barrel, of that, directly to the Users. So Users paid
NZRC only $US3.47 per barrel. That was only 31.5% of the 2014 Caltex figure of $US11.03.

Her's some hints pertaining to NZR, high oil input costs, ageing plant, high kiwi $, lower margins etc.
And ...ONE BILLION DOLLARS diverted to Users in the last 5 years

Many of you sound like disgruntled long term shareholders that may have payed way to much for the shares in the first place and held on for far to long. That would make me grumpy to but that is no ones fault but your own.

You were a shareholder a couple of years ago right? They were ripping you off then you poor thing. Didn't feel a thing eh

[PSE]

snaps is very happy with an average buy in of $2.03 so I don't share your pain or attitude.
Why do you hold an interest in a company that you believe is ripping you off.......... totally makes no sense to me.
Shareholder activism when successful is a great way to release value for all shareholders. Management should be held to account and there aint no one but us to do it.
When you buy cheap companies, typically it is something management have done (or haven't done) that is making them cheap.
Buying cheap companies is a valid investment approach.
You don't have to support it but I think your criticism of it is unfounded, in this case the register is dominated but can't hurt to try.

[psychic]

snaps is very happy with an average buy in of $2.03 so I don't share your pain or attitude.
Why do you hold an interest in a company that you believe is ripping you off.......... totally makes no sense to me.

Nope, no pain here fulla. Don't stress on my account.
I'm just asking people to consider what Halliwell has placed before them.

In Sept 2013, you were complaining on this thread about the divi being about 1/3rd of the going bank interest rate, saying what a dog etc.
Do you understand just why it was a dog now?

[barleeni]

Just quickly reading todays announcement:

"I am also pleased to say that we have seen stronger margins during the first part of 2015 and that we continue to benefit from a lower exchange rate environment. The self-help I referred to earlier has set the company up to deliver strong free cash flow and repay a further $50 million of debt duringthe first four months of 2015. End April borrowings stand at $264 million, $77 million lower than its peak, representing a gearing of around 27 per
cent"

Reading between the lines (I have only quickly glanced) but if they have paid down debt by $50 mill in the first 4 months, that puts them ahead of what they were hoping to achieve if I refer back to the profit matrix they published earlier this year. Good news then I assume!

[golden city]

speaking to the ceo today.., dividends is not far away.., once debt back to 200m.., confirmed

[bull....]

speaking to the ceo today.., dividends is not far away.., once debt back to 200m.., confirmed

concur they all want divs as soon as possible was the talk, also ceo looking at some more profit opportunities over an above whats out there ( he seems very motivated to want to have a very profitable refinery, I liked his vibe being a s/h ) also staff incentivised to share in gains nice.
Also say margins still good esp brent to Dubai spread , but lag margins they make gone now , expect low oil environment for foreseeable future all good for nzr anyway su4

[golden city]

happy to hold

[cdonald]

concur they all want divs as soon as possible was the talk, also ceo looking at some more profit opportunities over an above whats out there ( he seems very motivated to want to have a very profitable refinery, I liked his vibe being a s/h ) also staff incentivised to share in gains nice.
Also say margins still good esp brent to Dubai spread , but lag margins they make gone now , expect low oil environment for foreseeable future all good for nzr anyway su4

Did they explain any thing more about the Brent/Dubai spread? Even me, a past oil economist struggle with their wording in their new releases on this. Maybe it is time for them to try and simplify what they are saying. Looks like a good meeting was had and hopefully a return to dividends soon on this one.

[dodgy]

Good morning all
Great meeting, positive as expected. Yes I supported Halliwell, maintaining our "ownership" conferred right to a fair hearing and a fair deal must be paramount. We do not always have to agree with the motions proposed as "owners" , but I was heartened to hear the outgoing chairman, reinforce this right.
Divis are on the cards and I stick with March 16 $3/share - for any shred of credibility I had better be right.
My only negative takeaway was the forward looking vision of the CEO concerning future expansion/upgrades. Hopefully the pull of the return to "decent" dividends , which was alluded to, may temper overzealous future capital commitments. There is a fine line between return on investment and investment for investments/personal pride and achievements sake.
Regards
-dodgy (owner/shareholder - may all your investments produce abundant fruit)

[bull....]

Did they explain any thing more about the Brent/Dubai spread? Even me, a past oil economist struggle with their wording in their new releases on this. Maybe it is time for them to try and simplify what they are saying. Looks like a good meeting was had and hopefully a return to dividends soon on this one.

No they did not elaborate in meeting.

It is difficult for me to work out as well because they only speak in broad terms of what there crude basket consists of and say it changes all the timeso working out an accurate margin is difficult on the brent/Dubai spread.

[bull....]

snaps I talked to z man bennetts about there throughput policy - anyway he say it running 24/7 so yes, the ups and downs in throughput as he say are based on weather they import or refine.
anyway he sounded keen to get a div from refinery as he say they invested over 100m in upgrade so they want a return just like me lol

[bull....]

thanks bull what about the pipeline is this annually negotiated....appreciate your answers

sorry forgot to ask

[barleeni]

the US exchange rate seems to be relatively stable still, which is good for profit. We should be expecting a throughput update in the next week or so I guess for march/april? average exchange rate for that period should be the same $0.75 as previous reporting period I would think.

Will a throughput of the same nature as jan/feb see an upward movement in shareprice, or do we believe that this is already priced in?

[dodgy]

the US exchange rate seems to be relatively stable still, which is good for profit. We should be expecting a throughput update in the next week or so I guess for march/april? average exchange rate for that period should be the same $0.75 as previous reporting period I would think.

Will a throughput of the same nature as jan/feb see an upward movement in shareprice, or do we believe that this is already priced in?


Good morning barleeni,
Don't forget that NZR will be undergoing a shutdown for maintenance, in due course, if not already. This as always, effects throughput, profit. The good news is, this is the last scheduled, before new kit comes on stream Nov. Ist quarter next year, after run up of expansion, should be the best for a while.
Regards
-dodgy (owner/shareholder - expectant of increased prosperity)

[bull....]

march/april should have been a cracker, probably mostly baked in the price , depends how much above 9 they banked and if any xtra throughput done

[barleeni]

Agreed, but I think they were putting the shut off until early May (around about now I guess) to take advantage of the current scenario, so if that's the case March/April stat's should be unaffected by the shut, and hopefully would have been running at max throughput.


Good morning barleeni,
Don't forget that NZR will be undergoing a shutdown for maintenance, in due course, if not already. This as always, effects throughput, profit. The good news is, this is the last scheduled, before new kit comes on stream Nov. Ist quarter next year, after run up of expansion, should be the best for a while.
Regards
-dodgy (owner/shareholder - expectant of increased prosperity)

[cdonald]

yes, shutdown has just started so Mar/Apr should be at full production though as units get closer to shutdown they are less productive than they are just after a shut down. Liken it to a water filter on your kitchen sink, flows pretty well for the first few months after you replace it and then gets a bit slower as time goes on. I think margins going into May/Jun will be a bit lower than what they have been for the first 1/3 of the year but having that money locked in from CAP will help keep the cash flow going and ultimatly pay down some more debt. The more debt that can be paid down now the quicker we will get to dividends. Might start to see a few funds shifting back in soon to lock in the yield.

[bull....]

nzd new lows 73, margins have picked up again in the last week after a brief dip.
back to near highs which by my calcs would still translate into double digit margins at nzr

hopefully we get a update on how the shutdown is going with the throughput report due out shortly I believe

[cdonald]

nzd new lows 73, margins have picked up again in the last week after a brief dip.
back to near highs which by my calcs would still translate into double digit margins at nzr

hopefully we get a update on how the shutdown is going with the throughput report due out shortly I believe

sounds like shut down may have finished a couple of days ahead of schedule which is great news

[golden city]

margin still healthy

[cdonald]

margin still healthy

Yes, another brilliant 2 month period with record thruput. 63m in refining income for the 2 month period is going to be putting a dent into that overdraft. Refining margins still holding up there but to have 4 months of a year at CAP is pretty amazing really. The half year report is going to make staggering reading IMO, it will be interesting to see if the oil company directors start pushing for dividend sooner rather than later.

[golden city]

share price still stall.