LPC

[percy]

[ Why do you think that cool stores are a so much better use of that land? Doesn't It all smell a bit fishy? ;-)



That was about when I bought in I think, amidst all the trouble. I may even be the owner of your old shares Percy!

SNOOPY.[/QUOTE]

Coolstores are a lot more profitable than fuel storage. More activity where LPC could clip the ticket.Good luck with my shares. lol
The Timaru idea was only an idea of mine to wake up the oil companies to consolidate the huge area of land they take up.The area of land they take up is far more than they need.LPC under Layton would have found more profitable uses.That issue remains unresolved.
Did Barney wear his grandfather's hat to the AGMs?

[percy]

I have just read Margin Call by Nevil Gibson in NBR 20/8/2010.Headed Ports urged to end tea break."Parochial political considerations are holding back the economic efficiency of the port sector.relative performance has dropped compared with major Australian ports.His conclusions are likely to be agreed in private by those who run the ports-but not by their political owners"
"While all ports companies are returning positive economic returns,Dr.Layton's analysis questions whether they have an adequate return on capital."
Snoopy we may need the good Dr. to look at RYM accounts for us.now that would be fun.

[Marilyn Munroe]

To paraphrase the article below; Big container ships should go to Lyttelton and not Otago.

http://www.stuff.co.nz/business/industries/4059652/Bigger-port-facilities-would-boost-economy

That'l make the Otago Regional Councilors drop their breakfast porridge on their sporans.

Boop boop de do

Marilyn

[Snoopy]

Nevil Gibson in NBR 20/8/2010.Headed Ports urged to end tea break."Parochial political considerations are holding back the economic efficiency of the port sector.


I see merger talks with POL have been 'reluctantly called off'.
"Deputy Chairman Bill Luff says the earthquake has necessitated the company reviewing its short and long term asset management and development plans."

Huh? Isn't this exactly the time LPC and POL should be talking ? Why spend a fortune rebuilding duplicate facilities and then close half of them down. Can anyone make sense of this?

SNOOPY

[percy]

I see merger talks with POL have been 'reluctantly called off'.
"Deputy Chairman Bill Luff says the earthquake has necessitated the company reviewing its short and long term asset management and development plans."

Huh? Isn't this exactly the time LPC and POL should be talking ? Why spend a fortune rebuilding duplicate facilities and then close half of them down. Can anyone make sense of this?

SNOOPY

No surprises there.Halfwits make halfwited decisions.BRING BACK LAYTON>
Snoopy.Parochial interests will always override comon sense.They will wake up when large ships call only on Port of Tauranga and do not bother to call on any south Island ports.Layton sees this.As you understand,why build whafes for no customers.It is called the Sundstrum syndrome.
I am wrong ofcourse.Main hub port for south island will be Melbourne in Australia.

[Snoopy]

To paraphrase the article below; Big container ships should go to Lyttelton and not Otago.


The article estimated the cost of upgarding to 7,000 capacity container ships from 4500-5000 capacity container ships by 2015 as follows: POA $200m, POT $50m-$80m, LPC $40m-$80m, POL $100m. Intersting that LPC is potentially the lowest cost option. Anyone know why Otago would be so much more expensive to develop?

SNOOPY

[Marilyn Munroe]

It has long been held amongst the furious scribblers in the economic profession that a port has a significant multiplier effect on economic activity in its hinterland.

Both Lyttelton Port and Port Otago are controlled by territorial local authorities. These authorities have a duty to their constituents to be good stewards of the economic interest in their area.

For one of the authorities to yield to the trade enhancing development of a single port not in their area would be against the interests of their constituents.

Given the above I think it will be very difficult for this merger to proceed, and is the real reason for the breaking off of merger talks.

Or I could be completely wrong, the merger parties may be playing high stakes poker and each holds three aces.


Boop boop de do

Marilyn

PS Tony Curtis who played opposite my alter ego in the movie "Some Like It Hot" has just died. This movie is excellent with crackling wit. Worth a pluck from the shelf at the video store.

[percy]

It has long been held amongst the furious scribblers in the economic profession that a port has a significant multiplier effect on economic activity in its hinterland.

Both Lyttelton Port and Port Otago are controlled by territorial local authorities. These authorities have a duty to their constituents to be good stewards of the economic interest in their area.

For one of the authorities to yield to the trade enhancing development of a single port not in their area would be against the interests of their constituents.

Given the above I think it will be very difficult for this merger to proceed, and is the real reason for the breaking off of merger talks.

Or I could be completely wrong, the merger parties may be playing high stakes poker and each holds three aces.


Boop boop de do

Marilyn

PS Tony Curtis who played opposite my alter ego in the movie "Some Like It Hot" has just died. This movie is excellent with crackling wit. Worth a pluck from the shelf at the video store.

MM. You are 100% right about local authorities.Otago guy would never get voted in again if he agreed Lyttelton should be major SI port and visa versa.Both would sooner miss out altogether.
These huge ships will just go to Melbourne.
You are also 100% right with "Some Like it Hot".Fantastic movie.You were great.{as was TC]

[POSSUM THE CAT]

Possibly the only container port for very large container ships will be Marsden Point

[percy]

Possibly the only container port for very large container ships will be Marsden Point

thanks possum,but thats not what it is about.it is about routes,schedules,fewer ports of call.Go to my post no.249 in this thread.the big ships will not bother with us.We have to consider they may call at one NZ port ,or just go to Melbourne.

[POSSUM THE CAT]

percy Have a llok at water depth in Melbourne may take a lot of dredging. What I saw in an obscure article (sorry I can not remember where as some months ago)was that Marsden point SYdney & Brisbane were the most suitable for even bigger container ships in the feasability studies (that is if my Memory is correct for Australia)

[percy]

percy Have a llok at water depth in Melbourne may take a lot of dredging. What I saw in an obscure article (sorry I can not remember where as some months ago)was that Marsden point SYdney & Brisbane were the most suitable for even bigger container ships in the feasability studies (that is if my Memory is correct for Australia)

I stand corrected.marsden point,makes lyttelton,otago arguement secondary if the big boats cann't get in their harbours.as you point out Melbourne may take a lot of dredging.

[POSSUM THE CAT]

Percy that is why I do not hold shares in TPW log ships have already run aground there Auckland is also going to be a problem I believe but will probally be the most practical for smaller transfer container ships. The Railways may even get a boost

[percy]

Percy that is why I do not hold shares in TPW log ships have already run aground there Auckland is also going to be a problem I believe but will probally be the most practical for smaller transfer container ships. The Railways may even get a boost

please do not ever sell TPW shares.Just buy them.Sell POT may be.!!!lol
Now,, lets go back to the madness.Dredge POA because it may attract a large ship,dredge POT because it may attract a large ship,dredge lyttleton because it may attract a large ship,dredge Otago
because it may attract a large ship.Hell lets just keep dredging,wellington,new plymouth,napier,Bluff and anywhere else that one day may attract a large ship.

[percy]

Yesterday I read the POT annual report printed copy.Any one following ports in NZ may I suggest you read it.Gives a history of the port,and a very good insight into port operations and the future with regards to large ships and ship visits.I was greatly impressed with POT You can go to www.port-tauranga.co.nz to view.

[percy]

With LPC partially out of action for a while ... Where will the ships affected be un/loading?

Partially is the correct word.All shipping still un/loading at LPC.

[Marilyn Munroe]

Look at the share price. The price plot looks like the trajectory of a drunk stumbling off the end of a wharf.

Some must have been buying in anticipation of the small shareholders being brought out to facilitate the now canceled merger.

Boop boop de doo

Marilyn

[Snoopy]

Look at the share price. The price plot looks like the trajectory of a drunk stumbling off the end of a wharf. Some must have been buying in anticipation of the small shareholders being bought out to facilitate the now cancelled merger.


Earlier today Marilyn there were no buyers listed and one seller for LPC at $3. If a buyer had come in the shares would have closed today at an all time high, rather than $2.25. LPC has restricted liquidity. It is very close to being a private equity investment now. I would say these low liquidity share price movements do not reflect changes in the underlying value of the company. BTW, I believe that CCHL still wants to buy out the minority shareholders, merger or not.

SNOOPY

[percy]

Earlier today Marilyn there were no buyers listed and one seller for LPC at $3. If a buyer had come in the shares would have closed today at an all time high, rather than $2.25. LPC has restricted liquidity. It is very close to being a private equity investment now. I would say these low liquidity share price movements do not reflect changes in the underlying value of the company. BTW, I believe that CCHL still wants to buy out the minority shareholders, merger or not.

SNOOPY
Offcourse they want 100%,then they can do something positve with either Auckland or Tauranga.Otago is a step backwards.ps.have a look at POT chart.

[mr.needs]

Things can't be good with the new quake 5km directly beneath Lyttelton . Hope everyone is doing ok down there.

[Marilyn Munroe]

Some potential good news for Lyttelton Port as it extricates itself from the dust and rubble.

Solid Energy and Bathurst have agreed to become mates and work together on the Denniston Plateau.

This includes using Solid Energy to transport Bathurst coal to Lyttelton.

http://www.sharechat.co.nz/announcement/NZX/SOLIDE/210416/general-solide-solid-energy-bathurst-resources-to-cooperate-on-denniston.html

Boop boop de do

Marilyn

[Snoopy]

Things can't be good with the new quake 5km directly beneath Lyttelton . Hope everyone is doing ok down there.


Plenty of bad news about LPC in the media. They have abdicated their cruise ships responsibilities to Akaroa. The announcements on insurance cover were very notable for the cover they no longer have than what they do have. No more business interruption insurance and no more earthquake damage insurance. And according to my broker another share research house has stopped covering them. The share price has been under pressure as a significant shareholder (in today's terms anyone with 75,000 shares is in the top ten shareholder tent!) sells down.

However, underneath all the turmoil this business is riding the commodity wave well and operationally is performing at record levels of profitability.

Furthermore any wharf rebuild will not be based on just logs hammered into the sea, but will be built to the Californian maritime earthquake standards. As you may be aware earthquake insurance in California is very rare. That means wharves constructed there are engineered and built to a far higher standard than we are used to in New Zealand. That's because the wharf owners in California know there will be little insurance compensation if (when) the big one hits. When the next big one comes to Canterbury that means the 'new' Lyttelton wharves are unlikely to be as hard hit as the old ones were.

Meanwhile the availability of rubble has fast tracked the land reclamation process in the Lyttelton harbour. Those who think that the amount of valuable waterfront land on the planet is fixed please take note!

After five years of waiting some shares finally came on the market at my $2 accumulation price that were not snapped up by majority shareholder Christchurch City Holdings. I wasted no time in buying a few more over the last few days. A gamble I know, but in this case I think the gamble is well worth taking.

SNOOPY

[percy]

Plenty of bad news about LPC in the media. They have abdicated their cruise ships responsibilities to Akaroa. The announcements on insurance cover were very notable for the cover they no longer have than what they do have. No more business interruption insurance and no more earthquake damage insurance. And according to my broker another share research house has stopped covering them. The share price has been under pressure as a significant shareholder (in today's terms anyone with 75,000 shares is in the top ten shareholder tent!) sells down.

However, underneath all the turmoil this business is riding the commodity wave well and operationally is performing at record levels of profitability.

Furthermore any wharf rebuild will not be based on just logs hammered into the sea, but will be built to the Californian maritime earthquake standards. As you may be aware earthquake insurance in California is very rare. That means wharves constructed there are engineered and built to a far higher standard than we are used to in New Zealand. That's because the wharf owners in California know there will be little insurance compensation if (when) the big one hits. When the next big one comes to Canterbury that means the 'new' Lyttelton wharves are unlikely to be as hard hit as the old ones were.

Meanwhile the availability of rubble has fast tracked the land reclamation process in the Lyttelton harbour. Those who think that the amount of valuable waterfront land on the planet is fixed please take note!

After five years of waiting some shares finally came on the market at my $2 accumulation price that were not snapped up by majority shareholder Christchurch City Holdings. I wasted no time in buying a few more over the last few days. A gamble I know, but in this case I think the gamble is well worth taking.

SNOOPY
I do not see them as a gamble.Will always remain South Island's major port,for both exports and imports by it's position in the centre of the south island. They will have to research customer needs as far as wharfs are concerned.Can not go back to just building wharfs in the hope someone may use it.The extra land will enhance developement.Need coolstores near wharfs.the future for Lyttelton is good. No, I think you "are well positioned for the upturn."

[airedale]

Well done, Snoopy, I did all right with LPC over the years. I would buy whenever there was bad news such as a strike at the port. That always knocked the SP back. Then I sold out to the last CCC buy up. But the point is that newspaper bad news is good news for long term buyers.

[Marilyn Munroe]

After five years of waiting some shares finally came on the market at my $2 accumulation price that were not snapped up by majority shareholder Christchurch City Holdings. I wasted no time in buying a few more over the last few days.

SNOOPY

Marilyn who had a buy bid just below $2 shakes her tiny diamond encrusted fist at Snoopy.

Boop boop de do

Marilyn

[percy]

What will be interesting is whether LPC out performs POT.I hold POT and Snoopy appeared to buy my LPC shares a few years ago.
Lets say LPC at $2.00 and POT at $9.60.
I note there are 10,000 LPC shares for sale at $2.05 and 3110 POT at $9.70

[Scuffer]

Well 9 years smooth sailing for LPC I wonder how long before they are put up for sale again, I would think that the National government would love to flog off this dead duck, they tried before and with the all encompassing powers of Cera in canterbury it could well happen its not like they don't need the money down there after the eartquakes. I would think the port is a gonna, either them or the airport lets see if they're is trouble free motoring after LPC is sold to Hutchisons or Dubai world, by the way Hutchisons have a liking for airports too they good get a two for the price of one deal with the chch city holdings desperately looking for cash.

[Snoopy]

Marilyn who had a buy bid just below $2 shakes her tiny diamond encrusted fist at Snoopy.

Boop boop de do


I admire your parsimonious bidding Marilyn. I thought about a sub $2 bid myself. But knowing the way Christchurch City Holdings have been Hoovering up shares I couldn't risk it. I reckon you are still ahead of me anyway as you sold out for significantly more than $2? I have kept my shares all the way through since about 2002.

SNOOPY

[Snoopy]

Well 9 years smooth sailing for LPC I wonder how long before they are put up for sale again, I would think that the National government would love to flog off this dead duck, they tried before and with the all encompassing powers of Cera in canterbury it could well happen. Its not like they don't need the money down there after the earthquakes.


Actually they don't need the money do they? All damage up to now is fully insured.



I would think the port is a gonna, either them or the airport lets see if they're is trouble free motoring after LPC is sold to Hutchisons or Dubai world, by the way Hutchisons have a liking for airports too they good get a two for the price of one deal with the chch city holdings desperately looking for cash.

Spoken like a bitter ex shareholder who has sold out? If you believed your own words Scuffer, surely you would be buying back those LPC shares as you now see LPC as a takeover target? Except it can't be taken over no matter what CCHL says, unless Port of Otago agree to sell up.

SNOOPY

[Marilyn Munroe]

I admire your parsimonious bidding Marilyn. ...But knowing the way Christchurch City Holdings have been Hoovering up shares I couldn't risk it.
SNOOPY

While it is risky to outguess Christchurch City Holdings I suspect that buying out the minor shareholders of Lyttelton Port Co is not a priority for them just now.

City Holdings also owns the electrical reticulator for Christchurch Orion Energy, the major bus company in Christchurch The Red Bus Co, and the municipal service company City Care. I imagine they and their owner the Christchurch City Council will be screaming for any cash available.

The block of shares held by the Otago Regional Council may pop out the back of the scrum as well. Ask yourself this; if you were are Dunedin ratepayer who was being squeezed by the costs of the stadium built for the international tournament with the odd shaped ball and you had lump of dormant capital locked up in investment in a distant province, wouldn't you want your elected representatives to apply this capital to paying off the stadium debt?

Boop boop de do

Marilyn

[Scuffer]

Snoop listen dog I'm not a bitter ex shareholder far from it who says that it can't be sold they are more than a few ways to skin a cat you should know that the company could be broken up and parts sold off Voltaire said we live in the best of possible worlds so anything is possible it just has to be thought of before it can come to pass yes you're right they are insured for the damage and it will be repaired but the council are the ones wanting the cash lots of council buildings were either uninsured or under insured what could otago do if LPC separated into parts and the council were just landlords LPC would still exist and otago would get 15% of the rental

[Snoopy]

What will be interesting is whether LPC out performs POT.I hold POT and Snoopy appeared to buy my LPC shares a few years ago.
Lets say LPC at $2.00 and POT at $9.60.
I note there are 10,000 LPC shares for sale at $2.05 and 3110 POT at $9.70

With your astute purchase of POT Percy, I would say you have outdone me since the council offered $2.80 to you and other small shareholders a few years ago.

As for going forwards from now Percy, I don't like your chances. There are always several ways of looking at valuations. But last time LPC was 'in play' offers in this sector were being pitched at around ten times EBITDA. EBITDA for FY2011 was $32.229m. And no that EBITDA doesn't include any earthquake impact payments. So I calculate a mid range takeover price based on 102.261 million shares on issue of:

$32.229m x 10/ 102.261m = $3.15

CCHL are miserable sods and will pitch any offer right at the bottom end of the fair valuation range. Let's make it a round figure of $3-. Take away the takeover premium and I would say normal market value for LPC is around $2.50. You could say LPC has gone nowhere over the last five years in valuation terms. But those earlier takeover offers were based on exploiting synergies with the Port of Otago. This $3 valuation is for LPC on its own. So the port has been making operational progress, merger or not. Now all that remains to be seen is which of you sharechatters are going to snap up those shares on offer at $2.05 on Monday morning? I would if I hadn't just bought some last week.

SNOOPY

[percy]

Going forward I think LPC prospects are excellent.They have the oPportunity to rebuild for the future.With insurance,ChCh city holdings wanting best return on funds, and best return on assets,I think wise decissions will be made.Only port for the coal trade,import trade,and oil imports .Should they be able to build some cool stores near the wharfs exports of dairy,meat and fresh produce will increase.Crazy but produce exporters only use ports where cool stores are next to the wharf. A merger with either Auckland or Tauranga would have worked/or would work for LPC benefit.I think Peter Davie appears to have brains.Otago will not benefit LPC in any way.Otago only looking after Port Chamers interests.which are limited.
POT. Valuation.? no idea,sorry,however NZ's leading export port [better profits on imports] who is using inland port to balance trade.Management the best in NZ,and should overseas shippers use only one NZ port it will be POT. This is starting to happen.One expects POT to be NZ's hub rather than an Aussie port.
At present the mommetum is in POT's favour.I would expect this will continue . I would find it very hard to sell any of my POT shares,bearing in mind I could buy nearly five times as many LPC shares.I may end up buying some LPC shares but would be in addition to my POT shares.May I recommend POT annual report as an excellent read,and it gives a better understanding of NZ port business.

[Scuffer]

I would like to know why container rates across the wharf in NZ are approx. $220 and in Aussie are twice the price surely that would solve all the problems at the port of Auckland the council would make the profit required. It's a worrying fact that this issue could escalate to all ports in NZ, it's the last thing ChCh needs whilst trying to rebuild, indirectly international shipping lines are controlling our ports. There are three ways for a port to increase profit, faster efficient turn around, reducing wages and increasing across the wharf rates, the shipping companies are controlling these rates by playing NZ ports against each other to the detriment of all NZ, I say it's time this stopped, the repercussions are indeed far traveling, the ports need to take back control of how much they charge why should we subsidise freight.

[Snoopy]

I would like to know why container rates across the wharf in NZ are approx. $220 and in Aussie are twice the price


You know the answer Scuffer, because you gave it later on in your post!

"the shipping companies are controlling these rates by playing NZ ports against each other to the detriment of all NZ, I say it's time this stopped, the repercussions are indeed far traveling, the ports need to take back control of how much they charge why should we subsidise freight."

I take issue with your subsidization comment though. NZ ports are still profitable, even with a charge of $220 to clear each container.



There are three ways for a port to increase profit, faster efficient turn around, reducing wages and increasing across the wharf rates,


I would argue there is a fourth way to boost port profitability. Better match your imports and exports, so that you don't have to ship out or ship in lots of empty containers.



the shipping companies are controlling these rates by playing NZ ports against each other to the detriment of all NZ,


The importers and exporters would disagree with you. The lower the port charge, the bigger the slice of profit left for the importer or exporter.

SNOOPY

[Scuffer]

Snoop of course you are right in ports are still profitable in NZ but some are really struggling and i think in time a lot will become just regional ports. Do you think that the way the law is set up is fair when shipping companies can drive ports in NZ against each other the way they are doing, Timaru is a perfect example they spent up large only to lose out to Lyttelton, maybe they should have tied said shipping line into a binding contract.
The matching of imports exports is a good idea but I heard that ships carry empty containers in NZ simply because they have nowhere to put them, although they seemed to find plenty of room around ChCh for containers during the worst of the quakes, I also heard this is why Auckland council want to reclaim half the harbour, Tauranga has loads of storage room for empty containers, Lyttelton is choked and hence the need for the city depot "the inland port". I suppose we need a few international ports probably three and some small regional ports, that would go to solving a lot of problems, but then it puts freight onto road and rail which are at capacity without upgrading.

I've gotta go Snoop but I do enjoy your comments and hope to carry on our discourse at another time.

[Snoopy]

Going forward I think LPC prospects are excellent.They have the opportunity to rebuild for the future. With insurance, ChCh city holdings wanting best return on funds, and best return on assets, I think wise decisions will be made.


I have been studying the LPC FY2012 annual report, and particularly the treatment of insurance payments. LPC are reportedly still in dispute with their insurers over some claims. Bizarrely all those insurance payments are forced through the income statement. So the reported annual profit for LPC need not bear any relation to the profitability of the underlying port business. Blame IFRS I guess!

The 'earthquake income' is listed in three categories: Additional costs, Insurance Income and Assets written off (that last one is usually negative, surprise surprise).

IFRS requires that port assets are written down in the year that damage occurs. But the offsetting insurance payments are only recognized when there is near certainty they will flow into the balance sheet.

LPC was fully insured for replacement value up to current building standards. They also had income protection insurance. I was wondering who pays for the temporary repairs to get the port operational?

If LPC has full replacement cover, then probably the insurance company does not want to pay once to get the port operational and again when the wharf is finally rebuilt properly. Income protection insurance will pay for lost income, for a time. But they won't pay for the restoration of assets (the wharves) so that income can be restored. How do businesses hit by the earthquake handle this insurance conundrum?

SNOOPY

[percy]

Insurance.?? LPC will need the meanest nastiest lawyers in NZ.Trouble is those bast'rds work for the insurance companies.I have wondered what the value of "Barney" wharfes is.Building new wharfes in the hope they will get used was madness.If they weren't earning I can't see insurance companies coming up with full replacement cover.People I have spoken to have no faith in insurance companies.Income protection insurance has proven to be a joke.So what LPC gets fom its insurance companies is impossible to try and figure out.
The down turn in coal is not too bad as LPC earns most of its profits from imports.See a buyer there at $2.20.
I have not followed for awhile as I have held onto my POT,but would think they are still good value.

[Snoopy]

I was wondering who pays for the temporary repairs to get the port operational?

If LPC has full replacement cover, then probably the insurance company does not want to pay once to get the port operational and again when the wharf is finally rebuilt properly. Income protection insurance will pay for lost income, for a time. But they won't pay for the restoration of assets (the wharves) so that income can be restored. How do businesses hit by the earthquake handle this insurance conundrum?


Those attending the AGM today got the answer to my question. The $52m in temporary repairs incurred in getting the port operational is covered by the very good quality insurance policies that LPC held. $35m has already been received and the $15.2m is certain enough to declare it a done deal.

The forecast profit plunge to $13m-$15m for FY2013 is I think not necessarily as bad as it sounds. The loss of cruise ship revenue, previously covered by business interruption insurance, was expected. The Spring Creek Mine may be gone. But most of the LPC coal comes from Stockton, so the downturn in coal trade is not as great as I for one expected. Furthermore the 'record' earthquake adjusted profit of $17.0m for FY2012 contains some tax adjustments that I will need to investigate further. At this stage this FY2012 net after tax profit I believe to be overstated by up to $4m because of these tax issues, on a like for like comparison basis with pre-earthquake result years.

A question was put as to the progress of the new land reclaimation, which is already being used for used car storage. 3Ha is complete already. MD Peter Davie estimated that rubble from the CBD would be good for 4Ha of the 10Ha land to be reclaimed. The rest would be able to be sourced from rubble from Port Hills rock clearing, particularly around the Summit road. So it looks like the whole reclamation will be achieved at a reasonable cost.

The representatives from Christchurch City Holdings and Port of Otago were uncharacteristically vocal at question time. Councillor Corbett for CCH let it be known that the Christchurch City Council was keen to see a return of dividends. Later in the meeting two individual shareholders piped up and said that if LPC needed their capital generated to redevelop the port they should take that option, and keep the dividend suspended!

The Port of Otago man got stuck into the board for their relatively poor workplace safety record over the last year. He also asked about the total insurance proceeds that LPC was likely to receive. He wasn't the only one to ask about this and Chairman Fisher became slightly agitated at this continuing line of questioning. The "insurance deal" is apparently that LPC will be paid out in dribs and drabs as the reconstruction work is done. That being the methodology, there is no overall insurance payment figure available, and indeed the board are not allowed to hold back this kind of information from public shareholders if they did possess it. CFO Kathy Meads has been assigned to oversee the insurance claim process and a team of half a dozen are working through these issues. The full rebuild of the port up to modern earthquake standards could be up to seven years away.

The overall message was that there will be no "insurance windfall". Port reconstruction costs are liable to be greater than the insurance payouts because LPC will be building a larger capacity port to cater for the demands of the 21st century and beyond. Of course they will end up with a thoroughly modern port, albeit one that is not insured for natural disasters in the future. That has to be the big uncertainty that hangs over LPC.

SNOOPY

discl: hold LPC

[percy]

SNOOPY.
Thank you for your report.I looked up the board and am impressed.ChCh City Holdings and Port of Otago having to ask questions at the agm is music to my ears.With strong board and good management the future looks good.Sorry, but the two major shareholders do come with poor historys of self interest,which in the past have not been in LPC's best interest.Having to get councillor Barry Corbett to ask the questions has made my day>!!!!!
I would think any investment greater than insurance payouts will be well thought out and place LPC in a good position as South Island's leading port.

[Marilyn Munroe]

There was an item in the Christchurch Press commenting on Pater Davies million dollar salary.

Where does Lyttelton Port Co sit on Jim Andertons "you can run it from a golf course with a cell phone" scale of difficulties for Peoples Republic of Christchurch company CEO's?


Boop boop de do

Marilyn

[percy]

There was an item in the Christchurch Press commenting on Pater Davies million dollar salary.

Where does Lyttelton Port Co sit on Jim Andertons "you can run it from a golf course with a cell phone" scale of difficulties for Peoples Republic of Christchurch company CEO's?


Boop boop de do

Marilyn

Well going by the share price it would appear to have been badly run from shareholders' point of view, whether from a golf course or where ever.
Seller at @ $2.05 compared with a trade at $2.00 a year ago.
Port of Tauranga share price has gone from $9.99 to $13.45.!!!

[POSSUM THE CAT]

Percy Port of Tauranga was not badly damaged by earthquake. Damage may take up to 10 years to rectify

[percy]

Percy Port of Tauranga was not badly damaged by earthquake. Damage may take up to 10 years to rectify

The share price may take longer to perform.????? lol.

[Snoopy]

Well going by the share price it would appear to have been badly run from shareholders' point of view, whether from a golf course or where ever.
Seller at @ $2.05 compared with a trade at $2.00 a year ago.
Port of Tauranga share price has gone from $9.99 to $13.45.!!!


On a thinly traded share like this Percy, the share price isn't always right. However congratulations on your success with POT. Time to move some of those profits back to LPC do you think?

SNOOPY

[percy]

On a thinly traded share like this Percy, the share price isn't always right. However congratulations on your success with POT. Time to move some of those profits back to LPC do you think?

SNOOPY

I keep taking profits,or taking the top off my investments.Instead of remaining in cash I have spread myself around more.Difworseification.
At one stage I appeared to have too much in shares that were paying either no dividends [HNZ and SUM]and others like POT and RYM which pay very little in dividends.So HNZ starting to pay divies and the hope SUM will start paying divies at the end of the year makes me more relaxed.I am finding it difficult to find investments I want to add to in NZ and have been busy researching/buying a few small cap medical and industrial stocks in Aussie.
I think you are most probably right,I should buy some LPC.Will try to do some reading.Still feel LPC has an excellent future.
Those fuel storage tanks still take up too much room.Should be at Woolston and cool stores in their space.I noticed logs by the fuel storage area and along the railway line,so logs may take up some coal slack.Car imports should have been profitable,as are containners.Cruise ship visits will be a modest earner in the future ,and diary exports should be strong.ChCh rebuild will need to use LPC so more growth there.[talking myself into it already] Strong board.

[percy]

Insurance problems?
I wonder whether LPC are having trouble convincing the insurance company the "Barney white elephant"wharfes have a value?.
The insurance company may be of the opinion unused wharfes are value less?.
Still watching.May buy when divie is reintroduced.Meantime POT are performing very well.

[Banksie]

LPC Increases Full Year Profit Forecast1:45pm, 3 May 2013 | FORECASTFollowing a Board meeting on 2 May 2013, Lyttelton Port of Christchurch wishes to announce a revised Earthquake-adjusted Profit after taxation projection in the range of $15 million to $16 million for the financial year ending 30 June 2013. This reflects strong business performance.
This is an increase from the advice on 29 February 2013 to the market of a forecast between $13 million to $15 million.
Chief Executive Peter Davie stated "The port has handled record numbers of containers and seen consistent growth across its other trades. In March, we handled a record 34,877 TEU in the Container Terminal and attracted two new bulk break cargo services."
The Company continues to focus on delivering strong underlying business growth whilst planning for the reinstatement of its earthquake damaged assets.
-Ends-
For further information contact:
PETER DAVIE
Chief Executive
Lyttelton Port of Christchurch
027 444 1254

[noodles]

LPC Increases Full Year Profit Forecast

1:45pm, 3 May 2013 | FORECAST

Following a Board meeting on 2 May 2013, Lyttelton Port of Christchurch wishes to announce a revised Earthquake-adjusted Profit after taxation projection in the range of $15 million to $16 million for the financial year ending 30 June 2013. This reflects strong business performance.
This is an increase from the advice on 29 February 2013 to the market of a forecast between $13 million to $15 million.
Chief Executive Peter Davie stated "The port has handled record numbers of containers and seen consistent growth across its other trades. In March, we handled a record 34,877 TEU in the Container Terminal and attracted two new bulk break cargo services."
The Company continues to focus on delivering strong underlying business growth whilst planning for the reinstatement of its earthquake damaged assets.
-Ends-
For further information contact:
PETER DAVIE
Chief Executive
Lyttelton Port of Christchurch
027 444 1254

I would argue the good news has already been priced in. The price has already risen 10% in the last week. I would hope this is not a leak, but it smells like it.

[Banksie]

It is a very thinly traded - the 10% increase was on the back of 20,000 shares purchase over a week. Maybe someone just wanted to get in, but yes, the timing seems a little suspicious.

[Marilyn Munroe]

Intra day high $2.99

What is going on?

Boop boop de do

Marilyn

[percy]

The share price is only now starting to react to the positive numbers of tonnage and positve future growth prospects LPC have.
ps.No containner ships at Port Chamers today.

[Banksie]

The share price is only now starting to react to the positive numbers of tonnage and positve future growth prospects LPC have.
ps.No containner ships at Port Chamers today.

Just looked out the window - 1 container ship unloading in LPC ;).

[Marilyn Munroe]

LPC is getting out the cheque book and waving it around.

https://www.nzx.com/companies/LPC/announcements/237183

Boop boop de do

Marilyn

[percy]

LPC is getting out the cheque book and waving it around.

https://www.nzx.com/companies/LPC/announcements/237183

Boop boop de do

Marilyn

Maybe a waste of money seeing as POT have brought a half stake in Prime Port Timaru.LPC now face stiff competition,and may have to put users first.We live in interesting times considering Port of Otago has a blocking stake in LPC.

[Snoopy]

Maybe a waste of money seeing as POT have brought a half stake in Prime Port Timaru.LPC now face stiff competition,and may have to put users first.We live in interesting times considering Port of Otago has a blocking stake in LPC.


Yes POT are very serious competitors. However, we have to remember that it was Lyttelton Port's winning of the Fonterra contract from Clandeboye that got Primeport into its current troubles. So LPC obviously are very competitive on this contract.

POT buying a stake in Primeport Timaru is giving them a south island hub. But they still have to win back that contract from LPC, do they not?

SNOOPY

[percy]

Contracts are won by who can give the best service for the price.
I would think Prime Port's chances have greatly improved with the POT deal.
Will give South Island exporters/importers more choice.

[Marilyn Munroe]

I expect Tauranga to repeat what they did in Auckland, establish an inland port in the largest industrial area in the region, Christchurch.

To do serious damage they will have to equip Timaru with a container crane and straddle carriers.

Boop boop de do
Marilyn

[percy]

With fewer ship visits using larger vessels POT will be using Prime Port as a feeder.
Shedules and timetables will be important.
Cool stores close to or at the port will be a consideration too.
I hold POT shares.I have been considering buying LPC shares,but have put that idea on ice.
I do think LPC should have done a deal with either POT or POA years ago.
Offcourse Port Otago realised they were in the far que,so brought a blocking holding in LPC.Maybe because of so much earthquake damage,and rebuilding LPC may have taken their eye off the big picture.Bit like a good hanging,POT's move will have focused LPC's attention.

[Marilyn Munroe]

Today's Christchurch Press raises a journalistic eyebrow at the level of chief executive Pater Davie's pay.

Could the generosity of the board remuneration committee be the equivalent of engaging a medicine man to do a rain dance while looking at a falling barometer?

Perhaps remuneration committee chair Trevor Burt will inform members at the AGM whether the remuneration specialist they undoubtedly consulted was able to accurately split the portion of the positive result due to good fortune and the portion due to Mr Davie's skill and personal effort.

http://www.stuff.co.nz/the-press/business/9314775/Lyttelton-Port-CEOs-salary-exceeds-1m


Boop boop de do
Marilyn

[percy]

I was going to write a fair bit on this subject,then I realised I would be sued.
So all I can add is a "Yeah Right.!"

[Marilyn Munroe]

I was going to write a fair bit on this subject,then I realised I would be sued.
So all I can add is a "Yeah Right.!"

I think it unlikely that i would be sued. While I might think remuneration advisers are a bunch of gibbering baboons I would never say so in public. Oh wait.. Percy you tricked me.

Boop boop de do
Marilyn

[percy]

I think it unlikely that i would be sued. While I might think remuneration advisers are a bunch of gibbering baboons I would never say so in public. Oh wait.. Percy you tricked me.

Boop boop de do
Marilyn

Sorry I tricked you,and I agree with you.
Offcourse the people engaging theses people are the very people who end up paying them.A win win situation except for shareholders who lose out.Maybe if shareholders commissioned "independent" advisers we would see more modest pays.?!

[Marilyn Munroe]

Truck drivers are allways grumpy but this time they are really grumpy.

Seems disruptions in Australia, last minute shipping schedule changes, large volumes of dairy exports, the Chrischurch rebuild and the Cook Staight lost propellor incident are all causing congestion at the Port.

http://www.stuff.co.nz/the-press/news/hills-and-harbour/9483975/Lyttelton-Port-congestion-costs-millions

Boop boop de do
Marilyn

[percy]

I wonder if LPC are using the same computer program/system as Postie Plus.Does not work for Postie either.
May pay for them to use the same one as Port of Tauranga.
Ships just don't turn up with half an hours notice.
Maybe money would have been put to better use upgrading LPC's computer than paying it out to Pete.!

[Marilyn Munroe]

I wonder if LPC are using the same computer program/system as Postie Plus.!

I understand the backend database used by LPC is MSSQL. This is a widely deployed application with a good reputation and widely supported by developers. Of course its usefulness is dependent on the software in front of it which interacts with users. I have not heard of any complaints in this regard. LPC have deployed a booth system where drivers can interact with system without having to go the terminal office and hand paperwork over the counter. I understand this has been welcomed by drivers and has lowered dwell times for drivers at the terminal.

I think that they have been overwhelmed by a wall of boxes.


Boop boop de do
Marilyn

PS. Those who wonder why Bill Gates is one of the worlds richest men have never brought MSSQL software from Microsoft. Of course you can allways go for the alternative ORACLE and help Larry Ellison buy a new yacht.

[percy]

Yes a wall of boxes.
With land in Opawa and owing NZ Express Co,I would have thought they would have got themselves organised before the ships arrived in port.

[percy]

Good to see LPC have settled with their insurers for approx. $450mil.
Interestingly enough the market cap of LPC @$2.65 per share is only $271mil.!!??

[Snoopy]

Good to see LPC have settled with their insurers for approx. $450mil.
Interestingly enough the market cap of LPC @$2.65 per share is only $271mil.!!??

Yes, and that means on 28th February 2014, LPC will receive a cash payment of $4.40 per share.
So at $2.65 on the market you are paying 60c to get one dollar's worth of assets, plus you get the whole of Lyttelton Port thrown in for free! Suddenly looks very cheap at $2.65 doesn't it? But not withstanding the above, this is the bit of the announcement that I like:

"LPC is looking to put in place contract works insurance cover (including earthquake cover) for the rebuild programme. Work is progressing on the rebuild of Cashin Quay 2 and the Company expects to be able to fully insure this asset (including for earthquake) when the reinstatement is completed. It is anticipated that as the overall programme progresses, all assets will be able to be fully insured."

SNOOPY

[percy]

Well not sure what I was doing today??
My reaction time went from slow,to very slow,then dead slow.By the time I reversed it,and got back up to full power slow speed, I spent the afternoon chasing the LPC shareprice,without success. The train has left the station with me still in the ticket office trying to buy a ticket.!!! With so few good trains,one really has to be more alert.!!

[noodles]

Well not sure what I was doing today??
My reaction time went from slow,to very slow,then dead slow.By the time I reversed it,and got back up to full power slow speed, I spent the afternoon chasing the LPC shareprice,without success. The train has left the station with me still in the ticket office trying to buy a ticket.!!! With so few good trains,one really has to be more alert.!!

Once again Percy, do you need to consider an on-line broker? I missed it as well. Too busy watching cricket.

[percy]

Once again Percy, do you need to consider an on-line broker? I missed it as well. Too busy watching cricket.

There were shares for sale when I first posted today.But no I did not think it through.Took awhile to decide they were a gift. Then I did not match the seller.Then thought seller would come down to my price.Then those shares were gone. And so on.Only 11,825 traded.I have left a buy order in for 5000 at $2.85.
Only myself to blame.
Question;How can you be busy watching cricket?!! lol.

[Mista_Trix]

There were shares for sale when I first posted today.But no I did not think it through.Took awhile to decide they were a gift. Then I did not match the seller.Then thought seller would come down to my price.Then those shares were gone. And so on.Only 11,825 traded.I have left a buy order in for 5000 at $2.85.
Only myself to blame.
Question;How can you be busy watching cricket?!! lol.

Argh, same boat. Knew this was coming at some point - it was always a case of - yes yes I'll get around to buying some.

Wonder where it will settle...

[noodles]

Yes, and that means on 28th February 2014, LPC will receive a cash payment of $4.40 per share.
So at $2.65 on the market you are paying 60c to get one dollar's worth of assets, plus you get the whole of Lyttelton Port thrown in for free! Suddenly looks very cheap at $2.65 doesn't it? But not withstanding the above, this is the bit of the announcement that I like:

"LPC is looking to put in place contract works insurance cover (including earthquake cover) for the rebuild programme. Work is progressing on the rebuild of Cashin Quay 2 and the Company expects to be able to fully insure this asset (including for earthquake) when the reinstatement is completed. It is anticipated that as the overall programme progresses, all assets will be able to be fully insured."

SNOOPY

But Snoopy, aren't LPC going to use that money to repair the port? It's not like you are going to get special dividends?

[Snoopy]

But Snoopy, aren't LPC going to use that money to repair the port? It's not like you are going to get special dividends?


I know that Lyttelton Port will need all of their insurance payout to build the new port they need. But if you believe even half of the problems the Christchurch City Council are going to have bridging the gap between insurance payouts and fixing up their other infrastructure, I wouldn't totally rule out a raid on the LPC piggy bank. Small shareholders would get their hands on their fair share of any special dividend declared.

In more general terms Noodles, no I do not expect $4.40 per share in insurance payments to be realizable in cash for shareholders. But NTA is one measure by which companies are valued. With a fully rebuilt port and NTA at $4.40, it would be hard to look from afar at a key infrastructure asset and think it worth less than the cost of rebuilding that key asset.

SNOOPY

[noodles]

I know that Lyttelton Port will need all of their insurance payout to build the new port they need. But if you believe even half of the problems the Christchurch City Council are going to have bridging the gap between insurance payouts and fixing up their other infrastructure, I wouldn't totally rule out a raid on the LPC piggy bank. Small shareholders would get their hands on their fair share of any special dividend declared.

In more general terms Noodles, no I do not expect $4.40 per share in insurance payments to be realizable in cash for shareholders. But NTA is one measure by which companies are valued. With a fully rebuilt port and NTA at $4.40, it would be hard to look from afar at a key infrastructure asset and think it worth less than the cost of rebuilding that key asset.

SNOOPY
Perhaps they can use all that additional NTA to load up on debt and pay higher dividends.

Normally I buy shares on profit expectations. I don't see anything to get excited about there.

[Snoopy]

Perhaps they can use all that additional NTA to load up on debt and pay higher dividends?


They could, but they won't. At least I hope they won't, with so much construction work to do.



Normally I buy shares on profit expectations. I don't see anything to get excited about there.


You have to look long term Noodles, with what LPC are doing with the growth in log and container freight. Plus think about all those raw materials coming across the docks to assist the ChCh rebuild. I think the operational picture shows real improvement promise, but don't get too excited about the operational performance of the upcoming FY2014, even if those insurance payments cause headline profit to rocket.

SNOOPY

[Marilyn Munroe]

"David Faulkner, chairman of Port of Otago, said the southern port would look at options around the ownership of the LPC shares at a board meeting in early 2014. "

Source: News item on stuff.co.nz

Long suffering Otago ratepayers might catch a break. If they offered the shares at a price which allowed buy-in to the port sector cheaper than Port of Tauranga they would be eagerly taken up.

Boop boop de do
Marilyn

PS. Snoopy's comments about the log trade. Log trade is fickle, It would only take a change of policy by the mandarin in charge of log imports into China to bring the trade to its knees. The log yard is chocka with product. Go to the LPC web site and follow the, web cam --> log yard, link.

[percy]

Perhaps they can use all that additional NTA to load up on debt and pay higher dividends.

Normally I buy shares on profit expectations. I don't see anything to get excited about there.

I brought my bid back to $2.75.A lot of people ahead of me.
The insurance payout will mean LPC can resume dividend payments, and rebuild the port.They will also have the capacity to carry debt,with a very strong balance sheet.
However POT have proved themselves to be lot better operators,and with POT running Timaru LPC face strong competition.The recent bottle neck at LPC means LPC are not offering good service.Today, and in future they will need to offer excellent plus service.Maybe the best way forward is for ChCh City Holdings to sell out,?

[Snoopy]

"David Faulkner, chairman of Port of Otago, said the southern port would look at options around the ownership of the LPC shares at a board meeting in early 2014. "

Source: News item on stuff.co.nz


Another reference in the ODT

http://www.odt.co.nz/news/business/286159/lpc-shares-hit-new-high

-------

Port Otago, which does not have a director on LPC's board, has maintained it wanted to hold the stake long-term.

However, Mr Faulkner said given a gain of almost 40% on the shares, the Otago board would consider the holding when it met in early February for its annual strategy meeting.

''We'll have to look at our options then ... to hold or sell,'' Mr Faulkner said.

<snip>

The Christchurch City Council is the majority shareholder of LPC, with 75%, and would appear to be the logical buyer. Mr Faulkner said Port Otago would, in February, consider whether to initiate negotiations with the council.

''At around $3 per share, that's what'll be under discussion.''

------

This is a disaster for minority LPC shareholders. If the Dunedin City Council sell out to the CCC it is game over as we will all be compulsorily acquired! And the starting point for negotiation is to offer the shares at $3, when the cash in the bank adds up to $4.40? Come on!

SNOOPY

[Marilyn Munroe]

"The Christchurch City Council is the majority shareholder of LPC, with 75%, and would appear to be the logical buyer"

Hmm. The Christchurch City Council has received a recent report from Korda Mentha on their financial position. It revealed the Council is about to suffer a significant cash squeeze caused by under insurance and cost blow-outs on earthquake reconstruction projects. Christchurch City Holdings will come under pressure to provide cash for the Council. While in normal times CC Holdings would have liked nothing better than to take out the minority shareholders and gain direct access to the Ports cash flow these are not normal times. I doubt if the council would be happy if CC Holdings committed precious cash to balance sheet engineering.

An alternative option presents itself if Otago wishes to quit its shareholding. CC Holdings could join Otago and do a John Key style privatisation selling their interest down to 51%. The cash raised would be gratefully received by the Council.

Boop boop de do
Marilyn

[Snoopy]

Hmm. The Christchurch City Council has received a recent report from Korda Mentha on their financial position. It revealed the Council is about to suffer a significant cash squeeze caused by under insurance and cost blow-outs on earthquake reconstruction projects. Christchurch City Holdings will come under pressure to provide cash for the Council. While in normal times CC Holdings would have liked nothing better than to take out the minority shareholders and gain direct access to the Ports cash flow these are not normal times. I doubt if the council would be happy if CC Holdings committed precious cash to balance sheet engineering.


Cost savings could be gained by delisting LPC Marilyn. Less people on the PR side of the business to deal with all those pesky small shareholders. No more fees to the NZX, and possibly reduced auditing costs as well. The AGM expenses would be reduced to a single cup of tea with the mayor.

Now remember the MRP director fee hike just before listing due to the bringing on board of public shareholders? This time we would have the reverse. Directors would willingly take a fee cut because they no longer had any direct public accountability. OK maybe that last one is descending into the world of fantasy.....

SNOOPY

PS On the other option of a John Key style 49% listing. If this were to happen I would predict a full takeover first, then the council raiding of the LPC insurance boosted piggy bank, before the floating of shell version of LPC in the future.

[percy]

Freight companies in Canterbury region will be pleased with today's announcement that Port of Tauranga's signing of a conditional agreement to buy 15 hectares at Rolleston for development as an intermodal freight hub,to receive,pack and distribute containerised cargo.

[Marilyn Munroe]

This is interesting and will put LPC on their mettle.

I assume this inland port will be adjacent to the siding already used by Westland Dairy in the industrial area.

POT-Timaru will need to invest in straddles and ship to shore container cranes to make this work. Their tower crane and forklift method shipside will strugle to handle any increase in through-put.

I wonder if Kiwi Rail will reinstate the Rolleston Triangle to make connections to the South Line easier, and what strategy POT-Timaru has, will Timaru feed Tauranga via coastal shipping or will Timaru become an direct shipment port?

How can LPC repond? More gantry capacity at Chapmans Road, more truck lanes at the Lyttelton Terminal, bring forward the terminal expansion on to the Te Awaparahi Bay reclamation. If they really wanted to take the battle to POT-Timaru they could set up their own inland ports at Temuka Washdyke and Ashburton.

Boop boop de do
Marilyn

[percy]

This is interesting and will put LPC on their mettle.

I assume this inland port will be adjacent to the siding already used by Westland Dairy in the industrial area.

POT-Timaru will need to invest in straddles and ship to shore container cranes to make this work. Their tower crane and forklift method shipside will strugle to handle any increase in through-put.

I wonder if Kiwi Rail will reinstate the Rolleston Triangle to make connections to the South Line easier, and what strategy POT-Timaru has, will Timaru feed Tauranga via coastal shipping or will Timaru become an direct shipment port?

How can LPC repond? More gantry capacity at Chapmans Road, more truck lanes at the Lyttelton Terminal, bring forward the terminal expansion on to the Te Awaparahi Bay reclamation. If they really wanted to take the battle to POT-Timaru they could set up their own inland ports at Temuka Washdyke and Ashburton.

Boop boop de do
Marilyn

Although I agree with what you have written,I think it comes down to fewer large ship visits.
I was not joking when I wrote NZ's hub port will be either Tauranga or Melbourne.I think, and hope it will be Tauranga.
POT are also involved in Northland Port.Anything they do they do it right first time.

[Marilyn Munroe]

In reply to Percy;s post above;

It is unlikely their would be only a single container hub in New Zealand. The reason; the cost of moving boxes across the iron bridge on Cook Straight. Hubbing is trend in container transport but in Aoteroa the gap in the middle means that consolidation will take place separately on each island

The Danes already hub their boxes at either Malaysia or Panama. I can't see the logic of hubbing in Melbourne, it is not on the way toward anywhere else.

Wandering off-topic a bit. If the National Government were serious about their aim of assisting economic development in Northland they would get Gerry the Colossus of Rhodes to pull the pin on the wasteful Holiday Highway extension and spend the money on a spur rail line to Marsden Point instead.

Boop boop de do
Marilyn

[percy]

We can only hope you are right.
Larger ships means fewer ship visits.
Port calls will be decided by shipping lines.
Melbourne?? Again hope not.
NZ being at the bottom or end of the world means we do not rate highly on shipping company's radar.

[percy]

From the internet.Australia's largest container port is Melbourne.Annual TEU 1.9mil.

[Marilyn Munroe]

There is a, on one hand.. on the other hand, item by Marta Steeman in todays Christchurch Press,

Her conclusion, its not quite as easy for POT-Timaru as you would think.

http://www.stuff.co.nz/the-press/business/9611638/Freight-hub-should-benefit-Lyttelton

Boop boop de do
Marilyn

[percy]

There is a, on one hand.. on the other hand, item by Marta Steeman in todays Christchurch Press,

Her conclusion, its not quite as easy for POT-Timaru as you would think.

http://www.stuff.co.nz/the-press/business/9611638/Freight-hub-should-benefit-Lyttelton

Boop boop de do
Marilyn

Loved the quote "It's very early days."
So true.

[Marilyn Munroe]

Headline from the Christchurch Press;

"Lyttelton Port plans second inland site"

http://www.stuff.co.nz/the-press/business/9793067/Lyttelton-Port-plans-second-inland-site

Boop boop de do.
Marilyn

[Snoopy]

You have to look long term Noodles, with what LPC are doing with the growth in log and container freight. Plus think about all those raw materials coming across the docks to assist the ChCh rebuild. I think the operational picture shows real improvement promise, but don't get too excited about the operational performance of the upcoming FY2014, even if those insurance payments cause headline profit to rocket.


The biggest insurance payment ever made to a New Zealand company of $450m seems to have slipped quietly under the radar. But it will make a big difference to LPC from the FY2015 year. The earthquake adjusted profit for FY2013 was around $15m. Interest expense was $7.7m. So what if there was no interest bill (there won't be in FY2015)? Underlying net profit would jump to:

$15m + 0.72($7.7m) = $20.5m. (A)

Now what happens if you have a large wad of insurance payout cash to invest, once the underlying company debt was repaid? From the half year balance sheet:

$382.7m - $39.4m = $343.4m

Say you got 4% on that money, and tax was 28%. The interest earned would amount to:

$343.4 x 0.04 x 0.72 = $9.9m (B)

Add up A and B and I get a baseline NPAT of $30.4m. Shares on issue amount to 102.2m. So prospective FY2015 eps is:

$30.4m/102.2m = 29.7cps.

At $3.20, which is the price shares are being offered at on the market now, the prospective FY2015 PE is:

$3.20/ 29.7 = 10.8.

If there is a cheaper quality share on the market today, I can't think of it.

SNOOPY

discl: hold LPC

PS Net asset backing is now:

$528.4m/102.2m = $5.17

That means for every $1 of assets in LPC, you only have to pay 60c on the market. How's that for a discount fellow value investors?

[Snoopy]

------

31 March 2014

NZX RELEASE
BOARD CHANGES

Lyttelton Port Company Limited is pleased to advise that Mr Jim Quinn has joined the Board with effect from 1 April 2014. Mr Quinn has had a career in senior leadership roles and brings to the Company a wealth of experience in transport and logistics from his time as Chief Executive of KiwiRail Limited from March 2009 until earlier this month. Previously he was Chief Executive of Express Couriers Limited, a joint venture between New Zealand Post and DHL.

As required by the NZX Listing Rules, the Board has determined that Mr Quinn is an “Independent Director” for the purposes of the Listing Rules.

Mr Quinn will replace Alan Grant who has given notice of his resignation as a Director of the Company with effect from 1 April 2014. Mr Grant was appointed by the Board to fill a casual vacancy following the resignation of Rodger Fisher at the Company’s 2013 Annual Meeting.

-----------

A good appointment I think, as someone with wide experience in logistics.

SNOOPY

[percy]

The biggest insurance payment ever made to a New Zealand company of $450m seems to have slipped quietly under the radar. But it will make a big difference to LPC from the FY2015 year. The earthquake adjusted profit for FY2013 was around $15m. Interest expense was $7.7m. So what if there was no interest bill (there won't be in FY2015)? Underlying net profit would jump to:

$15m + 0.72($7.7m) = $20.5m. (A)

Now what happens if you have a large wad of insurance payout cash to invest, once the underlying company debt was repaid? From the half year balance sheet:

$382.7m - $39.4m = $343.4m

Say you got 4% on that money, and tax was 28%. The interest earned would amount to:

$343.4 x 0.04 x 0.72 = $9.9m (B)

Add up A and B and I get a baseline NPAT of $30.4m. Shares on issue amount to 102.2m. So prospective FY2015 eps is:

$30.4m/102.2m = 29.7cps.

At $3.20, which is the price shares are being offered at on the market now, the prospective FY2015 PE is:

$3.20/ 29.7 = 10.8.

If there is a cheaper quality share on the market today, I can't think of it.

SNOOPY

discl: hold LPC

PS Net asset backing is now:

$528.4m/102.2m = $5.17

That means for every $1 of assets in LPC, you only have to pay 60c on the market. How's that for a discount fellow value investors?

Thank you for your post...
Dividends...??? Is there any reason LPC can not pay out their total earnings in dividends.??

[noodles]

At $3.20, which is the price shares are being offered at on the market now, the prospective FY2015 PE is:

$3.20/ 29.7 = 10.8.

If there is a cheaper quality share on the market today, I can't think of it.

SNOOPY


Great analysis Snoopy. I have a couple of factors that I think will lower your FY15 NPAT.

The FY13 interest expense was only $3.863mill. The 1h14 interest expense was only $1mill. Expect another $0.333 mill for the first 2 months of this year. The company has given guidance for FY14 of between $15-16 mill. Perhaps that should be the baseline. So A would be 15.5 +(1.33*.72) =$16.46mill

Additionally, they owe the tax dept $40mill. I would have thought they would have to pay that at some stage.
So B would be $(343.4 - 40) x 0.04 x 0.72 = $8.74m

Add up A and B and I get a FY15 NPAT of $25.2m.

[noodles]

Great analysis Snoopy. I have a couple of factors that I think will lower your FY15 NPAT.

The FY13 interest expense was only $3.863mill. The 1h14 interest expense was only $1mill. The company has given guidance for FY14 of between $15-16 mill. Perhaps that should be the baseline. So A would be 15.5 +(1*.72) =$16.22mill

Additionally, they owe the tax dept $40mill. I would have thought they would have to pay that at some stage.
So B would be $(343.4 - 40) x 0.04 x 0.72 = $8.74m

Add up A and B and I get a FY15 NPAT of $24.96m.




Obviously the interest received will be a medium term benefit as the cash pile gets spent on rebuild. One would hope that rebuilding benefits outweigh the interest received. Otherwise, why bother.

Depreciation will also jump as newly built infrastructure will have higher depreciation. This will depress NPAT a little as well.

[Snoopy]

Thank you for your post...
Dividends...??? Is there any reason LPC can not pay out their total earnings in dividends.??


LPC would claim that even with their full and final insurance payout, there will not be enough money to rebuild the port they want in the future. So I am sure that managment will make the argument that if they keep the capital and reinvest the interest this is an essential part of the process in building up the capital they need.

OTOH the Cristchurch City Council is desperately short of capital for the rest of the city rebuild they have committed to. Perhaps Chrischurch City Holdings might instruct their subsidiary to pay out a spedcial dividend to bring the pain at the port of Lyttelton up to that of the rest of the city? I am sure the second largest shareholder, the Dunedin City Council with their own stadium problems would welcome a cash handout too!

SNOOPY

[Snoopy]

Great analysis Snoopy. I have a couple of factors that I think will lower your FY15 NPAT.

The FY13 interest expense was only $3.863mill.


The $7.7m figure that I put into my calculation was a mistranscription. Net finance expenses look to be $3.578m for FY2013 (p49)



The 1h14 interest expense was only $1mill. Expect another $0.333 mill for the first 2 months of this year.


I was trying to leave any interim FY2014 information out of it, as with the big insurance payment coming part way through the year, the underlying interest payments will be harder to unpick.



The company has given guidance for FY14 of between $15-16 mill. Perhaps that should be the baseline. So A would be 15.5 +(1.33*.72) =$16.46mill


Would not the guidance for FY2014 already include the projected interest savings from the capital repayments?



Additionally, they owe the tax dept $40mill. I would have thought they would have to pay that at some stage.


If you look back to the FY2010 statements (pre earthquake), there was an income tax liability of the balance sheet of $15m. That $40m owing may be 'eartquake inflated' but I don't think you can say that from here on in the income tax liability on the LPC balance sheet will be zero.

SNOOPY

[Snoopy]

Net finance expenses look to be $3.578m for FY2013 (p49)

If you look back to the FY2010 statements (pre earthquake), there was an income tax liability of the balance sheet of $15m. That $40m owing may be 'eartquake inflated' but I don't think you can say that from here on in the income tax liability on the LPC balance sheet will be zero.



I will have another go at this incorporating the corrections by noodles combined with my own corrections.

Underlying net profit would jump to:

$15m + 0.72($3.6m) = $17.6m. (A)

Now what happens if you have a large wad of insurance payout cash to invest, once the underlying company debt was repaid together with th eunusually large balance owing to inland revenue?

From the half year balance sheet:

$382.7m - [$39.4m + ($40m -$15m)] = $318.3m

Say you got 4% on that money, and tax was 28%. The interest earned would amount to:

$318.3 x 0.04 x 0.72 = $9.2m (B)

Add up A and B and I get a baseline NPAT of $26.8m. Shares on issue amount to 102.2m. So prospective FY2015 eps is:

$26.8m/102.2m = 26.2cps.

At $3.20, which is the price shares are being offered at on the market now, the prospective FY2015 PE is:

$3.20/ 26.2 = 12.2.

Not as cheap as I indicated yesterday, but still darn cheap even so. Is that better Noodles?

SNOOPY

[Snow Leopard]

...Additionally, they owe the tax dept $40mill. I would have thought they would have to pay that at some stage....

Actually the answer is theoretically yes and practically maybe some of it.


...If you look back to the FY2010 statements (pre earthquake), there was an income tax liability of the balance sheet of $15m. That $40m owing may be 'eartquake inflated' but I don't think you can say that from here on in the income tax liability on the LPC balance sheet will be zero....

It is not earthquake related but IFRS related.

This all comes about for reasons I have forgotten so completely I do not even know what to type into Google to get the right sort of result, but I do remember a few moans about it when it came in and it was possibly related to buildings? or land? or both? (though it may not be!)

But basically something on the balance sheet has increased in value and if you were to sell it you would have to pay tax on the profit. So when you do the accounts you up the assets by the increase in value of whatever it is and up the liabilities by the amount of tax you would have to pay if you did actually sell it.

But as you are not selling all you can do is leave it sitting on the books.

Best Wishes
Paper Tiger

[noodles]

Not as cheap as I indicated yesterday, but still darn cheap even so. Is that better Noodles?

SNOOPY

What with what PT has revealed, I reckon FY15 NPAT should be between 26.5-27.5cps.

They should also able to improve margins with all the capital investment going on. With some increased revenue, they may be able to add another 2cps.

So 30cps per share may be possible.

But the real story is how much of that capital will come back to shareholders(if any). I think this will be the catalyst for share price action.

[percy]

So long as capital is spent where it will generate a return on investment,and where they have customers, they should have plenty of cash to spare.
Hopefully the mad days of building wharfes for the sake of it are well past.
The board is a lot stronger today.
The real catalyst for me would be ChCh City Holdings selling out.

[noodles]

The real catalyst for me would be ChCh City Holdings selling out.
Why? More liquidity? Ability to renegotiate contracts with workers?

[percy]

Why? More liquidity? Ability to renegotiate contracts with workers?

ChCh has again a Labour mayor.
Trade Unions who represent port workers,spoke directly to a previous mayor.This led to ChCh city holdings approaching the chairman of LPC and telling him he had to give in to union demands.!
The Chairman knowing right from wrong resigned, with his reputation in tact.ChCh City Holdings them appointed as Chairman a commercial disaster."Build the wharves and the customers will come."
What is right for ChCh City Holdings is often not right for LPC.Rather than help progress ,they can hinder progress.
A partnership between either POT or POA would most probably have been of benefit.I think better long term planning would have progressed further with a strong partner.

[percy]

Noodles.
I covered this ground in depth from post No.242 [page 17] onwards on this thread.

[Marilyn Munroe]

Container traffic has increased sharply at Timaru since the Tauranga joint venture was launched Source; Timaru Herald

http://www.stuff.co.nz/timaru-herald/news/9946029/Sharp-rise-in-container-traffic

Boop boop de do
Marilyn

[Snoopy]

Container traffic has increased sharply at Timaru since the Tauranga joint venture was launched Source; Timaru Herald

http://www.stuff.co.nz/timaru-herald/news/9946029/Sharp-rise-in-container-traffic

Boop boop de do
Marilyn

A quote from the above article, about the involvement of Port of Tauranga at Primeport.

"Before the partnership, Timaru's port had seen container movements drop from 80,000 20-foot container equivalents a year to 20,000 as shipping companies decided to use larger ports, but the partnership with Tauranga has turned this around."

If trade in containers is up 25%, that still only brings Primeport container movements to around 25,000 container per year. Even with this growth Primeport are still down 69% from when LPC pinched the Fronterra trade. Not worth a furrow line on the forehead of Peter Davie yet.

SNOOPY

[percy]

Boop boop de do is exactly right Marilyn.!
Thanks for posting the link.

[percy]

[QUOTE=Snoopy;476064] Not worth a furrow line on the forehead of Peter Davie yet.

Want to bet on that !? lol.

[Snoopy]

ChCh has again a Labour mayor.
Trade Unions who represent port workers,spoke directly to a previous mayor.This led to ChCh city holdings approaching the chairman of LPC and telling him he had to give in to union demands.!


Dunedin has a new council too, that has just reviewed their 15% strategic stake in LPC!

http://www.odt.co.nz/news/business/299601/port-otago-reviews-lpc-shareholding

Quotes from the above article that I thought interesting:

"Port Otago chairman Dave Faulkner briefed the councillors, saying the insurance payout and the subsequent resumption of dividends at 2c per share were ''a little disappointing''."

Not sure why he thought the insurance payout was disappointing! It looks a much cleaner agreement to me than what is happening with the rest of the CCC controlled assets! And there is enough money there to rebuild all damaged assets to the highest earthquake standards.

-------

"Mr Faulkner said there were several maritime issues going on at the time the stake was purchased, including port operator Hutchison's desire to own and manage LPC and the Government talking of ''amalgamations'' of unnecessary port operations."

"''Because of our stake, Hutchison don't have it [LPC]. It is less strategic now; the reasons have changed. We've looked at what else to do with $47 million,'' he said. "

"Following the meeting, Mr Faulkner was asked if consultants had talked to potential buyers."

"''There are a few entities who have expressed an interest,'' Mr Faulkner said."

"Mr Faulkner said ''if the price isn't there'', Port Otago would not sell, while Port Otago chief executive Geoff Plunket said the company was able to maintain its ''long-term `hold' strategy'' and keep the stake."

-------

Will Port Otago sell or not? It seems the issue is not clear cut.

SNOOPY

[percy]

POT is Port of Tauranga.
POO must be Port of Otago.
No surprises in the announcement.Dunedin ratepayers will surely prefer to see their Stadium debt brought down.
Maybe the fun will now start.
An alliance with POA [Port of Auckland].
A big payout to ChCh City Holdings before they too sell out!!!???
Have not been brave/sure enough to buy back in.Maybe the unions scare me!!!

[airedale]

POT is Port of Tauranga.
POO must be Port of Otago.
No surprises in the announcement.Dunedin ratepayers will surely prefer to see their Stadium debt brought down.
Maybe the fun will now start.
An alliance with POA [Port of Auckland].
A big payout to ChCh City Holdings before they too sell out!!!???
Have not been brave/sure enough to buy back in.Maybe the unions scare me!!!

Hello Percy, The employers also have a union, it is called the Employers Federation {trade union} and the employment contracts act used to scare me. The best thing for a trade union is democratic participation by its members.

[percy]

Airedale.
Please go back to my post No.355 on this thread and you may see where I am coming from.

[noodles]

"Port Otago chairman Dave Faulkner briefed the councillors, saying the insurance payout and the subsequent resumption of dividends at 2c per share were ''a little disappointing''."

Not sure why he thought the insurance payout was disappointing! It looks a much cleaner agreement to me than what is happening with the rest of the CCC controlled assets! And there is enough money there to rebuild all damaged assets to the highest earthquake standards.



I guess he thought that the dividend should be bigger. Like about $2 per share instead of 2c?

[airedale]

Airedale.
Please go back to my post No.355 on this thread and you may see where I am coming from.
I take your point Percy.
Off topic: the city is strapped for cash. What do you think of LPC being partly sold like the power companies. 49% sold off. with the city holding the balance. Although the 15% held by Otago complicates things.

[percy]

I take your point Percy.
Off topic: the city is strapped for cash. What do you think of LPC being partly sold like the power companies. 49% sold off. with the city holding the balance. Although the 15% held by Otago complicates things.

First of all I don't think ChCh City Holdings would want LPC to share any of the insurance money with Otago.
Once Otago is gone then I would think we could see some fun.One off special dividend,followed by POA taking a large holding [ie ChCh Holdings selling them shares],or even ChCh City Holdings selling the port operations to a port operator,retaining land ownership.They could even sell out completely stating with POT operating Timaru and ????? [Hutchison] operating LPC there is no need for ChCh City Council to have ownership of the port, as the city is now well served.
I would think the government will be pushing ChCh City Council to sell assets.

[Snoopy]

One off special dividend,followed by POA taking a large holding [ie ChCh Holdings selling them shares],or even ChCh City Holdings selling the port operations to a port operator,retaining land ownership.They could even sell out completely stating with POT operating Timaru and ????? [Hutchison] operating LPC there is no need for ChCh City Council to have ownership of the port, as the city is now well served.
I would think the government will be pushing ChCh City Council to sell assets.


Not sure about the above ownership speculation. But big Gerry is now behind fast tracking the port rebuild. Today's press release:


------

Hon Gerry Brownlee
Minister for Canterbury Earthquake
Recovery
19 June 2014
Media Statement

Recovery Plan to streamline Lyttelton Port progress

Canterbury Earthquake Recovery Minister Gerry Brownlee says he is using the powers of the Canterbury Earthquake Recovery Act 2011 to allow for timelier redevelopment of the badly damaged Lyttelton Port.

“Under the CER Act I have today directed Environment Canterbury and Lyttelton PortCompany to prepare a Lyttelton Port Recovery Plan,” Mr Brownlee says.

“Lyttelton Port needs certainty about repairing, rebuilding and reconfiguring its operations, and this plan will deliver that.
“The port is the major gateway to the South Island for goods freighted by sea and it makes a significant contribution to the regional and national economy.“

Creating a Recovery Plan provides for the social, economic, cultural and environmental wellbeing of the Lyttelton and greater Christchurch
communities.” The plan will ensure safe, efficient and effective operations, while taking account of the impact on the coastal marine area and the community, any implications on transport and the needs of users of the port and its surrounding areas.

“I know the people of Lyttelton are passionate about their township and the community and port users need to be involved in the preparation of this plan.

“Lyttelton Port Company and Environment Canterbury will be required to consult with those groups and the public as the plan is developed.

“There have been no decisions made on how the port should be redeveloped, but I have determined that a Recovery Plan is the best tool for timely redevelopment to be achieved.

“A Recovery Plan allows for a streamlined process and will see redevelopment occur in a timelier manner than under the Resource Management Act, while still ensuring robust testing of information.

“This is a similar process to the Christchurch Central Recovery Plan and the Land Use Recovery Plan,” Mr Brownlee says.

Under today’s direction Lyttelton Port Company will undertake consultation and provide ECan with the initial information required.
ECan will then develop a preliminary draft, call for written comment and hold a hearing.

It is expected the draft Recovery Plan will be provided to the Minister for Canterbury Earthquake Recovery in July 2015.

“The plan will provide very clear guidance about how the port can be repaired and rebuilt, in a manner that works best for the Lyttelton area,” Mr Brownlee says.

----

SNOOPY

PS Buyers at $3.14, sellers at $3.29 as I write this.

[percy]

No surprise there!!
Get it fixed so it can be sold!!!!

[Banksie]

No surprise there!!
Get it fixed so it can be sold!!!!

I am not sure what he is hoping to speed up. They are building the new crane and pile driving for the contain wharf as I type. I don't think the repairs are being held up by resource consents.

Funny how he talks about redevelopment rather than rebuild, I suspect they are setting up to push some unpopular "redevelopments" past the lyttelton locals and ecan.

I don't trust this man.

[Marilyn Munroe]

I suspect they are setting up to push some unpopular "redevelopments" past the lyttelton locals and ecan.

I don't trust this man.

I share your suspicions. There is probably some quarrying reclamation or dredging in the wind and they want to head off the greenies and NIMBYS. Ecan is less of a hurdle, just call your plan an irrigation scheme and the Commissars would be all for it.

Boop boop de do
Marilyn

[noodles]

So does anybody have an opinion on what it means for shareholders?

LPC are going to spend all their insurance money on new projects?

LPC will get something that the council wants?

LPC can fast track the rebuild?

It is all very vague.

[percy]

All too vague.
Have to agree with MM on quarry reclamation.
Suppose my concern is LPC will spend all the insurance money and more "building the port of the future".
May be the only chance they will ever get?
What it means for shareholders other than CCC remains to be seen?.Too difficult for me at this stage to predict.

[Banksie]

Goss on the street is that LPC will be presenting their redevelopment plans to the community in the next few weeks.

[Marilyn Munroe]

Quote from CEO Peter Davie in the Christchurch Press;

"If we were to go through normal consenting process, and we need over 100 consents to rebuild and develop the port, it could take anywhere from five to 10 years to do."

http://www.stuff.co.nz/the-press/news/10180002/Lack-of-detail-in-port-fast-track-announcement

Boop boop de do
Marilyn

[percy]

One billion dollars,30 year upgrade.!!???
I wish them well.

[Banksie]

One billion dollars,30 year upgrade.!!???
I wish them well.

Link to the plan http://www.portlytteltonplan.co.nz/

[noodles]

Sounds great for non-shareholders

[percy]

Sounds great for non-shareholders

My thoughts too.!!!
POT announcement today will not be enjoyed by LPC shareholders either.

[Banksie]

My thoughts too.!!!

Who are the non-shareholders? LPC have a tricky path to walk, as being 80% owned by council all ratepayers are shareholders.

[noodles]

Sounds great for non-shareholders
I guess Christchurch rate payers will effectively be paying for it l as LPC won't be able to pay large dividends to the Council. Maybe this is part of the reason why rates have been hiked 7.5%

[Marilyn Munroe]

Wow! The Vikings have entered into a long term binding contract with the Fontera, Silver Fern Farms joint venture which involves shipping through Timaru and Tauranga. Of course nobody regards these Vikings as swashbukling opportunists, so its all good.

Boop boop de do
Marilyn

[Marilyn Munroe]

Will the Otago Regional Councillors drop their morning porridge on their sporrans in the future when they read in the morning newspaper that the recently announced expansion plans will be funded in part by share issues?

Boop boop de do
Marilyn

[percy]

No surprises there.Halfwits make halfwited decisions.BRING BACK LAYTON>
Snoopy.Parochial interests will always override comon sense.They will wake up when large ships call only on Port of Tauranga and do not bother to call on any south Island ports.Layton sees this.As you understand,why build whafes for no customers.It is called the Sundstrum syndrome.
I am wrong ofcourse.Main hub port for south island will be Melbourne in Australia.

Posted 01-10-2010.
Could be said to be right on the money?

[Xerof]

Hell's teeth, thats a fairly ambitious reclamation plan - if you are any good at long jumping, you'll be able to leap to Diamond Harbour without taking the ferry

will any dolphins be lost because of this?:ohmy:

[Snoopy]

Will the Otago Regional Councillors drop their morning porridge on their sporrans in the future when they read in the morning newspaper that the recently announced expansion plans will be funded in part by share issues?


What paper are you quoting Marilyn? The figures I got from "The Press" dated 26th June were:

1/ Total 30 year plan cost $1b
2/ Total five year plan cost $450m
3/ Total Insurance Payout $438m

I don't see any need for share issues within the next five years, albeit some profit retention will be necessary to close the five year funding gap.

The billion dollar 30 year plan is a different issue.

I saw the article on the inside of the front page where Peter Davie is suggesting that developers get in touch as regards what might happen in the inner harbour. But that doesn't mean shareholders will supply that inner harbour capital. Peter's plan as I read it is quite the opposite.

LPC will probably lease out the inner harbour land (I am taking that as code for 'wanting to retain some control of harbour land') to developers. Leasing out land would be cashflow positive for LPC, so no issues for shareholders with that. The $1b 30 year plan that Peter talks about includes all the inner harbour development as well that will not be done by LPC (according to Peter's wishlist).

After reading all this I too had porridge for breakfast. But I didn't come close to spilling any.

SNOOPY

discl: LPC shareholder

[Snoopy]

POT announcement today will not be enjoyed by LPC shareholders either.


One LPC shareholder, Port Otago, doesn't seem too worried. From the ODT dated Friday 27th June:

--------

Port Otago operates a daily rail link to Timaru, in turn picking up less than 10,000 TEUs (20ft container equivalents) annually from South Canterbury. Last financial year Port Otago handled a total 80,000 containers, while Timaru hopes its numbers will return to 80,000.

Port Otago chief executive Geoff Plunket said, when contacted, a small number of containers out of Timaru was likely to be affected, but Port Otago intended to keep the daily rail service (from Timaru) in operation.

''This won't be hugely significant for us.

''Any loss from Timaru in likely to see gains elsewhere ... there's still growth in the Otago-Southland region, and extra production capacity,'' Mr Plunket said.

He did not expect the volume of southern exports across Port Chalmers wharves from Fonterra and Silver Fern Farms to be affected by the freight alliance with Timaru.

----------

Peter Davie not too worried either. From the Timaru Herald dated 27th June:

----------

LPC chief executive Peter Davie played down the news. He said the port would lose some container handling work when the five-year contract for the Fonterra work finished at the end of July.

Davie said he had not worked out the volume changes in the short or long term. "This is normal trade back and forth [between ports] a little bit. What we're trying to do is make sure we grow the port for the long term."

----------

Meanwhile the share price is slowly coming back to all time highs after all the announcements. Perhaps some non-shareholders worry too much?


SNOOPY

[percy]

If I was a LPC shareholder I would be very concerned by Peter Davie's comment " This is normal trade back and forth."
It is not!! It is a fundamental change,to POT attracting bigger ships,and POT becoming NZ's hub port.
Perhaps non-shareholders have had a clearer view of the "big picture" and what the future holds.

[Banksie]

http://www.stuff.co.nz/business/industries/10339594/CCHL-set-to-take-over-LPC

End of the road for LPC shares. Looks like a good deal for holders.

[percy]

http://www.stuff.co.nz/business/industries/10339594/CCHL-set-to-take-over-LPC

End of the road for LPC shares. Looks like a good deal for holders.

Yes it makes sense to me.

[blackcap]

http://www.stuff.co.nz/business/industries/10339594/CCHL-set-to-take-over-LPC

End of the road for LPC shares. Looks like a good deal for holders.

Come on NZX, your conduct yesterday was disgraceful. Embedded in the SSH notice sent to the market at 2.24pm was the following information yet you let the stock trade on.

"Details of transactions and events giving rise to relevant event
Details of the transactions or other events requiring disclosure under the
instructions to this form:
Port Otago Limited ("POL") has entered into a lock up agreement ("Lock Up
Agreement") with Christchurch City Holdings Limited ("CCHL") dated 1 August
2014 for POL to sell 15,825,477 ordinary shares in Lyttelton Port Company
Limited ("LPC") to CCHL pursuant to a full takeover offer to be made by CCHL
in accordance with the Takeovers Code. The consideration for the sale of the
shares will be cash of $3.95 per LPC share.

Subsequently at 2.57pm (35 minutes later) and only then do you place a trading halt on the shares of LPC with an official takeover notice following minutes later. But in the mean time some enterprising reader of the SSH notice has gone and hoovered up all the shares on offer.

If I was one of the shareholders that had shares on the offer I would be seriously pissed.

[glennj]

Closed at 4.10 yesterday a jump of 0.80 now just 0.05 short of the offer plus dividend. I was contemplating selling after the recent news re POT but am glad I hung on now.

[ratkin]

Im jealous , well donr to holders

[Marilyn Munroe]

I assume that CCHL making LPC a wholly opened subsidiary means they intend to remain 100% owners of the company but extract dividends by loading it up with debt.

Could this mean that cash extraction Ninja Brett Layton will resume his old gig?

Boop boop de do
Marilyn

[Marilyn Munroe]

If I was one of the shareholders that had shares on the offer I would be seriously pissed.

Sect 4.8.4 (b) of the NZX listing rules.


Boop boop de do
Marilyn

[Snoopy]

I assume that CCHL making LPC a wholly opened subsidiary means they intend to remain 100% owners of the company but extract dividends by loading it up with debt.

Could this mean that cash extraction Ninja Brett Layton will resume his old gig?

Boop boop de do
Marilyn


Could be although he might have to reduce his salary expectations. If the company is no longer public it will no longer demand the salary premium for senior staff that being under public and NZX scrutiny requires. I heard on the grapevine that Peter Davie will pre-emptively be asking for his salary to be cut next week....

SNOOPY

[Snoopy]

http://www.stuff.co.nz/business/industries/10339594/CCHL-set-to-take-over-LPC

End of the road for LPC shares. Looks like a good deal for holders.

A bit disappointed not to see anything about independent directors asking for an independent valuationin teh news report. Even $4.15 is well under NTA for this company now.

SNOOPY

[percy]

I assume that CCHL making LPC a wholly opened subsidiary means they intend to remain 100% owners of the company but extract dividends by loading it up with debt.

Could this mean that cash extraction Ninja Brett Layton will resume his old gig?

Boop boop de do
Marilyn

Knowing CCHL's history I think they would be more likely to bring back that great commerce disaster, Barney Sundstrum {My grandfather was a ship's captain] whose mantra was "build the wharfes,the customers will come" ,rather than someone with a brain.

[winner69]

Come on NZX, your conduct yesterday was disgraceful. Embedded in the SSH notice sent to the market at 2.24pm was the following information yet you let the stock trade on.

"Details of transactions and events giving rise to relevant event
Details of the transactions or other events requiring disclosure under the
instructions to this form:
Port Otago Limited ("POL") has entered into a lock up agreement ("Lock Up
Agreement") with Christchurch City Holdings Limited ("CCHL") dated 1 August
2014 for POL to sell 15,825,477 ordinary shares in Lyttelton Port Company
Limited ("LPC") to CCHL pursuant to a full takeover offer to be made by CCHL
in accordance with the Takeovers Code. The consideration for the sale of the
shares will be cash of $3.95 per LPC share.

Subsequently at 2.57pm (35 minutes later) and only then do you place a trading halt on the shares of LPC with an official takeover notice following minutes later. But in the mean time some enterprising reader of the SSH notice has gone and hoovered up all the shares on offer.

If I was one of the shareholders that had shares on the offer I would be seriously pissed.

Mr Daniel a bit seriously pissed
http://www.stuff.co.nz/business/10345890/LPC-shareholder-wants-trades-reversed

Suppose onus was on LPC to ask for the halt

Not a good day for many on the nzx

[Marilyn Munroe]

Mr Daniel a bit seriously pissed
http://www.stuff.co.nz/business/10345890/LPC-shareholder-wants-trades-reversed

Suppose onus was on LPC to ask for the halt

Not a good day for many on the nzx

The opportunist buyer was probably a broker trading on their own account.

Mr Daniels probably assumed the exchange acts in the best interests of their clients. He is correct in his assumption, the error was to.assume that clients mean shareholders not share brokers.

Snoopy:if you be leave the offer price is too low study NZX listing rule 4.8.4.


Boop boop de do
Marilyn

[Marilyn Munroe]

The Lairds of the Otago Regional Council had only a few bent farthings in their coffers and lots to pay out for past dreams and follies.

They could of course raise taxes but that would risk a rising of the clans. They dinnae want the clans besieging them in their castle using that weapon of terror, the ballot box, against them.

So instead they cast around for some hidden treasure which earned no pennies and could be flogged off to fill the coffers.

Trouble was those canny Sassenachs from North of the border ken the pressure they were under and were able to beat them down to a wee muckle.

Some impertinent questions;

1. Is the above true or just a fairy tale?

2. If true is the Otago Regional Council a distressed seller?

3. If the price is set by a distressed seller does it meet the fair and reasonable price test of the takeovers code?

Boop boop de do
Marilyn

[sommelier]

Lyttelton harbour vibrating to a General Emergency Alarm tonight.. #nolongermyproblem #hopeitsadrill

[Marilyn Munroe]

Item in the Christchurch Press detailing the timetable for the despatch of the offer document and independent advisers report.

http://www.stuff.co.nz/the-press/business/10400813/Formal-port-offer-expected-in-weeks

Boop boop de do
Marilyn

[Marilyn Munroe]

I recived the takeover documents from CCHL today.

They disclose there is no escalation clause in the lock-up agreement between Port Otago Ltd and CCHL.

This supports my speculation the Otago Regional Council is a weak seller.

Boop boop de do
Marilyn

[Marilyn Munroe]

I received the takeover documents from CCHL today.

They disclose there is no escalation clause in the lock-up agreement between Port Otago Ltd and CCHL.

This supports my speculation the Otago Regional Council is a weak seller.

Boop boop de do
Marilyn

[Snoopy]

I recived the takeover documents from CCHL today.

They disclose there is no escalation clause in the lock-up agreement between Port Otago Ltd and CCHL.

This supports my speculation the Otago Regional Council is a weak seller.

Boop boop de do
Marilyn

This is the bit that I didn't like Marilyn.

------

14 CLASSES OF SECURITIES
No report is required under Rule 22 of the Takeovers Code (which, if the offer is for more than one class of securities, requires a report by an independent adviser on the fairness and reasonableness of the consideration and terms of the offer as between different classes of securities)

-------

However, I see that CCHL have commissioned a valuation report which will be posted out within 14 days. Good on them for doing that, I suppose.

It willl be interesting to see how the independent Northington's Partners justifies saying selling $5 worth of assets for $4 is a good deal. If they can do that I might go down to the council chambers and offer councillor Raf Manji a couple of large gold coins in exchange for one of his orange bank notes.

SNOOPY

[Marilyn Munroe]

It willl be interesting to see how the independent Northington's Partners justifies saying selling $5 worth of assets for $4 is a good deal.
SNOOPY

Take heart Snoopy, Northington Partners will not want to be shown up by their illustrious predecessors, Crighton Anderson Corporate Finance who gave an opinion(1) that an offer was not fair.

Boop boop de do
Marilyn

(1) Page 2, Lyttelton Port Company Target Company Statement March 2006

[Marilyn Munroe]

I received the takeover documents from CCHL today.

They disclose there is no escalation clause in the lock-up agreement between Port Otago Ltd and CCHL.

This supports my speculation the Otago Regional Council is a weak seller.

Boop boop de do
Marilyn

When the Ashburton District Council sold their Lyttelton Port shares to Christchurch City Holdings in 2005 they got an escalation clause. The Otago Regional Council did not.

Boop boop de do
Marilyn

[minimoke]

It ought to be worth recording here yesterday's death of a third worker in 12 months at the port.

[minimoke]

Totally unacceptable this day in age. Is OSH and management doing anything about this???
Osh is meeting senior management next week. 4 warnings, 5 improvement notices and 6 prohibition notices in past 12 months indicates directors and managers who don't listen. Expect hefty fine or out with the wet bus ticket

[Snoopy]

It ought to be worth recording here yesterday's death of a third worker in 12 months at the port.


As a shareholder I am starting to feel complicit in this mass manslaughter, as an accomplice. I suppose this is how all you Pike River shareholders felt? Not a nice feeling at all. I should probably be chained up and restricted to a small room. But since I do live in a kennel, perhaps I am just getting my comeuppance after all?

SNOOPY

[minimoke]

As a shareholder I am starting to feel complicit in this mass manslaughter, as an accomplice. I suppose this is how all you Pike River shareholders felt? Not a nice feeling at all. I should probably be chained up and restricted to a small room. But since I do live in a kennel, perhaps I am just getting my comeuppance after all?

SNOOPY
and so you should. Do you not wonder what the ceo is doing for his pay? But there is a similarity to nzo and prc. Lpc have the same approach to mushrooms. Here is what it says on their career page: "safety is our top priority.......as a result we have an excellent safety record". Imagine how many workers your company would be killing if they didn't take safety so seriously!

[Marilyn Munroe]

The release of LPC's annual result has been overshadowed by the unfortunate death in the terminal.

The effects of the earthquake have had a whip-saw effect on the balance sheet making the result difficult to interpret Container volumes have grown, fixed asset values have grown massively. It points to good future financial results.

The board is meeting tomorrow(01/09/2014) to consider the independent advisers report, adopt the target company statement , their recommendation to shareholders, and approve the dividend which forms part of the takeover offer.

LPC faces an important crossroads in ownership. Whatever the result of this process I hope it does not negatively effect health and safety at the port.

Boop boop de do
Marilyn

[Snoopy]

The board is meeting tomorrow(01/09/2014) to consider the independent advisers report, adopt the target company statement , their recommendation to shareholders, and approve the dividend which forms part of the takeover offer.


Released at the close of trading today

"The Board of Lyttelton Port of Christchurch (LPC) met today to consider the Independent Adviser's Report prepared by Northington Partners on the merits of the Offer by Christchurch City Holdings Limited (CCHL) and to finalise the Target Company Statement and Directors' recommendation to shareholders in respect of the Offer."

"The Board has unanimously resolved to recommend to shareholders that they accept the Offer."
"The Board has also resolved to pay a fully imputed special dividend of $0.20 cents per share on 18 September 2014."

SNOOPY

PS Shouldn't only the independent directors be advising on this takeover offer?

[Snoopy]

Released at the close of trading today

"The Board of Lyttelton Port of Christchurch (LPC) met today to consider the Independent Adviser's Report prepared by Northington Partners on the merits of the Offer by Christchurch City Holdings Limited (CCHL) and to finalise the Target Company Statement and Directors' recommendation to shareholders in respect of the Offer."

"The Board has unanimously resolved to recommend to shareholders that they accept the Offer."
"The Board has also resolved to pay a fully imputed special dividend of $0.20 cents per share on 18 September 2014."


The trick on how $5 is really only worth $4 is out.

Northingtons have valued the company on future cashflows. That means the insurance payout is modelled as being spent {in the future} and so is not reagrded as cash on the balance sheet. That means that $5 is really only worth $3.50, and you minority sharehodlers ought to be really pleased we are offering $4 for your $5. Great eh?

The question in my mind though is this: If the insurance payout combined with existing assets is really only worth $3.50, yet it has a cash value of $5 today, does this not imply that LPCs future business plan will not earn the company its cost of capital?



PS Shouldn't only the independent directors be advising on this takeover offer?


Hmm looks like all the directors regard themselves as independent, because they were not appointed by the council. They were instead appointed by CCHL, the 100% owned commercial arm of the council! Seems a dubious way to look after small shareholders to me!

SNOOPY

[Snoopy]

The question in my mind though is this: If the insurance payout combined with existing assets is really only worth $3.50, yet it has a cash value of $5 today, does this not imply that LPCs future business plan will not earn the company its cost of capital?


LPC has been valued as a ‘development project’ based on future cashflows. This is principally because of the huge pipeline of building projects going forward, as the port is rebuilt. An alternative valuation technique, using industry multiples, requires a series of closely comparable industry players to be traded on market. That way a comparative database is available. But few ports are being rebuilt in the way that Lyttelton is being rebuilt.

Interestingly the lead author of the report, Greg Anderson from Northington Partners, is the same Greg Anderson who was lead author of a similar report published in 2006 by Crighton Anderson. Crighton Anderson subsequently merged into Northington Partners. 2006 was the last time CCHL made a formal bid for the whole company. Interestingly, back then they also used a discounted cashflow valuation when valuing LPC.

At least one copy of this 2006 valuation survives, in what I have coined as my ‘library of shame’ (a rather nondescript cardboard box in my spare bedroom). A comparison between the two offers is interesting reading, of which more later.

The HY2014 report (ended 31-12-2013) supplied with the current takeover offer is seemingly a deliberate attempt to ensure minority shareholders are not fully informed. I say this, because Northington partners have clearly had access to the FY2014 results. Selected FY2014 results are quoted in comparison tables 6 and 7.

Furthermore, the full results were released to the stock exchange on Friday 29th August.

https://www.nzx.com/companies/LPC/announcements/254620

So how can you explain what arrived in the envelope other than to say the full FY2014 results have – deliberately - not been forwarded to minority shareholders?

SNOOPY

[Marilyn Munroe]

I to share Snoppy's reservation about the independent advisers report. Nortington Partners have used an enterprise value method when there is a comprable publicy listed company to compare with.

The most relevant parrallel to LPC is Tauranga. This is for two reasons, both are publicly quoted and containers are a significant part of their business. Other listed port operations such as Southport(Bluff) and Northport(Marsden Point) are less relevant.

I not finally made up my mind but I propose to ignore the take-over offer and then request the directors undertake a Expert Value Determination as is provided for in the compolsory aqusition provisions of the take-overs code.

The mechanics of compolsory aquisition are discussed on pages 5 and 6 of the Northington Partners report. A fish hook for hold-outs is if the expert valuation report is less than the CCHL offer then you will be forced to accept the experts lower price.

Boop boop de do
Marilyn

[Snoopy]

I to share Snoopy's reservation about the independent advisers report. Nortington Partners have used an enterprise value method when there is a comparable publicy listed company to compare with.

The most relevant parrallel to LPC is Tauranga. This is for two reasons, both are publicly quoted and containers are a significant part of their business. Other listed port operations such as Southport(Bluff) and Northport(Marsden Point) are less relevant.

I not finally made up my mind but I propose to ignore the take-over offer and then request the directors undertake a Expert Value Determination as is provided for in the compulsory acqusition provisions of the take-overs code.

The mechanics of compulsory aquisition are discussed on pages 5 and 6 of the Northington Partners report. A fish hook for hold-outs is if the expert valuation report is less than the CCHL offer then you will be forced to accept the experts lower price.


Marilyn, Northington's have declared that a direct multiple comparison with POT is not relevent because POT is bigger and growing faster. I am not sure I agree with that. But other expert advisors may take the same view as Northingtons.

Namely, because of all the rebuild cashflows, you have to value LPC on future cashflows via this enterprise value method. And if they do that (getting it wrong like Northingtons ;-) ) then holdouts may only get $3.50, not $4. Can you 'hold out' on your own, or do you need a critical mass of like minded shareholders?

SNOOPY

[percy]

Marilyn, Northington's have declared that a direct multiple comparison with POT is not relevent because POT is bigger and growing faster.

SNOOPY

Get your hands on the cash as soon as you can and get some POT .
Faster growing,better managed.

[Snoopy]

The trick on how $5 is really only worth $4 is out.

Northingtons have valued the company on future cashflows. That means the insurance payout is modelled as being spent {in the future} and so is not reagrded as cash on the balance sheet. That means that $5 is really only worth $3.50, and you minority sharehodlers ought to be really pleased we are offering $4 for your $5. Great eh?


The asset value question has prompted a market response from LPCs Chairman.

-----

12 September 2014
NZX RELEASE: MESSAGE FROM LPC CHAIRMAN

The Lyttelton Port of Christchurch (LPC) Board has received enquiries about whether the net asset value contained in LPC's 2014 Annual Report should have been compared to the valuation used in the Independent Adviser's Report prepared by Northington Partners Limited, dated 2 September 2014. The Board raised this question with Northington Partners who have noted the following:

Our assessed value for LPC is based on the business’ future earnings capacity. This approach reflects that LPC will continue to operate as a port business and that its current value is a function of future trade volumes, revenues and net earnings. Importantly, our value assessment also reflects the fact that the Company needs to invest over $500m in the next 10 years to rebuild the basic port infrastructure that is needed to service the business volumes that are incorporated into our financial projections.

The net assets value reported for LPC as at 30 June 2014 is at a historically high level because of the $322m cash balance arising from the insurance settlement received in February 2014. This cash is however clearly not a “surplus” asset; the cash represents pre-funding for the capital expenditure program needed to rebuild the port infrastructure and support future business operations –it is not a separate realisable asset that can be added to the underlying business value.

The net assets value of a business reported in its financial statements is very rarely a useful indicator of the fair market value of the business, and is only potentially relevant when:

Liquidating the business is a sensible strategy, and the assets can be physically and economically separated and sold; and
Recorded book values are based on updated market valuations which reflect separate sale.

Neither criterion is satisfied for LPC.

Clearly the best use of the LPC assets is to support continued port operations, and the recorded value for “Property, Plant and Equipment” (approximately $249m) largely represents depreciated cost. Because our valuation assessment is based on the future earnings potential of the business, the most appropriate cross-check for our Discounted Cash Flow (DCF) value range is based on
implied earnings multiples.

The Board believes that the Independent Adviser's Report was prepared in accordance with best industry practice and that LPC was valued appropriately.


-------
Ends

I wonder what will happen when CCHL gets its hands on LPC with all that cash on the books? Do Northingtons really believe that the cash strapped Chistchurch City Council, via CCHL, won't be raiding the LPC piggy bank? Perhaps Northington's haven't considered that question because they truly believe cash in a bank account cannot be transferred (is not separate and realisable)??!!?

I don't see the cash part of the NTA as 'adding to the business value', as Northington's put it. But I do see it as one good measure of the business value.

SNOOPY


-

[blackcap]

I thought company directors were tasked under the Companies Act to maximize share holder value?

Would it not be more beneficial for shareholders if the company were liquidated and cash paid out to owners?

[Snoopy]

I thought company directors were tasked under the Companies Act to maximize share holder value?


They will be maximising shareholder value, for the major shareholder CCHL (100% council owned), who appointed them all.



Would it not be more beneficial for shareholders if the company were liquidated and cash paid out to owners?


Of course and this is what will happen, once those pesky minority shareholders are out of the way of course!

SNOOPY

[blackcap]

They will be maximising shareholder value, for the major shareholder CCHL (100% council owned), who appointed them all.



Of course and this is what will happen, once those pesky minority shareholders are out of the way of course!

SNOOPY

Love it Snoopy, love it. :) Maybe my initial statement should have read "all shareholders" :)

[winner69]

http://www.nzherald.co.nz/opinion/news/article.cfm?c_id=466&objectid=11323630


Brian Gaynor: Port takeover bid raises important issues

[Snoopy]

I not finally made up my mind but I propose to ignore the take-over offer and then request the directors undertake a Expert Value Determination as is provided for in the compolsory aqusition provisions of the take-overs code.

The mechanics of compolsory aquisition are discussed on pages 5 and 6 of the Northington Partners report. A fish hook for hold-outs is if the expert valuation report is less than the CCHL offer then you will be forced to accept the experts lower price.


To quote from Brian Gaynor's article referenced by Winner:

"One of the frustrating aspects of the Takeovers Code is that a bidder can move to compulsory acquisition once they reach 90 per cent and CCHL has already achieved this because of its arrangement with Port Otago. However, if a bidder reaches 90 per cent, but gets less than 50 per cent of the outstanding shares, then the holdout shareholders can object and the Takeovers Panel must appoint another independent expert to determine the "fair and reasonable" value of the shares. This represents a viable option for Lyttelton Port shareholders who believe the offer is too low as CCHL needs to obtain more than 97.59 per cent to ensure no one can exercise this option (this is because CCHL and Port Otago are associate parties under the Takeovers Code as their pre-bid holdings are combined)."

I think perhaps I will sit on my LPC holding for now, to see what develops over the next week.

SNOOPY

[Snoopy]

Interestingly the lead author of the report, Greg Anderson from Northington Partners, is the same Greg Anderson who was lead author of a similar report published in 2006 by Crighton Anderson. Crighton Anderson subsequently merged into Northington Partners. 2006 was the last time CCHL made a formal bid for the whole company. Interestingly, back then they also used a discounted cashflow valuation when valuing LPC.

At least one copy of this 2006 valuation survives, in what I have coined as my ‘library of shame’ (a rather nondescript cardboard box in my spare bedroom). A comparison between the two offers is interesting reading, of which more later.


Here is my promised comparison chart between the Greg Anderson valuation in 2006, and the valuation by the same lead author in 2014




2006
2014


Riskless Interest rate
5.75%
4.1%


Post Tax Market Risk Premium
7.0-7.5%
7.0-7.5%


Asset Beta
0.6-0.7
0.7-0.75


Equity Beta
0.92-1.08
1.00-1.07


WACC debt/equity/combined
4.8% / 11.1% / 8.9%
4.0% / 10.45% / 8.5%


Marginal tax rate Interest Income
33%
28%


Post Tax Nominal Cost of Equity
10.3%- 11.95%
9.95% - 10.0%


Debt Ratio
24%
30% (Northington Assumed)


EBITDA multiple 'this year' (Lyttelton)
11.1x
10.9x


EBITDA multiple 'next year' (Lyttelton)
10.7x
12.9x


EBITDA multiple 'this year' (Port Tauranga)
11.0x
16.5x


Annual Increase: Container Volume
3.75%
4.0%


Annual Increase: Container Price Growth
1.5%
1.5%


Annual Coal Volume
3.2 Mt
1.6 Mt


Stand Alone Enterprice Value
$297.776m
$358.300m


Number of Shares
102.261m
102.261m


Full Valuation per Share (mid range)
$2.30
$3.50



SNOOPY

[Snoopy]

Here is my promised comparison chart between the Greg Anderson valuation in 2006, and the valuation by the same lead author in 2014




2006
2014


EBITDA multiple 'this year' (Lyttelton)
11.1x
10.9x


EBITDA multiple 'next year' (Lyttelton)
10.7x
12.9x


EBITDA multiple 'this year' (Port Tauranga)
11.0x
16.5x





Get your hands on the cash as soon as you can and get some POT .
Faster growing,better managed.

I would have a hard time refuting that POT is the best run post in the country. But I would argue that LPC have an impressive financial performance behind them too. In 2006 both LPC and POT traded on similar EBITDA multiples. In 2014 the multiple for POT is 50% greater. Is POT a 50% better business than LPC? I think the answer to that question, the question that a new investor in POT should ask, is far from obvious.

SNOOPY

PS The mid point EBITDA multiple for FY2014 at $3.50 is 10.9x, as per my table. But the offer price is $4.15 ($3.95 + 20c dividend). So that makes for an EBITDA multiple of:

(4.15/3.50) x 10.9x = 12.9x,

including a premium for control which is not specified. That is is substantially below the market figure for POT for FY2014, which at 16.5x does not include a premium for control.

[Snoopy]

Here is my promised comparison chart between the Greg Anderson valuation in 2006, and the valuation by the same lead author in 2014





2006
2014


[tr]
Number of Shares
102.261m
102.261m


Full Valuation per Share (mid range)
$2.30
$3.50




With hindsight views are always a bit dubious. That's because the alternative futures that might have happened are ignored. The actual result that happened, certain with hindsight, was not certain at the start of the forecast period.

Nevertheless 8.5 years of a business like LPC , with a strong Buffett style moat, is enough to even out the ups and downs of the business cycle. I want to take you back eight and one half years, before the GFC, to see what happened to those LPC shareholders who did not accept the CCHL takeover offer in 2006.

Dividends received from that time to date (including the about to be declared 20c special dividend) totalled 45.4c per share. For those who accept the takeover offer on the table at $3.95, the annual compounding rate of return can be worked out from the following equation:

$2.30(1+i)^8.5 = ($3.95+$0.45)

Solving for 'i' I get: 1.079. That means a compounding annual rate of return of 7.9% (net). With a tax rate of 0.3 (IOW a retained earnings rate of 0.7), that equates to an annual compounding gross return of

7.9%/0.7=11.3%.

Rather good over that long time period. It is clear those shareholders who did not accept the 2006 Crighton Anderson evaluated offer are now very well rewarded!

SNOOPY

[percy]

In hindsight those with foresight may have accepted the offer and reinvested in POT.!!????

[Marilyn Munroe]

The level of acceptances CCHL holds when the offer closes on Tuesday 23rd will tell you if the game is afoot.

Others with more at stake and with more resources than me will no doubt be examing the offer and the alternatives very closely.

Boop boop de do
Marilyn

[winner69]

I thought company directors were tasked under the Companies Act to maximize share holder value?

Would it not be more beneficial for shareholders if the company were liquidated and cash paid out to owners?

Mute and debatable point

Has anybody ever been found guilty of not carrying out that task successfully?

[Snoopy]

Mute and debatable point


I don't usually get too hung up about grammar, except when misuse creates quite the wrong impression of what was intended.

http://grammar.about.com/od/alightersideofwriting/a/mootmutegloss.htm

The adjective mute means 'unspoken' or 'unable to speak'. So by definition it can't be debated. "Mute and debatable point" is a contradiction.

The adjective "moot" refers to something that is debatable or of no practical importance, which is I think what was intended here.

SNOOPY

[Snoopy]

Here is my promised comparison chart between the Greg Anderson valuation in 2006, and the valuation by the same lead author in 2014




2006
2014


[tr]
Annual Coal Volume
3.2 Mt
1.6 Mt




The coal trade is a big difference between 2006 and 2014. If the coal trade is wound down completely, this will ultimately result in a loss to port shareholders of 53c per share. IIRC the current port facilities weer built on a joint agreement between Solid Energy and LPC. There is an element of 'use or pay' about those facilities. That means that if coal throughput suddenly increases 2.0Mt pa in 2017 and a 2% annual inccrease thereafter), the upside is nowhere near 53c. The upside is only 7c per share.

SNOOPY

[Snoopy]

2006
2014


Riskless Interest rate
5.75%
4.1%


Post Tax Market Risk Premium
7.0-7.5%
7.0-7.5%


Asset Beta
0.6-0.7
0.7-0.75


Equity Beta
0.92-1.08
1.00-1.07


WACC debt/equity/combined
4.8% / 11.1% / 8.9%
4.0% / 10.45% / 8.5%


Marginal tax rate Interest Income
33%
28%


Post Tax Nominal Cost of Equity
10.3%- 11.95%
9.95% - 10.0%


Debt Ratio
24%
30% (Northington Assumed)




Northington's have fiddled with the debt ratio in the FY2014 report. Those who have been following the takeover will know that as a result of the insurance payouts, LPC is now debt free.

Perversely if Northington's had used the equity WACC when discounting future cashflows ( 10.45%, and technically correct ), this would have provided a lower valuation of the company than if they used the mixed debt/equity WACC ( 8.45% ) that they did. I for one am rather uncomfortable about that, even if in this case, assuming more debt than there is, works in my favour.

At the end of 10 years, I believe that Northington's are expecting more than 30% debt on the balance sheet. So this 30% is some kind of average figure. Again I am not comfortable with this. It would be better I think to use a different WACC as the debt varies. But perhaps this would be too complicated for Northington's modelling?

SNOOPY

[winner69]

I don't usually get too hung up about grammar, except when misuse creates quite the wrong impression of what was intended.

http://grammar.about.com/od/alightersideofwriting/a/mootmutegloss.htm

The adjective mute means 'unspoken' or 'unable to speak'. So by definition it can't be debated. "Mute and debatable point" is a contradiction.

The adjective "moot" refers to something that is debatable or of no practical importance, which is I think what was intended here.

SNOOPY

I am so stupid .... sorry

So not grammar but really a spelling mistake please

I could always blame spell check

And by the way Snoops some of your sentences are very long and what you intend saying gets a bit confusing. or the wrong impression of what was intended.

[Snoopy]

2006
2014


Annual Increase: Container Volume
3.75%
4.0%


Annual Increase: Container Price Growth
1.5%
1.5%




Container traffic is measured in TEUs , which stands for Tonne Equivalent Units. What I want to do now is to compare the forecast container traffic growth at the time the April 2006 bid was made, to the actual growth that happened in subsequent years.

TEU container volume during FY2005 (the last reporting period before the FY2006 bid) was 208,600,000 TEU.
TEU container volume during FY2014 was 377,000,000 TEU.

We can work out the annual compounding growth rate of LPC container traffic 'r' over those nine years by solving the following equation:

208,600,000(1+r)^9= 377,000,000

Solving for 'r' I get 1.066. That represents 6.6% annual compounding volume growth.

Some may say this is optimistic and unrealistic as a forecast. That's beacuse LPC has just lost 50,000TEU units with the loss of the Fonterra contract to Timaru for FY2015. So let's take that out of the equation, a sthough the contract had been lost last year, and see what effect that has on container traffic growth.

208,600,000(1+r)^9= 327,000,000

Solving for 'r' I get 1.051. That represents 5.1% annual compounding volume growth.

The Northington forecast is for only 4% growth going forwards. Even taking Fonterra out of the eqaution, that growth rate is significantly less than LPC has averaged over the past nine years. Northington's would call that being conservative. Considering the fourth container crane is already installed at LPC, I would call a 4% growth assumption going forwards pessimistic.

SNOOPY

PS The LPC business plan calls for a doubling in container volumes over the next ten years. For that to happen you need the following compounding growth rate.

327,000,000(1+r)^10= 654,000,000. Solving for 'r' I get 7.2% compounding. That is way higher than Northington's 4% assumption. I just can't see how they could come up with a container volume growth figure as low as that.

[Snoopy]

I am so stupid .... sorry

So not grammar but really a spelling mistake please

I could always blame spell check


Winner, theree is a big difference between spelling and grammar. I never criticize anyones spelling, as my own gets ropey enough at times.

Grammar is a matter of comprehension.

Moot in British English means arguable, doubtful, or open to debate.
Moot in American English means hypothetical or academic, i.e. of no practical significance."

Or maybe you could make a clever pun like:
"Mute and debatable point", a natural contradiction that might mean "such a point is not open to discussion."

There is not enough context around your comment to know which of the three you meant. All three are possible interprtations within context. I genuinely had no idea what message you were trying to convey, even though your spelling was perfect. Even after sleeping on it, I still don't understand what you were trying to say.



And by the way Snoops some of your sentences are very long and what you intend saying gets a bit confusing. or the wrong impression of what was intended.


That is a fair cop. I do tend to waffle, using the forum as a notepad rather than a repository for a finished piece. I am trying to make my sentences shorter. Also I am trying to use more graphs and tables to convey information too. It is a work in progress. I hope you will forgive me if I don't get it right all the time. I'm not perfect.

SNOOPY

[Snoopy]

In hindsight those with foresight may have accepted the offer and reinvested in POT.!!????


In 2006 LPC and POT traded at around the same EBITDA multiple. There was no mention of POT being 'superior' or 'having higher growth prospects' that deserve a higher rating. A lot of weight has been given by Northington's on POTs acquisition of Timaru and the Fonterra / Silver Fern Farms contract in the 2014 report. But over the long term these contracts come and go. POT may have given LPC a solid left hook. But LPC are by no means down for the count.

SNOOPY

[Snoopy]

Here is my promised comparison chart between the Greg Anderson valuation in 2006, and the valuation by the same lead author in 2014




2006
2014


Riskless Interest rate
5.75%
4.1%


Post Tax Market Risk Premium
7.0-7.5%
7.0-7.5%


Asset Beta
0.6-0.7
0.7-0.75


Equity Beta
0.92-1.08
1.00-1.07


WACC debt/equity/combined
4.8% / 11.1% / 8.9%
4.0% / 10.45% / 8.5%


Marginal tax rate Interest Income
33%
28%


Post Tax Nominal Cost of Equity
10.3%- 11.95%
9.95% - 10.0%




A word on the Northington assumptions in general and how they have changed over time.

I fully appreciate the risk free premium falling since the GFC.

The Betas are more dubious. These are calculated on market trading data which is then extrapolated to being a constant value going forwards. There are two potential problems here:

1/ LPC is thinly traded. That means the amount of data used to calculate Beta is restricted and the Beta value so obtained liable to be unreliable.
2/ The method assumes that volatility of LPC relative to the market will not change going forwards. That could very well end up being a false assumption.

For these reasons, I tend to distrust 'Beta' with LPC. With a stable quasi utlility such as this, I would expect an equity 'Beta' well below 1.0. I would say 0.8 is a more realistic figure, given more market liquidity. I would also reduce the post market risk premium to around 5 percentage points in a quasi-utility like LPC.

Repeating the post tax nominal cost of equity calculation on p41 of the Northington report.

By my measures the nominal cost of equity would be:

4.1%(1-0.28)+ 0.8[5%]= 6.95%

This would increase the value of future cashflows, as a rough measure, by 40%. Thus the mid range fair value of LPC is not $3.50, but $4.90. I note that this valuation is in close agreement with the net asset backing that Northington's conveniently omitted from their original report.

Given the choice I would rather stay in LPC and hold out for that price. $4.15 just seems far too low. But unfortunately most of these company valuation firms do not see things as I do!

SNOOPY

[percy]

In 2006 LPC and POT traded at around the same EBITDA multiple. There was no mention of POT being 'superior' or 'having higher growth prospects' that deserve a higher rating. A lot of weight has been given by Northington's on POTs acquisition of Timaru and the Fonterra / Silver Fern Farms contract in the 2014 report. But over the long term these contracts come and go. POT may have given LPC a solid left hook. But LPC are by no means down for the count.

SNOOPY

Depends where you see the future NZ hub port, Tauranga or Melbourne ?
I see it as Tauranga.This will make live harder for NZ's other ports,including LPC. Bigger ships,fewer port calls.[foresight]
As aside LPC business plan of doubling containers in ten years.7.2% growth pa,compared with Northington's 4% is interesting !!

[blackcap]

Extract from a newsletter I subscribe to.

A “Message from the LPC Chairman”, released to the stock exchange, states that the board “has received enquiries about
whether the net asset value in the Annual Report should have been compared to the valuation in the Independent Adviser's
Report”, but avoids answering that question by referring it to the Adviser.
The Adviser replies “Our assessment” (of $342.6-$373.3 million) “reflects that the Company needs to invest over
$500 million in the next 10 years” and “clearly the best use of the LPC assets is to support continued port operations”.
The “message” concludes “the board believes that the Independent Adviser's Report was prepared in accordance with
best industry practice and that LPC was valued appropriately”.
What total nonsense! It is insulting that these people think shareholders are so stupid! In what School of Economics
does one invest $500 million in cash to “support” a business with a net present value of only $343-373 million? This is “best
industry practice”? Where? In North Korea? Venezuela? Somalia?
Clearly either (1) the valuation of the port exceeds $500 million (and, as investors, we would estimate a fair valuation
around $650-680 million or 635-665 cents per share) or (2) the boards of LPC and CCHL are mis-allocating capital,
investing $500 million of cash to build a business worth only $343-373 million.

[Snoopy]

Extract from a newsletter I subscribe to.


What total nonsense! It is insulting that these people think shareholders are so stupid! In what School of Economics
does one invest $500 million in cash to “support” a business with a net present value of only $343-373 million? This is “best
industry practice”? Where? In North Korea? Venezuela? Somalia?

Clearly either
(1) the valuation of the port exceeds $500 million (and, as investors, we would estimate a fair valuation around $650-680 million or 635-665 cents per share) or
(2) the boards of LPC and CCHL are mis-allocating capital, investing $500 million of cash to build a business worth only $343-373 million.


Agree Blackcap. As I said in an earlier posting, with $500m and ending up with a business worth only $343-373 million, means that the Port's future investment plans are earning less than the cost of capital, thus devaluing the business long term. That is rather an insulting view of the board's abilities going forwards!

SNOOPY

[percy]

It may be the truth of the matter.?
I am jolly sure one needs user contracts in place,rather than build in hope.!
Did not work for [my grandfather was a ship's captain] Sundstrum,and will not work for "our Pete".

[Marilyn Munroe]

I am jolly sure one needs user contracts in place,rather than build in hope.

Long term contracts between shippers and shipping companies have a history that could be charitably described as mixed.

I am not saying these contracts are entered into with same level of cynicism as the Hitler Stalin pact, but they tend to fall over when the advantage between players shifts.

Boop boop de do
Marilyn

[percy]

Long term contracts between shippers and shipping companies have a history that could be charitably described as mixed.

I am not saying these contracts are entered into with same level of cynicism as the Hitler Stalin pact, but they tend to fall over when the advantage between players shifts.

Boop boop de do
Marilyn

They did not fall over when LPC was run by Dr. Layton and David Vials.
POT don't appear to have the problem either.

[percy]

It may be the truth of the matter.?
I am jolly sure one needs user contracts in place,rather than build in hope.!
Did not work for [my grandfather was a ship's captain] Sundstrum,and will not work for "our Pete".

Received POT's annual report today.
"Our new agreement with Kotahi has secured the future of our South Island operations and given us the confidence to further progress our expansion plans at Tauranga."

[percy]

Anyone wanting to know what the future holds for port companies will find out for themselves by reading POT's annual report.
phone 07 572 8899 and ask for a copy,or email ;marketing@port-tauranga.co.nz

[Snoopy]

Received POT's annual report today.
"Our new agreement with Kotahi has secured the future of our South Island operations and given us the confidence to further progress our expansion plans at Tauranga."

Northingtons have already made sure we LPC shareholders are right up to date Percy: From p13 of the independent Advisor's report:

Key aspects of the Kotahi agreement, together with a separate long term agreement between Kotahi and Maersk Line (the world's largest container shipping company) are as follows:

1/ Kotahi has committed to provide 1.8m TEU export cargo containers to the Port of Tauranga over the next ten years, commencing 1st August 2014.
2/ Kotahi has committed significant export cargo to Timaru Container Terminal Limited ("TCTL") for the next ten years commencing 1 August 2014.
3/ The Port of Tauranga has committed to investment in infrastructure to enable visits from larger 6,500 TEU container ships within the next few years.
4/ Port of Tauranga will subject to certain conditions issue shares to Kotahi, and Kotahi will take a stake in TCTL; and
5/ Kotahi has committed to provide up to 2.5m TEU export cargo containers to Maersk Line for the next 10 years, commencing 1 August 2014.

(Kotahi is jointly owned by Fonterra and Silver Fern Farms)

If my subtraction is correct, then looking at points 1 and 5 means that Kotahi will be shipping 0.7m TEU export cargo through Primeport Timaru over the next ten years. That is 0.7m TEU that would otherwise have gone through Lyttelton or Otago.

SNOOPY

[percy]

What I find a comfort is POT have contracts in place before they commit capital,while LPC commits capital in hope?!

[Snoopy]

The asset value question has prompted a market response from LPCs Chairman.

-----

12 September 2014
NZX RELEASE: MESSAGE FROM LPC CHAIRMAN

The Lyttelton Port of Christchurch (LPC) Board has received enquiries about whether the net asset value contained in LPC's 2014 Annual Report should have been compared to the valuation used in the Independent Adviser's Report prepared by Northington Partners Limited, dated 2 September 2014. The Board raised this question with Northington Partners who have noted the following:

[i]Our assessed value for LPC is based on the business’ future earnings capacity. This approach reflects that LPC will continue to operate as a port business and that its current value is a function of future trade volumes, revenues and net earnings. Importantly, our value assessment also reflects the fact that the Company needs to invest over $500m in the next 10 years to rebuild the basic port infrastructure that is needed to service the business volumes that are incorporated into our financial projections.

The net assets value reported for LPC as at 30 June 2014 is at a historically high level because of the $322m cash balance arising from the insurance settlement received in February 2014. This cash is however clearly not a “surplus” asset; the cash represents pre-funding for the capital expenditure program needed to rebuild the port infrastructure and support future business operations –it is not a separate realisable asset that can be added to the underlying business value.


I have been reading the latest version of the Takeovers code.

http://www.legislation.govt.nz/regulation/public/2000/0210/latest/versions.aspx?search=ts_all%40act%40bill%40regulat ion_Takeovers+Code+Approval+Order_resel&p=1

Section 20 is on asset valuation and reads as follows:

----

20 Asset valuation

If any information provided in the target company statement
refers to a valuation of any asset,—
(a) the date of the valuation, the identity of the valuer, and
a summary of the valuation, that discloses the basis of computation and the key assumptions on which the
valuation is based; and
(b) an address or addresses where copies of the valuation
are available for inspection and a statement that a copy
of the valuation will be sent to any offeree on request.
87

-----

The original Northington report was compliant with the code in not mentioning asset values, which therefore absolved them of mentioning how assets should be fairly valued.

Section 21 is on prospective financial information and has similar wording

------

21 Prospective financial information
If any information provided in the target company statement
refers to prospective financial information, the principal assumptions on which the prospective financial information is based.

-------

I contend that no-one would attempt to value a company without looking at prospective financial information. Similarly I don't think that those who wrote the takeovers code would have contemplated valuing a company without looking at the asset values. Yet there is nothing in the takeovers code that says you must consider asset values and prospective financial information. It seems it would be quite legal to value a company and leave out both.

The code only requires the independent advisor to investigate the 'merits' of the offer. 'Merits' is not defined specifically. But I do note 'merits' is a plural word, and that implies more that than one measuring stick of valuation should be used.

So, why would the code go into similar detail on 'asset valuation' and 'prospective financial information' if they assumed that only one of those valuation methods was going to be used?



The net assets value of a business reported in its financial statements is very rarely a useful indicator of the fair market value of the business, and is only potentially relevant when:

Liquidating the business is a sensible strategy, and the assets can be physically and economically separated and sold; and Recorded book values are based on updated market valuations which reflect separate sale.

Neither criterion is satisfied for LPC.
<snip>


This last paragraph, as an explanation by Northingtons, I find unfathomable. If the cash value of business assets is $5, and the assessed high value of the business after the rebuild is complete is $3.65, isn't the only sensible action to liquidate?

Likewise, what easier way is there to economically split assets when the majority of those assets are just cash sitting in your bank account? Finally wasn't the LPC insurance pay-out entirely based on market valuations (replacement values) that are right up to date?

It looks to me as though both criteria are satisfied almost perfectly. It is unfathomable to me that the directors have agreed with Northington's opposite conclusion.

SNOOPY

[percy]

I guess you would do the same as me if you owned LPC 100%;take the cash,then put the port business either up for sale/lease as is where is?

[Snoopy]

I guess you would do the same as me if you owned LPC 100%;take the cash,then put the port business either up for sale/lease as is where is?


The ironic thing is Percy, I soon will own 100% of the company. That's because I am a stakeholder in the 'Peoples Republic of Christchurch' which I help fund through my rates bill.
Raf Manji, the CCC Financial Controller, will soon be managing my LPC interests, after his arm's length clean out of those 'filthy capitalistic scum' minority shareholders. And good on him for dealing to them!

The City Council is financially cash strapped. So what I would do is dip into the LPC cash piggy bank to equalise the pain with the rest of the city. Then I would sell down 49% of what was left - with a preference for resident Cantabrians as shareholders, of a new lean LPC, to repay council debt. Finally I would create a special 'CCC share' to ensure the remaining 51% could never be privatised.

I wouldn't sell 'as is where is'. I would have to leave the port with the ability to rebuild a no frills version of Cashin Quay, just not the 21st century dream. Then I would have a separate float to create a new company to build better cruise ship facilities in Akaroa. Maybe that could be 100% sold off? LPC doesn't seem to be interested in tourists anymore.

SNOOPY

[Snoopy]

If the cash value of business assets is $5, and the assessed high value of the business after the rebuild is complete is $3.65, isn't the only sensible action to liquidate?

Likewise, what easier way is there to economically split assets when the majority of those assets are just cash sitting in your bank account? Finally wasn't the LPC insurance pay-out entirely based on market valuations (replacement values) that are right up to date?

It looks to me as though both criteria are satisfied almost perfectly. It is unfathomable to me that the directors have agreed with Northington's opposite conclusion.


Time, as a shareholder, to round up my fears.

The board as a collective have approved and unanimously endorsed the Northington's report. That means they have cemented a position in public, which they cannot go back on without loss of face. If there is a second valuation the board will be funding it. That means there will be no particular reason for whoever comes in next, probably Simmons, to reinterpret the valuation information in a substantially different way, even if the original Northington report contains certain biases. NZ is a small market. So if any other local valuer gave a substantially higher valuation of LPC shares, that outfit would probably go to the bottom of the 'desirability hire list' during any future takeovers of other companies.

In the end, whatever the fairness, psychology will rule. No-one will dare prepare a report that is more favourable than Northingtons, so shareholders can either:

1/accept the unfair offer valuation from Northingtons at $3.30, and be grateful you will actually get $3.95, even if that is still below fair value.
2/ Accept a lower offer of $3.30, as determined by an as yet unselected valuer, probably Simmons, later.

Have I got that right?

SNOOPY

[Marilyn Munroe]

T
Have I got that right?
SNOOPY

I'm not sure. I may have misled you by implying in a post that if the independent experts determination was less than the CCHL offer you would be paid the lesser amount. I have had a look at part 7(Compulsary aquisitions) of the Takeovers Code Approval Regulations 2000 and from my reading of them the amount paid to the objecting sharholders can not be less than the CCHL offer. The code defines this as the default consideration and whatever the experts determination the price can not be less than the default consideration. The is at variance with the information in part 1.4.3 of the Northington report which states that "if the price.....is less than the Offer Price...then CCHL can recover the difference."

I also think the compulsary aquistion notice must also explain the options avlalable for hold-out shareholders.

I think we are gonna need a lawyer.

Boop boop de do
Marilyn

[Marilyn Munroe]

....from my reading of them the amount paid to the objecting sharholders can not be less than the CCHL offer.


Should have read the whole section of the regulations. Clause 62(2) of the regulations supports Northingtons interpretation.

Boop boop de do
Marilyn

[Snoopy]

I think we are gonna need a lawyer.


Things can't have got that desperate surely!

I have been trying to read the LPC NZX announcement from 11:33am, 17 Sep 2014 | TAKEOVER, titled "Waiver of Certain Conditions". But my Adobe Acrobat reader won't bring the page up. Anyone able to access what it says?

SNOOPY

[blackcap]

Its pretty much accept the offer or get a lower price as far as I understand the whole saga.

[Marilyn Munroe]

Things can't have got that desperate surely!

I have been trying to read the LPC NZX announcement from 11:33am, 17 Sep 2014 | TAKEOVER, titled "Waiver of Certain Conditions". But my Adobe Acrobat reader won't bring the page up. Anyone able to access what it says?

SNOOPY

Yes I can read it but I had to resort to 3 different web browsers to get a working link to download. It is a letter fron CCHL to LPC.

Extract;

From CCHL to LPC

2. In accordance with 5.4 of the Offer Document CCHL hearby waives all conditions contained in 5.1 of the Offer Document.

Signed CCHL

This is a standstill condition, the waiver letter gives no explanation why the standstill condition is waived.

Boop boop de do
Marilyn

[Snoopy]

Its pretty much accept the offer or get a lower price as far as I understand the whole saga.

It all depends on the remaining small shareholders (i.e. excluding CCHL and Port Otago) cumulatively sell half the balance of shares on issue.

If more than half are sold into the offer, then everyone gets $3.95 (all shares are already ex the 20c dividend). If

1/more than half of the shares are kept AND
2/ Mike Daniel (largest small shareholder, or a roughly equivalent number of small shareholders together ) complains in writing

THEN we get the valuation done again and that new figure is binding for all the hold outs.

SNOOPY

[Snoopy]

Should have read the whole section of the regulations. Clause 62(2) of the regulations supports Northingtons interpretation.

Boop boop de do
Marilyn

OK, I am saving Mr Simmons some time here (even though he hasn't been appointed yet) by outlining how far he can go without upsetting management when he compiles his alternative LPC valuation report.

Look at my post 436 and you will see that actual container volume growth over nine years far exceeds Northington's forecast figure of 4% volume growth per year. And that outperformance assumes the Fronterra / Silver Fern farms contract is lost forever. Boost container volume to 5% growth per year (p32 Northington report) and the mid price valuation rises from $3.50 to $3.66. And a 5% container volume growth is still far less than historic container volume growth. That looks like a legitimate correction.

Northington's have really attacked the forecast EBITDA margin. I think

1/ the retirement of million dollar Pete, and
2/ the consequent downsizing of next tier management packages and
3/ the sale of LPC's castle like but unoccupied HQ at the tunnel gate could deliver half the management forecast gains alone, no problem.

So that could boost the company's mid fair value share price by a further 14c.

Combining those two effects and fair value from Simmons looks to be:

$3.50+$0.16+$0.14= $3.80

That price includes the 20c dividend (already paid). So 'hold out' shareholders look on target for $3.60 per share. Not great when $3.95 is already on the table.

If Simmons has the courage to tackle the net asset value question, then we could be looking at a payout of $4.95 for hold out shareholders. I rate the likelihood of that as about 10%, verses 90% for the other option. So the 'expected value' of the Simmons mandated payout would be:

0.9 x $3.60 + 0.1x $4.95 = $3.74

That is less than the $3.95 already on the table. Logic tells me I should fold my cards and accept the offer on the table. And yet....

SNOOPY

[percy]

www.sharechat.co.nz news "Tauranga 'game-changer' to boost Timaru port's 2015 profit."
"Prime Port says the deals position it as the prime central hub of the South Island as it acts as a feeder for POT,which is dredging its shipping channels to make them big enough for a new generation of larger container vessels."

[Marilyn Munroe]

www.sharechat.co.nz news "Tauranga 'game-changer' to boost Timaru port's 2015 profit."


Percy hark back to the last time Maersk upped the anchor and shifted to Timaru because Bret Layton and David Viles wouldn't pay the Dane geld. Mediterranean Shipping moved in pretty quickly to fill the gap. I reckon the Vikings would have have swallowed pretty hard when they looked at the filled slots they gifted to their competitor.

This time it could be even worse as Mediterranean are now well established at the port.

Boop boop de do
Marilyn

[Marilyn Munroe]

Logic tells me I should fold my cards and accept the offer on the table. And yet....

SNOOPY

I recommend that you keep your powder dry and wait until the offer closes. Wait until the number of acceptances of the offer is disclosed. If the number of acceptances is low it means the larger of the remaining shareholders haven't risen to the bait and the game is afoot.

If there is a large number of acceptances you can fold your tent and accept the compulsory sale. If there is a small number of acceptances you can decide whether or not to request an expert determination at that point.

Boop boop de do
Marilyn

[Snoopy]

<snip>
Combining those two effects and fair value from Simmons looks to be:

$3.50+$0.16+$0.14= $3.80

That price includes the 20c dividend (already paid). So 'hold out' shareholders look on target for $3.60 per share. Not great when $3.95 is already on the table.

If Simmons has the courage to tackle the net asset value question, then we could be looking at a payout of $4.95 for hold out shareholders. I rate the likelihood of that as about 10%, verses 90% for the other option. So the 'expected value' of the Simmons mandated payout would be:

0.9 x $3.60 + 0.1x $4.95 = $3.74

That is less than the $3.95 already on the table. Logic tells me I should fold my cards and accept the offer on the table. And yet....


OK, made my decision. I am selling around 90% of my LPC shares into the offer and keeping around 10% in the 'hold out' bunker.

My deciding factor in the end was pragmatism. This LPC takeover will be my biggest ever payday from the sharemarket. Frankly I don't think I can leave all my capital repayment to chance. If Simmons comes back with a higher valuation than Northingtons (and I think he will), ironically I will actually lose capital (for me a significant amount) because the CCHL $3.95 offer price on the table is so far above the $3.30 Northington valuation, and still above the likely Simmons value.

However, I would like Simmons to do his alternative evaluation. For that reason I have left 10% of my shares in the 'hold out' pot. I have further decided I can afford the loss that the Simmons valuation might lead to on that proportion of my shares.

I realise this decision will probably lose me my LPC fan club base. But I see no point in being pious in the poor house. Better to keep most of my capital and use this surviving 'sympathetic capital' to fight another battle another day in another place.

My main message here is for remaining shareholders to think how much of their capital they can afford to put on the line. I hope Mike Daniel holds out and there are enough non accepting shareholders to force another evaluation. But if Mike Daniel's, bet doesn't come off, that is probably the equivalent of only one years FPH CEO's bonus lost. IOW he can afford to lose. I have nothing like as much capital at stake as Daniel, but then I am not CEO of an NZX top 50 company. In proportion my potential loss would be greater than his if I held out.

Sorry for folding the big tent, but in the end I have to be pragmatic about this. And I do at least have a pup tent remaining so I have some skin in the game for the fight that remains.

SNOOPY

[Snoopy]

I recommend that you keep your powder dry and wait until the offer closes. Wait until the number of acceptances of the offer is disclosed. If the number of acceptances is low it means the larger of the remaining shareholders haven't risen to the bait and the game is afoot.

If there is a large number of acceptances you can fold your tent and accept the compulsory sale.


If there are a large number of acceptances, the tent will be folded for me and I will get $3.95.



If there is a small number of acceptances you can decide whether or not to request an expert determination at that point.


Yes, but the problem is I will only have a vote in the decision to get Simmons to do an alternative valuation. It will be up to Mike Daniel to decide whether to appeal or not, because he has enough shares to control whether a review happens on his own. So if I hold out then decide I don't want Simmons to do an alternative evaluation, I can't stop the process at that point. I hope you are understanding of my dilemma!

SNOOPY

[percy]

If there are a large number of acceptances, the tent will be folded for me and I will get $3.95.



Yes, but the problem is I will only have a vote in the decision to get Simmons to do an alternative valuation. It will be up to Mike Daniel to decide whether to appeal or not, because he has enough shares to control whether a review happens on his own. So if I hold out then decide I don't want Simmons to do an alternative evaluation, I can't stop the process at that point. I hope you are understanding of my dilemma!

SNOOPY

I think you have come to the right decision.
Mike Daniel may find the cost of fighting, costs far more than he will ever gain.
You may have to read between the lines here,as I don't want to open myself up to be sued.

[Snoopy]

If there are a large number of acceptances, the tent will be folded for me and I will get $3.95.


Running the numbers on the 19th September 2014 announcement.

"3. CCHL has to date received acceptances in respect of 18,392,283 LPC ordinary shares. This constitutes 17.986% of the total LPC ordinary shares on issue."

Before the offer, as at 7th August 2014, CCHL held 81,499,857 shares out of a total of 102,261,279 shares on issue. The 18,392,283 shares referred to above include the 15,825,477 shares held by Port Otago. So the number of shares CCHL has acquired from small shareholders since the offer opened is:

18,392,283 - 15,825,477 = 2,566,806

CCHL required half of the small shareholder's shares to be sold into the offer to wipe out the chances of a second valuation. The total number of shares in small shareholder's hands before the offer was 4,935,945. Half that number is 2,467,973. More than that number is already in the hands of CCHL. I therefore conclude it is 'game over' and all remaining shareholders will be paid out at $3.95, even as I was posting my own acceptance form away.

Quite why CCHL did not say this explicitly in their Friday announcement I don't understand. Perhaps they wanted remaining small shareholders to gradually work it out for themselves to forestall a co-ordinated backlash of anger?

SNOOPY

PS Game over on hold. See highlighting in my post 469

[Marilyn Munroe]

Quite why CCHL did not say this explicitly in their Friday announcement I don't understand. Perhaps they wanted remaining small shareholders to gradually work it out for themselves to forestall a co-ordinated backlash of anger?

SNOOPY

I believe that your assumption that its all over is wrong. This arises because I reckon you are mistaking the current offer on the table as a compulsory acquisition under the takeover code. My understanding is that the current offer is an ordinary offer conducted on a willing seller, willing buyer basis.

Only when the offer closes on Tuesday 23rd will CCHL move to compulsory acquisition to mop up the hold-outs. This is also when the hold-outs can invoke the expert determination provisions of the takeover code.

I have looked in the Takeover Regulations and can not find the source of the statement in 1.4.3 of the Northington Partners report that if 50% accept all other outstanding shareholders must accept the offer.

This takeover stuff is tricky so I may be mistaken.

The Shareholders Association have had a grump about the valuation information disclosed;

http://www.stuff.co.nz/the-press/business/10522236/Port-takeover-highlights-confusion-on-valuations

Publicly listed companies are valued at higher multiples than private companies like say a sawmill in the bush. My concern about the Northing Partners valuation method is they have chosen a valuation method more suited to a sawmill in the bush than a publicly listed company.

Snoopy in an earlier post hoped that any decisions he made would not loose him his LPC fan club base. You be cool with me Snoopy, you must act in what you believe to be your best interest.


Boop boop de do
Marilyn

[Snoopy]

I believe that your assumption that its all over is wrong. This arises because I reckon you are mistaking the current offer on the table as a compulsory acquisition under the takeover code.


The current offer and the compulsory acquisition process are separate legal processes. I agree with you Marilyn. But I liken the whole process to an express train. Once the train rolls past the first signal (the CCHL voluntary offer), it rolls straight into the compulsory acquisition process. There is no station to get off along the way. The CCHL's 100% acquisition strategy is in effect one process, even if legally it is not.



My understanding is that the current offer is an ordinary offer conducted on a willing seller, willing buyer basis.

Only when the offer closes on Tuesday 23rd will CCHL move to compulsory acquisition to mop up the hold-outs. This is also when the hold-outs can invoke the expert determination provisions of the takeover code.


According to clause 62 of the "Takeover code approval order 2000", with 1st June 2013 amendments, the hold outs will be acting a collective, whatever decision (alternative valuation or not) is to be taken. There will not be an option to go back and accept the CCHL offer at $3.95 if an alternative valuation is sought.



I have looked in the Takeover Regulations and can not find the source of the statement in 1.4.3 of the Northington Partners report that if 50% accept all other outstanding shareholders must accept the offer.

This takeover stuff is tricky so I may be mistaken.


Looking again at the "Takeover code approval order 2000", with 1st June 2013 amendments myself: I can't find the 50% must not accept for an alternative determination to be able to be called either.

The closest I can find is section 23. But that only applies if the offeror does not control "more than 50% of the voting rights in the target company". Since CCHL controls 79.7% of shares,this clause does not apply! It will be very unfortunate if Northington's have misread this clause as applicable, when it is not.

However, section 57(2) of the act does seem relevant.

57(2)(a)

2% of all shares are:

0.02 x 102,261,279 = 2,045,226 -OR-


57(2)(b) 10% of the outstanding shares in the class are:

Outstanding shares (not held by CCHL & Port Otago) as of 7th August are 4,935,945

0.1 x 4,935,945 = 493,594 shares.

So Mike Daniel, with 555,000 shares can control this process alone if he so wants.



The Shareholders Association have had a grump about the valuation information disclosed;

http://www.stuff.co.nz/the-press/business/10522236/Port-takeover-highlights-confusion-on-valuations

Publicly listed companies are valued at higher multiples than private companies like say a sawmill in the bush. My concern about the Northington Partners valuation method is they have chosen a valuation method more suited to a sawmill in the bush than a publicly listed company.


I share the concerns of the shareholders association. But the hand of the law cannot extend as far as determining the judgement of business valuation experts. Experts following the law cannot always be relied upon to deliver valuation justice.

SNOOPY

[Snoopy]

The current offer and the compulsory acquisition process are separate legal processes. I agree with you Marilyn. But I liken the whole process to an express train. Once the train rolls past the first signal (the CCHL voluntary offer), it rolls straight into the compulsory acquisition process. There is no station to get off along the way. The CCHL's 100% acquisition strategy is in effect one process, even if legally it is not.


The express train rolls past the signal tonight as the voluntary offer closes.

I must say that although I think small shareholders were not well served by the Northington's evaluation, I didn't get mad reading it. Northington's were quite humble and up front in pointing out the difficulties and limitations with the discounted cashflow analysis. Considering who paid for the Northington's report, we small shareholders could hardly expect any other kind of report. No other kind that is, if you accept that ignoring the net cash position of the company in this evaluation was legitimate.

What really got me worked up was the universal unquestioning endorsement of the Northington report by the board. Since Northington's admitted showing a draft of the report to the board, I wouldn't have been surprised if Northington's had been quietly told to say nothing about the net asset position of LPC. Forgetting to mention the NTA was such a basic omission, it is hard to believe every member of the board as individuals would be so careless as to not consider it.

As high noon, or is that high midnight, passes I wait in anticipation of what press release they put out next.

SNOOPY

[Marilyn Munroe]

http://www.stuff.co.nz/the-press/business/10539010/Council-set-to-delist-Lyttelton-port


Boop boop de do
Marilyn

[Snoopy]

Raf Manji, the CCC Financial Controller, will soon be managing my LPC interests, after his arm's length clean out of those 'filthy capitalistic scum' minority shareholders. And good on him for dealing to them!

The City Council is financially cash strapped. So what I would do is dip into the LPC cash piggy bank to equalise the pain with the rest of the city.


Quoting our mayor in the press today
"Christchurch Mayor Lianne Dalziel has said the council is considering releasing up to $400m from its commercial and investment arm as it addresses a funding shortfall and the city looks to rebuild from the damaging 2020 and 2011 earthquakes."

So the raping and pillaging of LPC is confirmed under council ownership. Even though Northington's valuation report said it wasn't possible to decouple the LPC insurance capital from what is a going concern. How could Northington's have been so naieve? Unless of course they were really working for the people who paid them instead of minority shareholders, in which case the whole Northington evaluation makes perfect sense.

SNOOPY

[Marilyn Munroe]

This is interesting. An on-market sale has been made at $4.10, although for a small parcel.

This is greater than the CCHL offer of $3.95.

Boop boop de do
Marilyn

[Snoopy]

This is interesting. An on-market sale has been made at $4.10, although for a small parcel.

This is greater than the CCHL offer of $3.95.


Yes Marilyn, something is afoot. The only explanation that makes sense is that someone is going for an alternative valuation. And they are having a good bet it will be more than $3.95.

SNOOPY

[percy]

Yes Marilyn, something is afoot. The only explanation that makes sense is that someone is going for an alternative valuation. And they are having a good bet it will be more than $3.95.

SNOOPY

Something afoot?
You must be joking!
243 shares at $4.10 is $996.
Just some one p,ssing in the wind !

[Marilyn Munroe]

Riddle me this. If the Northington Partners report is an accurate reckoning of the value of Lyttelton Port why are CCHL spending $3.95 to purchase a $3.50 value?

Boop boop de do
Marilyn

[Snoopy]

Riddle me this. If the Northington Partners report is an accurate reckoning of the value of Lyttelton Port, why are CCHL spending $3.95 to purchase a $3.50 value?


$3.95 for 20% of the company and about $2.20 for the remaining 80% of the company comes to ....... less than $3.50.

SNOOPY

[Snoopy]

Looking again at the "Takeover code approval order 2000", with 1st June 2013 amendments myself: I can't find the 50% must not accept for an alternative determination to be able to be called either.

The closest I can find is section 23. But that only applies if the offeror does not control "more than 50% of the voting rights in the target company". Since CCHL controls 79.7% of shares,this clause does not apply! It will be very unfortunate if Northington's have misread this clause as applicable, when it is not.


I have reread the takeovers code yet again.

http://www.legislation.govt.nz/regulation/public/2000/0210/latest/DLM10106.html?search=ts_all%40act%40bill%40regulat ion_Takeovers+Code+Approval+Order_resel&p=1

Section 23, that I referred to above, is a minimum acceptance condition of the offer. The offer has now been declared unconditional. So the above clause has done its job. Now we move onto the compulsory acquisition stage.

Compulsory acquisition is a separate part of the act (Part 7). The contents of the acquisition notice are set out in act section 55 (under Part 7). Clause 56(1) lays out that we 'holdouts' must received the same consideration as everyone else. Clause 56(2) lays out that

"Subclause 56(1) applies only if acceptances of the offer were received in respect of more than 50% of the equity securities that were the subject of the offer in the class in respect of which the consideration is to be determined."

This has now happened. So I think Marilyn, and any other holdouts out there, this means we are now denied the option to go for an alternative valuation.

Darn it! (with my shareholder hat on)

Woo hoo! (with my ratepayer hat on. You capitalist scum should never have imagined that you could take on the Peoples Republic of Christchurch and win!)

SNOOPY

[Marilyn Munroe]

Woo hoo! (with my ratepayer hat on. You capitalist scum should never have imagined that you could take on the Peoples Republic of Christchurch and win!)

SNOOPY

Marilyn shakes her tiny capitalist jewel encrusted hand at Commrade Aviator Hero Snoopy. May you join your doggy cosmonaut commrade Laika and be shot into space in a Sputnik capsule.

Boop boop de do
Marilyn

[Snoopy]

Marilyn shakes her tiny capitalist jewel encrusted hand at Commrade Aviator Hero Snoopy. May you join your doggy cosmonaut commrade Laika and be shot into space in a Sputnik capsule.

Boop boop de do
Marilyn


Wrong answer Marilyn. You were meant to review the takeovers code again, point out my foolish misinterpretation in getting the wrong end of the stick, then dazzle me with your alternative path to getting the whole of LPC revalued. I am still holding on to my compulsory acquisition form hoping you can come through.....

SNOOPY

[Marilyn Munroe]

I am still holding on to my compulsory acquisition form hoping you can come through.....

SNOOPY

Sorry Snoopy, I have capitulated and sent in my acceptance. I sent the form away last week, I haven't got the check yet.

I tried to work out how the statement in 1.4.3 of the Northington Partners report arises from the code but my brain started to hurt.

My bigest beef in all this is the valuation method adopted by Nortington Partners. A discounted cash flow valuation is not an apropriate valuation method when a match to LPC is availiable and publicly quoted on an open market. I refer to Port of Tauranga. Sure it is not an exact match but it should not be beyond the skills of a experienced analyist to make appropriate adjustments.

A car anology often helps. Just imaging that you are selling a Toyota Corolla in a relared party transaction which happens to be beneficial tax wise. Now imagine the reaction of the tax department when you explain to them the price of the transaction is something you just sort of plucked out of thin air and the fact cars of the same age make and model have been sold through a vehicle auction at twice your imaginary value is of no consequence.

Northingtons are asking us to accept an abstract method delivers a better measure of value than one set by the market.

Boop boop de do
Marilyn

Edit: Just checked my bank a/c the money turned up today(Tues).

[Marilyn Munroe]

For the sake of completeness.

Christchuch City Holdings have now aquired 100% of the shares of Lyttelton Port Company and it will be delisted in the near future.

https://www.nzx.com/companies/LPC/announcements/256827
https://www.nzx.com/companies/LPC/announcements/256747

Boop boop de do
Marilyn

[Marilyn Munroe]

The is an item in todays Christchurch Press where Christchurch Mayor Dalziel mulls over the options for raising cash to fund the earthquake rebuild.

http://www.stuff.co.nz/the-press/news/63695778/Dalziel-looking-at-asset-sales-for-rebuild

One of the options is a John Key style privatisation of the Port, where the council retains control with a 51% stake.

Would I participate in such a float? Only if the strike price was set by Nothington Partners using the same methodology as was used for the compulsory acquisition.

Hey I'm not bitter.... well only a little bit.

Boop boop de do
Marilyn

[blackcap]

Hey I'm not bitter.... well only a little bit.

Boop boop de do
Marilyn

YOu have every right to be bitter, well even more than bitter. This would be hypocrisy in the extreme if they did decide to partially float the compnay they just took over.

[percy]

The is an item in todays Christchurch Press where Christchurch Mayor Dalziel mulls over the options for raising cash to fund the earthquake rebuild.

http://www.stuff.co.nz/the-press/news/63695778/Dalziel-looking-at-asset-sales-for-rebuild

One of the options is a John Key style privatisation of the Port, where the council retains control with a 51% stake.

Would I participate in such a float? Only if the strike price was set by Nothington Partners using the same methodology as was used for the compulsory acquisition.

Hey I'm not bitter.... well only a little bit.

Boop boop de do
Marilyn
No surprises there!!!!!
Joint venture with POA?
30 year with 30 year ROE with Hutchinsons?

[Marilyn Munroe]

Should this link be passed on to Northing Partners so next time they are called on to perform an independent valuation of a port company they do a better job?

http://gcaptain.com/australias-busiest-port-melbourne-sold-for-7-3-billion/

Boop boop de do
Marilyn

[percy]

Should this link be passed on to Northing Partners so next time they are called on to perform an independent valuation of a port company they do a better job?

http://gcaptain.com/australias-busiest-port-melbourne-sold-for-7-3-billion/

Boop boop de do
Marilyn

Go to www.lpc.co.nz and find their result to 30th June 2016.
Revenue $105,714,000
Result from operating activities $9,051,000
Then enjoy the huge right down of assets to bring them in line with projected earnings.
Same capital on bank deposit would have earnt $15,000,000 on a Kiwi Bank at call a/c.
LPC will remain in The People's Republic ownership for the foreseeable future.!!
I think Northing Partners would be revising their valuation downward.!!

[Marilyn Munroe]

I think Northing Partners would be revising their valuation downward.!!

No doubt Northing Partners would welcome any opportunity to wail loudly and render their garments over a valuation of LPC. But would their anguish be as great if they were valuing LPC like the market does listed port companies.



LPC will remain in The People's Republic ownership for the foreseeable future.!!

I d'uno Councillor Raf Manji must be wondering if the Peoples Republic can sell LPC for the same multiples as Melbourne.

Boop boop de do
Marilyn

[percy]

Fantasy world.!!!

[Lewylewylewy]

Just for anyone new to share trading: It's like the railways and utility companies in the game of monopoly, if you own shares in all the ports, you get to charge double the price if someone uses your port. True story, I didn't just make that up :)

[Marilyn Munroe]

"History never repeats
I tell myself before I go to sleep"
Split Enz

https://www.stuff.co.nz/the-press/opinion/115478948/council-needs-to-free-up-funds-from-commercial-assets-base

Boop boop de do
Marilyn

[Marilyn Munroe]

Turmoil at LPC?

https://businessdesk.co.nz/article/infrastructure/lyttelton-port-loses-chair-weeks-after-ceo-departs?utm_source=nzh&utm_medium=referral&utm_campaign=nzh-home

Boop boop de do
Marilyn

Note: Article is pay walled. I have only read the teaser opening paragraph.

[Marilyn Munroe]

Christchurch City Council looking for ways to raise cash.

https://www.thepress.co.nz/a/nz-news/350064918/christchurch-council-will-have-sell-assets-or-do-less-mayor-says

Boop boop de do
Marilyn

[Sideshow Bob]

Meanwhile Chch airport, 75% owned by the Chch City Council spend $40m+ buying land in Tarras to look to build an airport that may or may not happen, and probably isn't needed (or wanted).

At the same time as their company being an enabler, looking to build another airport, CCC declared a 'climate and ecological emergency' in 2019.