Meridian float

[troyvdh]

Is there an appetite for this...I personally think the prospects are quite ghastly....Its my belief that eventually the appetite for share investing in these "things" will not only sour the appetite of many folk but reinforce the fact that the share MKT is a "play thing for those who ,,,,,,"......

sad as it well be...cheers

[CJ]

Will be interesting to see how they go about this. I think it needs to be instalment receipts for NZ investors. I don't think there is enough money in NZ to get a good price. Without that, to get a good price, more than 13.5% will need to go overseas and that isn't politically viable.

[Joshuatree]

A friend sold his rental house to put into MRP saying it was a sure bet, a one in 5 year opp. Maybe meridian will actually be the one as they will have to pitch it at a better price for us ,with higher incentives to stay in.

[digger]

A friend sold his rental house to put into MRP saying it was a sure bet, a one in 5 year opp. Maybe meridian will actually be the one as they will have to pitch it at a better price for us ,with higher incentives to stay in.

Sparky the clown says he does not know what to say about this sort of investment decision. Mr Clown your inability to see the fault is because your name is too close to the action. The guy in the investment world is a clown.

I was going to invest in MRP but once the labour /green thing stepped in I quickly changed my decision. The original definition of an idiot going back 1500 years referred to a person who believed he could live his life independent of politics. Unfortunately that has over time changed to being one of reduced mental ability. That is unfortunate as now there is no word that fills the space when someone is going against the political tide.The labour /greens have decide to screw this up and they have by chaseing off a lot of investers.
So what happens next time?????

[Xerof]

The kindest advice I have is " nothing is ever a sure bet"


(Ahem, except Black Caviar)

[J R Ewing]

It may be the same case with this person, although I hope to hell they were joking when they called MRP a "sure shot".

Each to their own I guess... :blink:

Well I hope to hell he does know what he's talking about and MRP is a sure shot

[Joshuatree]

Luckily my friend only put a re a fifth into MRP in the end. wasnt going to put any in but his investment advisors encouraged him , not me.

[Statistically Deviant]

Well if anyone is interested they might like to look at the valuation reports at http://www.comu.govt.nz/publications/information-releases/valuation-reports/ before they are removed.

[Joshuatree]

Thanks SD re $5.5 billion for meridian dec 2011

-.34 TO - .48 billion for Kiwi rail

$1.7 to $2.1 Billion Genesis

Met service $.5 billion

Solid energy $1.7 to $2.7 billion :)

[CJ]

Well if anyone is interested they might like to look at the valuation reports at http://www.comu.govt.nz/publications/information-releases/valuation-reports/ before they are removed.That Kiwi Rail was a good buy wasn't it!!! (For Toll).

Landcorp should be added to list to SOE's to be sold, even if they have to restrict it to NZ resident owners.

[Banksie]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10886538

A couple of sound bites from the article:


but Key said the government "reserves the right to do that float in chunks.'
"You wouldn't have to float 49 percent in one day.''


Asked whether the government might change its mind about the proportion of local ownership, which includes the 51 percent controlling stake the government would continue to own, Key said it was an election commitment.
"We have to get the 85 percent.''

So 2 tranches maybe? 50% in Oct 2013 and 50% in April/May 2014, To give M&P investors time to save?

[POSSUM THE CAT]

Banksie they might have to pay investors to take them of their hands

[blah]

Until the MRP share price is a good margin above the IPO, I think investor appetite for Meridian wouldn't be that great. If you further take into account that MRP was the one that needed to be successful (and we can better judge at a later stage in time), I think it would be better to delay Meridian to next year to give investors and mums and dads to watch how MRP goes.

[fungus pudding]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10886538

A couple of sound bites from the article:




I can't hear a thing.

[janner]

...... I don't quite know what to say about that .....

You have heard it before Sparky.. " One born every minute ".. It has to be, gross stupidity !!..

Investors like that give the SM a bad name..

[Beagle]

I can't help ponder if some influence will be brought to bear, e.g. ACC being "encouraged" to invest more in N.Z. companies and maybe we will see a "remarkable recovery" in MRP's share price just before the Meridian offer. That would be an interesting coincidence wouldn't it !!

Buying shares you already own at over-inflated prices because of overseas insto demand is the just lunacy, all the more so because you're not actually in control of what you're paying. What a fantastic investment opportunity *Sarcasm*

The sheep are being fleeced, enough said.

[Anna Naum]

ACC have never been the subject of 'suggested investment' indeed that is why they have outperformed nearly every year for the last 20+ years.

[samdaman]

Having a quick look at the fundamentals of this company. Doesn't look too atrcious? debt to equity around 22%, a couple valuations look under valued, low P/E. I'm new to investing so am I missing any large warning flags?

[Harvey Specter]

Having a quick look at the fundamentals of this company. Doesn't look too atrcious? debt to equity around 22%, a couple valuations look under valued, low P/E. I'm new to investing so am I missing any large warning flags?
ForBar rates it neutral, the lowest of the 4 power companies (CEN, TPW, MRP being outperform). dont know why, didn't read past the recommendations.

[samdaman]

Morningstar has all at hold aside from MRP at accumulate however whether I trust morningstar is a different can of worms. Being relatively new maybe it's just been pushed to the side for now?

[Snoopy]

Having a quick look at the fundamentals of this company. Doesn't look too atrcious? debt to equity around 22%, a couple valuations look under valued, low P/E. I'm new to investing so am I missing any large warning flags?


Underlying profit from FY2013 was $162.7m. Based on 2,563m shares on issue this represents earnings per share of:

$162.7 / 2,563 = 6.35cps. Allowing for the final 50c instalment, yet to be paid, the implied final share price is $1.50 (based around the instalment receipts trading at $1). The implied historical PE is therefore:

150/6.35 = 23.6

I know there is a new 'growth era' on the NZX, with many companies trading at PEs much higher than this. But for a mature market company, I would class a PE of 24 as high, not low.

The reason such a high PE might be justified is because electricity is a stable market that has provided good margins for generators/retailers over the last decade. Meridian has been generally well managed and people have been prepared to pay a good price for perceived security of income.

Security of income may change with a Labour/Greens lead government. Owners of hydro dams are being told they should only be paid according to an historic cost formula and any savings passed into a common pool market for electricity that will deliver lower power prices to consumers. Meridian is the power company likely to be second most affected, behind only Mighty River Power, by such a policy change. Opinions vary as at whether the Labour/Greens will come to power this year, and if they do exactly how their proposed new power policy will be implemented.

Meridian Energy currently trades as instalment receipts (partly paid shares). This structure is much more affected by a possible change of government than just straight shares. So even though IMO, MRP would be more affected, from an NZ sharemarket investor perspective as of today the MELCA Meridian instalment receipts are likely to experience more market volatility than the plain rival MRP shares.

Good arguments can be drawn up for investing in all the players in the energy sector. But IMO, for a single energy sector investment, it is actually Contact Energy which offers the best risk adjusted return going forwards. That doesn't mean that CEN shares won't be outperformed by Meridian instalment receipts should a National lead government be returned though!

SNOOPY

[Harvey Specter]

The reason such a high PE might be justified is because electricity is a stable market that has provided good margins for generators/retailers over the last decade. Meridian has been generally well managed and people have been prepared to pay a good price for perceived security of income.In addition, with little capital investment to take place in the mid term due to zero demand growth, they will be cash cows able to distribute 100%+ of accounting profits.

[samdaman]

Snoopy, as I'm new I have a couple questions about your post.

First up I'm not too sure what you mean by final instalment? What is this and how is it applied to the current trading shares?

Also I was unaware that the EPS were only 6.35c I thought from calculation they would be more towards 18.4c? (295.1m NPAT / 1600m shares). Dividing the current price by earnings I come to around a P/E of 5.55? I don't understand the mistake I've made in doing this so an elaboration of your method would be much appreciated :)

Sam

[Snoopy]

First up I'm not too sure what you mean by final instalment? What is this and how is it applied to the current trading shares?


Technically MELCA as they are trading on the market now are not shares. They are a down payment on what will become shares on 15th May 2015. Just before that time, the then holders of MELCA will be asked to stump up an additional 50c for each MELCA held.



Also I was unaware that the EPS were only 6.35c I thought from calculation they would be more towards 18.4c? (295.1m NPAT / 1600m shares). Dividing the current price by earnings I come to around a P/E of 5.55? I don't understand the mistake I've made in doing this so an elaboration of your method would be much appreciated :)


$295.m was indeed the net profit after tax for Meridian Energy for FY2013, you are correct. However that figure included proceeds from the sale of the Macarthur wind farm in Australia in June, which resulted in a $101 million pre-tax gain, and a $6 million gain on the sale of the company's subsidiary Energy for Industry, as well as other non cash 'fair value' movements for other balance sheet items that won't be repeated. This is why Meridian themselves in their press release dated 12th August 2013 quoted an underlying profit of $162.7m.

There are currently 1,255m MELCA partly paid shares in existence (after allowing for the latest on market buy back). But this doesn't include the 51% of what will ultimately become part of the total MEL shares that will continue to be held by the government.
Not quite sure where your figure of 1,600m MEL shares comes from.

SNOOPY

[samdaman]

Ahhhh I see now, this makes. Cheers snoopy. I'm still new to finding all these figures and that makes a lot more sense now. I got the 1600m from their equity notice in the 2013 annual report. wouldn't adding 51% shares get a number of shares after the final instalment of around 1895m instead of 2563m?

[Snoopy]

Ahhhh I see now, this makes. Cheers snoopy. I'm still new to finding all these figures and that makes a lot more sense now. I got the 1600m from their equity notice in the 2013 annual report.


Meridian wasn't listed at the time of the 2013 annual report Sam. Sometimes the number of shares on issue is changed immediately before a float, although I am not certain what happened in the case of Meridian. I got my number of shares using the statement on p8 of the Meridian prospectus.

"The Crown is seeking to sell up to 1,255,870,000 shares in Meridian. This is up to 49% of the Meridian shares on issue."

So doing the maths. If 'T' is the total number of Meridian shares on issue, that means the above statement is telling us:

T x 0.49 = 1,255,870,000

The value of T that makes that equation true is 2,563,000,000. So that must have been the total number of planned Meridian shares on issue immediately after the float.



wouldn't adding 51% shares get a number of shares after the final instalment of around 1895m instead of 2563m?


The number of government owned shares in Meridian doesn't add 51% to the total held by the public. It adds an amount such that the total held by private investors is only 49% of the grand total. So the amount 'added', if you want to think of it that way, is something just over 100%

SNOOPY

[Harvey Specter]

Come on people - it's all out there:

http://www.business.govt.nz/companies/app/ui/pages/companies/938552/shareholdings

[samdaman]

*click* mistook add 51% and 51% of

[macduffy]

Alcoa to close its Point Henry smelter in Australia.

http://www.smh.com.au/business/alcoa-announces-closure-of-point-henry-aluminium-smelter-20140218-32wzq.html

Now, does this take a bit of competitive pressure off the Bluff smelter - or does it underline just how dire the state of the aluminium industry is? Or both?

[peat]

Macduff
Rio is saying there is a good outlook for the aluminium industry

NOT WHAT THEY SAID WHEN THEY SCAMMED NZ OF $30m

[fungus pudding]

Alcoa to close its Point Henry smelter in Australia.

http://www.smh.com.au/business/alcoa-announces-closure-of-point-henry-aluminium-smelter-20140218-32wzq.html

Now, does this take a bit of competitive pressure off the Bluff smelter - or does it underline just how dire the state of the aluminium industry is? Or both?

Both obviously.

[Harvey Specter]

Alcoa to close its Point Henry smelter in Australia.

http://www.smh.com.au/business/alcoa-announces-closure-of-point-henry-aluminium-smelter-20140218-32wzq.html

Now, does this take a bit of competitive pressure off the Bluff smelter - or does it underline just how dire the state of the aluminium industry is? Or both?When you add this to BHP closing its Bayside plant in South Africa, I think it proves that there was too much supply in the industry and closure is a real threat. Whether Bluff was near the bottom of the list and risked closing I am not sure.

[Xerof]

Gee, and here I was thinking the shareprice was urgently moving up over the past few days on the political poll results released last week, but no, it seems there is a leak in some of the dams?

nice interim......

[Master98]

Gee, and here I was thinking the shareprice was urgently moving up over the past few days on the political poll results released last week, but no, it seems there is a leak in some of the dams?

nice interim......

could be both, anyway nice interim indeed.

[Traderx]

Things are looking good for MELCA

High short term market prices due to outages on other competitor plants
http://www.electricityinfo.co.nz/media_releases/160214.pdf

I think Tiwai will stay around supporting the wholesale market prices. MEL is generally net "long" to wholesale prices except in a dry winter obviously!

Excellent interim report. Costs look under control. Hopefully with the slowdown in plant construction key IP in people is not being lost. Further Huntly coal units or Contact CCGT unit closures along with Tiwai retention could quickly require a resumption of builds.

[Master98]

Gee, and here I was thinking the shareprice was urgently moving up over the past few days on the political poll results released last week, but no, it seems there is a leak in some of the dams?

nice interim......
Latest One News poll show NATS has reach to 51%. Both MELCA and MRP rise today.