Exactly!!! He would be "poised" had he also held GNE. lol.
What is your third one?
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I can't help thinking this 'diversification' across a range of electricity sector companies is very similar to what we witnessed back in 2006/7 with the finance companies. I'm not saying the sector is going the same way as the finance companies did, but the underlying principle is the same.
My personal view is to (over the course of the next 12 months) pick the winner, divest the rest and be happy with one representative in the portfolio.
Why I say don't rush into divesting now is due to the likely collection of some excellent divi's up until mid 2015, and some bonus shares. I think it is likely that the electorate is going to retain the incumbents in office (by default rather than by anything else) so the (political) threats of economic destruction of wealth will dissipate, and the mid term tale of the tape for equities displays no reason to get out (but must of course be monitored)
I was particularly interested to read in the Craigs analysis of Genesis, a table of comparatives, in which they valued Meridian (as instalment receipts) at 1.65. Not sure if many people picked up on that, but for me it is the one I personally will retain.
Sorry to talk about everything but MRP on the MRP thread, so for relevance to this thread, I did not participate in that float. :mellow:
Mouse, Meridian in the prospectus declared that it expects to pay its dividends for FY2014 of 10.5cps in two instalments, one in April 2014 and the other in October 2014. The April interim dividend (the one you got) was 4.19cps. Come October you can expect a final dividend of 6.31cps which will bring the total to 10.5cps.
The underlying MEL share you can get by adding the final 50c payment to the trading price of the instalment receipt (currently $1.175). The underlying share price is therefore $1.675. This gives a forecast net dividend yield of:
10.5 / 167.5 = 6.27%
Mighty River Power OTOH has already paid a 7.2cps dividend on 30th September 2013 and another dividend of 5.2cps on 31st March 2014. To make it strictly comparable for the same time period I need to know what the MRP dividend is expected to be in September 2014. MRP are forecasting a FY2014 total dividend of 13cps, which translates to a final dividend of 7.8cps. MRP are currently trading (based on the MRP share price of $2.21) on a net dividend yield of:
13 / 221 = 5.9%
So it looks like Meridian is paying the higher yield on a share fully paid basis.
On an instalment receipt basis, ignoring the 50c capital payment from next year the Meridian yield is much higher.
10.5 / 117.5 = 8.9%
Your perception that Meridian is paying less than Mighty River is I suspect only true for the six month time window that you choose to observe.
SNOOPY
Meridian shares you cannot buy, only the instalment receipts. Instalment receipts are by their nature more volatile than the underlying shares. So comparing MRP with MELCA is not a like with like comparison.
Another thing that is affecting the relative performance of MRP and MELCA is the fact that the general market environment was more in favour of high yielding shares when MRP listed and more in favour of growth shares when MELCA listed. In effect Meridian listed in a less favourable environment for 'dividend' shares and so ended up listing cheaper. As an investor now, you have to forget about the listing price. The climate of the market then means that all of we MRP IPO investors 'overpaid' for our MRP shares. But it will be the performance of MRP and MEL going forwards (and the environment that shapes the future performance) that will determine the share price direction from here on in.
To summarize, just because the share price performance of MRP has been worse than MELCA, does not mean the underlying MRP company is performing worse. It also doesn't mean that MRP is relatively cheap compared to MELCA. From a strict yield basis MELCA is the better investment. But that assumes you will have no trouble stumping up the 50c final payment to convert MELCA to plain MEL. There is also the bonus shares you will get on MRP shares if you keep holding for two years after the float.
On balance, I would look at ultimately you might look to equalise your holding which would mean buying more MRP. Wait till the Labour/Greens rise in the polls again though. The MRP share price should come back a bit then.
SNOOPY
I don't see a parallel between finance companies and electricity companies myself. It is easy to see why the demand for high risk financing might go away when the economy is squeezed. Electricity demand is much more likely to stay steadier, no matter what happens to the wider market.
I do take the lesson of only investing in the very best finance companies (with hindsight I guess this means just the banks) when assembling a term deposit portfolio. But which is the best electricity company to invest in? In the short term, the answer to that question probably depends on rainfall and lake storage capacity, and a company's resilience to adverse events. You could draw up a scenario on what might be the best company for a particular annual waether prediction. But unless you were absolutely sure you knew what the weather might do, I can't see you being able to know in advance which of the gentailers will do best.
So which power company will be the winner in your view? You do have a point of not being over represented by power comnpanies in your portfolio.Quote:
My personal view is to (over the course of the next 12 months) pick the winner, divest the rest and be happy with one representative in the portfolio.
Five months is a long time in politics!Quote:
Why I say don't rush into divesting now is due to the likely collection of some excellent divi's up until mid 2015, and some bonus shares. I think it is likely that the electorate is going to retain the incumbents in office (by default rather than by anything else) so the (political) threats of economic destruction of wealth will dissipate, and the mid term tale of the tape for equities displays no reason to get out (but must of course be monitored)
SNOOPY
If Craigs are assuming no change of government, then an installment receipt will likely do better from here, I agree with that. But that is because in an installment receipt, all of the risk must be priced into the partly paid capital. That will make MELCA more volatile than all the other alternative NZ power gentailer investments going forwards. If Labour look like getting in, I predict MELCA will be the worst performer of all, even though on a fully paid basis, I believe MRP carries the greatest investment risk should a Labour/Green power policy be implemented.
SNOOPY
PS I also believe that in terms of being able to balance geothermal generation and hydro generation MRP is the best power company of all. That makes it worth holding despite the Labour/Green risk IMO.
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SNOOPY
PS I also believe that in terms of being able to balance geothermal generation and hydro generation MRP is the best power company of all. That makes it worth holding despite the Labour/Green risk IMO.[/QUOTE]
Many thanks Snoopy and friends for your comments.
Clearly I will have to wait for the final dividend to compare the twelve months performance of both companies.
I am rather keen on Hydro electrical generation. Geothermal is useful, but I am sure it costs a lot more per kWh than Hydro. Of course Hydro needs a full head of water, so is a problem in drought.
Which brings me to Meridian. Who have Wind Turbines. Why? What use are they? Apart of course from generating noise and killing off birds. But Meridian have Lake Manapouri, which in 2013 produced 4546GWh. How much are we getting for that bit of production? Why not 'mothball' all the Wind generators, and just sell the Manapouri electricity onto the main grid? Page 58 of the IPO document shows the generation capacity, and production of the various Meridian sites.
But wait for the twelve month report to compare apples with apples.
Note, Meridian and Mighty River seem to me to be power companies with very similar production.
Geothermal or Hydro cheaper? Meridian pulled out of project aqua on the Waitaki. Most of the big power stations commissioned since have been geothermal. I guess it depends on how you measure cost.
In the heyday of Hydro, there was no resource management act. Would all of MRPs power stations on the Waikato have been built in todays political climate if the resource management act had been in force then? Not a very useful question to ask I know, as they all were built and are now owned by MRP.
All of those Waikato dams were built when the price of fuelling the earthmoving equipment was peanuts in today's terms. I suspect the economics of hydro dams would be very different today if you evaluated building one from scratch. I think the building of MRPs geothermal stations wasn't just made on cost considerations though. They are a very good fit with hydro because under the earths crust in the central North Island the earth continues to bubble away rain or shine. This means the use of the hydro power can be cut back when lake storage is low, and the company (MRP) doesn't have to buy power on the open market to fill the gap anymore. To me this is the great appeal of MRP.
MRP is the best balanced entirely renewable generator (forgetting about MRP's Southdown gas turbine which is now a back up plant), that is located closest to NZ's largest power market (Auckland). To me that is a killer combination. Yes I am smarting about paying too much in the IPO. But quality never comes cheaply. And I intend being a shareholder in MRP for the long haul.
SNOOPY