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  1. #2001
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    Quote Originally Posted by Jiggs View Post
    Thank you for all your recent analysis. I don't understand it all, but I do understand I have made a 54% profit from buying and selling Contact over the past 2 years, but a 4% loss over the past month, and as this cow is no longer giving me any milk (wrong metaphor I know) I have just taken her out of my herd. When it looks like she's come into calf again, I might bring her back in again.
    Way to go mate

    Might do same myself with Genesis
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

  2. #2002
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    Default The Problem with Valuing Gentailers under Accounting Rules

    Quote Originally Posted by Jiggs View Post
    Thank you for all your recent analysis. I don't understand it all, but I do understand I have made a 54% profit from buying and selling Contact over the past 2 years, but a 4% loss over the past month, and as this cow is no longer giving me any milk (wrong metaphor I know) I have just taken her out of my herd. When it looks like she's come into calf again, I might bring her back in again.
    Ok , I will have another go at trying to make this easier to understand. There is no shame in 'not understanding it all' because this is an extremely difficult topic.

    I decided the electricity sector would be a core part of my investment portfolio because:

    1/ everyone needs electricity through good times and bad, and therefore companies like Contract should continue to pay good divies.
    2/ being a 'boring utility' it would be easy to analyse.

    I was right on only the first of those points!

    The basic problem is that for really long lived assets that increase in value, like the renewable energy power stations, following conventional accounting practices and standards doesn't really work. Evaluating these companies requires thinking outside normal valuation techniques. In general depreciation is a way of making sure you account for the fact that at some point in the future, you will have to replace your machinery. Depreciation reduces your profits but also allows for more cashflow to come in under the radar of the taxman. That cashflow can be used to rebuild your plant and equipment as it wears out. The problem is following the tax rules tells you that everything is wearing out (depreciating) faster than it really is.

    The other 'fly in the analysis' factor is that not only do these long lived renewable assets not wear out as accounting rules suggest they should. They actually increase in value. This is because all electricity is priced in accordance with the marginal cost of building a new power station. Construction costs for large engineering projects have a habit of rocketing up faster than inflation. This isn't great for those building a brand new power station. But it is great news for those power station owners who have existing renewable power stations. Because those existing stations suddenly become worth a lot more. And this increase in value is not speculative or empty because it is accompanied by a consummate increase in the price paid for historically costed renewable energy, which is now bought at present day market price levels. The problem then becomes how do you compensate, to get a 'true value' of your investment from the numbers spat out by accounting standard compliant income statements?

    I had a good debate with Ferg on this thread a few months back (see post 1800 on this thread for Ferg's alternative viewpoint). In the end we agreed to disagree, although in fairness I don't believe there is any one correct way to solve this problem.

    My own method is initially to follow all the accounting rules as though they are representative and correct. Doing this underreports an investors real return, because it removes the unimputed portion of investors dividends from their return. But taking unimputed capital away from a company's books also reduces the book value of assets . In this process, the value of present value power is subtracted from the historical cost book value of power stations. Over time, as Ferg pointed out, this method tends to reduce the book value of all company owned power stations, (because most of the power stations are historic) to zero. This is nonsensical. So to counter this effect, I introduce a periodic revaluation of power stations that reflects their current earning capacity. No money is required to boost the earning capacity of historic power stations as the market price of power goes up. So I term my revalued capital to be 'thin air capital', because the incremental asset value of the historic renewable power stations increases from nothing.

    For those who find the notion of 'thin air capital' ridiculous, I would point out in my defence that I only needed to invent the concept because the accounting rules that exist today do not provide for realistic depreciation of long life renewable power generation assets. The debate on how to account for unimputed profits is a live one, even though I am happy with my own solution to the issue.

    Coming back to your own analogy Jiggs, your herd of (power) cows never stopped producing. It is just that some wildcat farmer offered to buy your cows for a silly price then withdrew that offer that made it look like you had lost money. If a fool offers to buy your cows for a lot more than they are worth, you can kick yourself for not taking advantage of the situation. But by not accepting at least you still have your milk (power) producing cows (except in this instance you don't because you sold them).

    SNOOPY
    Last edited by Snoopy; 23-02-2021 at 07:29 AM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  3. #2003
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    A question : If I sell now, do I still receive the divident?

  4. #2004
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    Quote Originally Posted by tomm View Post
    A question : If I sell now, do I still receive the divident?
    Tomm it dividend not divident.

    Every dividend announcement has the dates that the shares trade ex dividend. The dates are also on the NZX site.


    https://www.nzx.com/markets/NZSX/dividends
    Last edited by 777; 23-02-2021 at 12:55 PM.

  5. #2005
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    Quote Originally Posted by 777 View Post
    Tomm it dividend not divident.

    Every dividend announcement has the dates that the shares trade ex dividend. The dates are also on the NZX site.
    Very appreciated .

  6. #2006
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    Quote Originally Posted by tomm View Post
    A question : If I sell now, do I still receive the divident?
    Distribution Amount NZD 0.15588235
    Ex Date Friday, March12, 2021
    Record Date Monday, March 15, 2021
    Payment Date Tuesday, March 30, 2021

    http://nzx-prod-s7fsd7f98s.s3-websit...580/340296.pdf
    Last edited by HKG2301; 23-02-2021 at 11:43 AM.

  7. #2007
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    Quote Originally Posted by tomm View Post
    A question : If I sell now, do I still receive the divident?
    Love the new word though, be in the next dictionary update .
    Divident - noun- A dividend is evident, transparent and imminent.

  8. #2008
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    Quote Originally Posted by Joshuatree View Post
    Love the new word though, be in the next dictionary update .
    Divident - noun- A dividend is evident, transparent and imminent.
    I thought the word referred to a reduced value dividend, as CEN announced their upcoming dividend would be reduced..

    divident 'a dividend with a dent (in value)'

    So tomm's wording looks absolutely correct to me!

    SNOOPY
    Last edited by Snoopy; 23-02-2021 at 07:29 PM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  9. #2009
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    Quote Originally Posted by Baa_Baa View Post
    On the chart, CEN daily SP is basing now at a historical support, the 200MA and the 61.% FIB retrace from Covid-low to the insane spike-high recently. It is and remains in a severe short term down-trend.
    It is interesting that Contact closed at $6.96 today, below the nominal retail offer price of $7. If you look in the offer document, the alternative price setting mechanism is the lower of $7 or:

    "a 2.5% discount to the volume weighted average market price of the Shares traded on the NZX Main Board over the five business day period prior to and including the Closing Date, rounded down to the nearest cent."

    A 2.5% discount on $7 is $6.83

    If the share price stays down, we 'small investors' might get one over on the big guys (for once).

    SNOOPY
    Last edited by Snoopy; 04-08-2022 at 08:35 PM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  10. #2010
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    Quote Originally Posted by Snoopy View Post
    It is interesting that Contact closed at $6.96 today, below the nominal retail offer price of $7. If you look in the offer document, the alternative price setting mechanism is the lower of $%7 or:

    "a 2.5% discount to the volume weighted average market price of the Shares traded on the NZX Main Board over the five business day period prior to and including the Closing Date, rounded down to the nearest cent."

    A 2.5% discount on $7 is $6.83

    If the share price stays down, we 'small investors' might get one over on the big guys (for once).

    SNOOPY
    Thanks for pointing this out I read it incorrectly and thought the lowest price was $7

    FT

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