Contact Energy - CEN Chart

[Snoopy]

Assets + Turn over , also can take the probability of the business's future into consideration.

Good answer.

The reason I make my valuations detailed is to show what assumptions are behind such a valuation. A market has many more players than one. And all of those players may have different views. The buying and selling between market players is then what determines the market price. So when I call the valuation of CEN to be $6.04, verses are market p[rice of $7.01, you should not take this to mean I am declaring Mr Market to be wrong. You should instead take it to mean that Mr Market is using a different valuation technique than I, or possibly using the same technique, but with different input assumptions.

Personally I invest for dividend yield. So I like to think of $6.04 being the 'dividend yield value' and the difference between that and the market price of $7.01, being 97c as the 'growth premium'. As an investor, you would have to consider whether that growth premium of 97c is justified. One investment technique I use is to buy shares on an income basis only. That means that any growth I do get comes for free. Correspondingly if the company does not grow, then I haven't wasted any money paying a growth premium. But buying a utility type share rarely throws up such a discount. So my next exercise is to try and make a calculated guess at what I think the growth premium should be.

SNOOPY

.....who holds CEN shares, bought at a price significantly less than $6.04!

[dreamcatcher]

.....who holds CEN shares, bought at a price significantly less than $6.04!

I do Sir and far lower still...... many thanks for all your work here and elsewhere Snoopy.

[Entrep]

Can't give you more rep, but amazing content from you on this thread Snoopy

[tomm]

I am unsure how TILT share price would be with the input as mentioned by Snoopy.
Due to the trend of renewable energy , we will see a bit of down play but soon enought the Sp will be rocket again after the revaluation so how they call.

[BlackPeter]

I am unsure how TILT share price would be with the input as mentioned by Snoopy.
Due to the trend of renewable energy , we will see a bit of down play but soon enought the Sp will be rocket again after the revaluation so how they call.

Tilt clearly is part of the green bubble.

https://www.nzherald.co.nz/business/...VKOEPFXI2LOQQ/ (paywalled)

As the enthusiasm for climate-friendly investing hits fever pitch, analysts warn that investors are pumping cash into anything that looks "green" — sending valuations of eco-friendly companies into the stratosphere and fanning fears of a bubble.

How long this bubble will continue to inflate before it burst is everyone's best guess , however - bursting it will.

[Lego_Man]

Imploding now. Blackrock haven't even sold a buck yet.

[Snoopy]

Imploding now. Blackrock haven't even sold a buck yet.

http://nzx-prod-s7fsd7f98s.s3-websit...135/341087.pdf

Well according to the notice above they just sold 7,600 shares. That was after buying gazillions though. I could make neither head nor tail of the announcement until I remembered about the share placement to institutions. Blackrock weren't offered any. So when other institutions took up their holdings, that meant Blackrock got diluted below substantial holder level.

SNOOPY

[Snoopy]

If we assume that a business cycle investment 'gross return' of 4.5% is required, then this equates to a CEN share price of:

23.6c /0.045 = $5.25

So $5.25 is therefore 'fair value'.

Readers should note that $5.25 represents 'business cycle neutral' fair value. We could argue that we are currently, keeping in mind the increasing ten year bond rate, descending from the top of a low interest rate inspired valuation cycle. My rule of thumb would suggest a 'top of cycle' value some 20% higher than my calculated fair value. However, given we may have passed the interest rate low, I am reducing my interest rate cycle premium from 20% down to 15%

$5.25 x 1.15 = $6.04

Contact Energy is trading at $7.01 as I write this post. This technique would suggest that Contact Energy is now 16% overvalued (above fair valuation), but not out of line with the broad overvaluation of the NZX as a whole.

But does a 'capitalised dividend valuation' give the full picture? This is a 'no growth valuation', so maybe not!

To clarify, I am modelling here a no growth valuation after Tauhara is built. I am not saying no growth from today, as the current cash issue presentation (attached to the half year report), forecasts that this $580m project from here on in (funded by $400m of new equity and $180m of new debt) will produce a substantial uplift in EBITDA.

If you look back at my post 1978, I have taken the forecast $85m EBITDA uplift as incremental cashflow of $85m. I have subtracted suitable incremental depreciation of $14m and incremental interest charges of $8m. Assuming a tax rate of 28%, I can calculate an incremental net profit after tax of:

(1-0.28)x($85m-$14m-$8m)= $45m or $45m/805m = 5.6cps

That is a significant part of the 17.5cps modelled earnings total. To be more precise the forecast increase is:

5.6c / ( 17.5c -5.6c) = +47%

That sounds high. But those are Contact's own numbers, not mine.

SNOOPY

[HKG2301]

That may well depend on where this dip bottoms as we run into next week. If the SP looks to be averaging lower than $7.18 next week, I expect the offer will attract a lot more interest!

But as the crystal ball is still cloudy on that front (US futures' plummet notwithstanding), I guess there's a third option to consider: buy at market if it continues lower this week and consider applying for the Retail Offer next week as well!

What are the sums for equity dilution as a result of the $400M raise, about 7.5%...?

OK, money where my mouth is. Just topped up my 7.5% dilution's-worth at $6.82.

If it stays at these levels (or lower) I'll add more through the Retail Offer next week.

Goes without saying, I'm happy to accumulate at these levels...

[Entrep]

Imploding now. Blackrock haven't even sold a buck yet.

Sorry can you explain the blackrock thing a bit more?