ALF - Allied Farmers Limited

[Alan3285]

What? Damn!. Just sent my screen to the repair shop to get rid of the bug.

(:-O)

Alan.

[minimoke]

BTW - I just tripped to squash the freaking insect moving around under your name!

Good one!

I'm told those that see the dancer going anti clockwise make the best investment decisions

[trackers]

damn... used to be able to see that chick spin both ways but can only see counterwise today... My share picking skills have also taken a turn for the worse lately, so perhaps you're right Minimoke lol!!

[Alan3285]

I'm told those that see the dancer going anti clockwise make the best investment decisions

What does it mean if she seems to be totally static for me??


Alan.

[minimoke]

What does it mean if she seems to be totally static for me??


Alan.

There's a bug in your system? (alternatively brain function has ceased)

[Alan3285]

There's a bug in your system? (alternatively brain function has ceased)

Damn bug!

I'm itchy all over now!

Alan.

[Doyle]

The comments from Rob Alloway, I find very curious. To me their original disclosure notice was perfectly adequate and made it clear that an "extension" had been made through to march next year. If some media have reported it incorrectly that is hardly ALFs problem. I.e. if the media are being over negative print a clarification, if the media are being over positive thats their problem not ALF's.
It seems to me alloway is very worried there is still a lot more to play out on their banking arangements, why else come out with a negative press release. I sold my ALF on friday on the tone of the announcement. Plus at 6.9 cents, they really are starting to get well above the NPV of their loan book.

Keep an eye on this one though i'm thinking there will be plenty more oppertunities to trade this one.

[Alan3285]

The comments from Rob Alloway, I find very curious. To me their original disclosure notice was perfectly adequate and made it clear that an "extension" had been made through to march next year. If some media have reported it incorrectly that is hardly ALFs problem. I.e. if the media are being over negative print a clarification, if the media are being over positive thats their problem not ALF's.
It seems to me alloway is very worried there is still a lot more to play out on their banking arangements, why else come out with a negative press release. I sold my ALF on friday on the tone of the announcement. Plus at 6.9 cents, they really are starting to get well above the NPV of their loan book.

Keep an eye on this one though i'm thinking there will be plenty more oppertunities to trade this one.

Hi Doyle,

What is the NPV of their loan book?

Where are you getting a figure from, or how are you working it out?

I realise it will only be an estimate, but I am interested in what you are getting, and the methodology you are applying.

Thanks,

Alan.

[Doyle]

Hi Doyle,

What is the NPV of their loan book?

Where are you getting a figure from, or how are you working it out?

I realise it will only be an estimate, but I am interested in what you are getting, and the methodology you are applying.

Thanks,

Alan.

Hi Alan, can only provide two estimates I am afraid. And they are not particularly insightful.

The first is the disclosed fair value, most of you will discredit these as nonsense, however I would remind everyone of the impact of the IFRS on calculating these assets, meaning they are infact discounted using appropriate ( In this case high) discount rates. After impairments are calculated.

The Value of assets received from hanover are currently valued at 86.5 Million.
I estimated you can add around another 17 mil to that from the amount that has not been reviewed yet. (Thats a simple pro rata calculation nothing scientific.)

So the figure is 103.5 Million.

Plus you can add to that any net assets from the ALF previous to hanover takeover. The rural supplies bussiness still has a value, the finance company was virtually insolvent before hanover came along. Un-fortunately we don't know alot about these as they are no longer really central to ALF operations. Now I view the rural bussiness as having a value however, have a concern that the old finance was walking a tightrope. So Im going to hope that the net balance of the old assets are zero.

103.5 mil / 1952290000 = 5.30 cents per share.

This is really a generous estimate, however there is some potential upside to this due impairments not necesarily being realised.

The next estimate is one i probably like a little more although it is probably more generous, grant thortons report gave 56 cents as the bottom of the range for its report. They already payed out 6 cents, so minus that off and ascribe a value of 78cents in the dollar which is what the original transaction was based on.

396.2 mil/ 0.78 *0.5 = 253.974

Then discount these, (This is bascilly a junk bond and in all seriousness you would expect about an 18 percent return to take on these kind of crap asstes)
253.974/ 1.18 ^3 = 154.8621 /1952290000 = 7.9323 cps.


So NTA in my view is somewhere between 5.3-7.9 cps.

There are risks to this:

Too the downside:
-we don't know what has been happening in ALF's other bussiness's. There could be more writedowns in it's old non-hanover loans.
- The developent market could continue downwards.
-high legal and administrative costs.
Too the upside:
Impairments may not be realised, particularly overtime.
Interest collected on some loans may exceed expectations. (penalty interest)

Sorry Allan I dont have any insightful information really, only some guesses. To me the bigger uncertainty lies not in the hanover loan book but the old ALF loan book which was subjected to far less scrutiny.

Personally I see it as a buy in the low fours and a sell at anything above 6. We will know more when we see the annual report.

What I really want to see is the rural supplies business sold, it's only a distraction now.

Many will ridicule my estimates and insist there is no value here at all. It will be interesting to see how this one plays out, but to be honest I see movement to the upside possible over the longtime.

I agree the assets are not worth alot however, I don't accept and never have that they are worth nothing. If you have nerves of cast Iron then there will be many trading oppertunities on this one in the days to come.

[Alan3285]

Hi Alan, can only provide two estimates I am afraid. And they are not particularly insightful.

The first is the disclosed fair value, most of you will discredit these as nonsense, however I would remind everyone of the impact of the IFRS on calculating these assets, meaning they are infact discounted using appropriate ( In this case high) discount rates. After impairments are calculated.

The Value of assets received from hanover are currently valued at 86.5 Million.
I estimated you can add around another 17 mil to that from the amount that has not been reviewed yet. (Thats a simple pro rata calculation nothing scientific.)

So the figure is 103.5 Million.

Plus you can add to that any net assets from the ALF previous to hanover takeover. The rural supplies bussiness still has a value, the finance company was virtually insolvent before hanover came along. Un-fortunately we don't know alot about these as they are no longer really central to ALF operations. Now I view the rural bussiness as having a value however, have a concern that the old finance was walking a tightrope. So Im going to hope that the net balance of the old assets are zero.

103.5 mil / 1952290000 = 5.30 cents per share.

This is really a generous estimate, however there is some potential upside to this due impairments not necesarily being realised.

The next estimate is one i probably like a little more although it is probably more generous, grant thortons report gave 56 cents as the bottom of the range for its report. They already payed out 6 cents, so minus that off and ascribe a value of 78cents in the dollar which is what the original transaction was based on.

396.2 mil/ 0.78 *0.5 = 253.974

Then discount these, (This is bascilly a junk bond and in all seriousness you would expect about an 18 percent return to take on these kind of crap asstes)
253.974/ 1.18 ^3 = 154.8621 /1952290000 = 7.9323 cps.


So NTA in my view is somewhere between 5.3-7.9 cps.

There are risks to this:

Too the downside:
-we don't know what has been happening in ALF's other bussiness's. There could be more writedowns in it's old non-hanover loans.
- The developent market could continue downwards.
-high legal and administrative costs.
Too the upside:
Impairments may not be realised, particularly overtime.
Interest collected on some loans may exceed expectations. (penalty interest)

Sorry Allan I dont have any insightful information really, only some guesses. To me the bigger uncertainty lies not in the hanover loan book but the old ALF loan book which was subjected to far less scrutiny.

Personally I see it as a buy in the low fours and a sell at anything above 6. We will know more when we see the annual report.

What I really want to see is the rural supplies business sold, it's only a distraction now.

Many will ridicule my estimates and insist there is no value here at all. It will be interesting to see how this one plays out, but to be honest I see movement to the upside possible over the longtime.

I agree the assets are not worth alot however, I don't accept and never have that they are worth nothing. If you have nerves of cast Iron then there will be many trading oppertunities on this one in the days to come.

Thanks Doyle - That's great stuff.

Alan.