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  1. #661
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    I sold my NZR shares after the recent earnings announcement for $2.60. After digesting the numbers, it looked to me to be over priced and quite a risky investment.

    Even if they have a stellar year and deliver NPAT of $70M, this would be a PE multiple of about 10 which seems alright but you have to ask yourself, are these kind of earnings sustainable for the next 10 years?

    Its a great story and its good to see them returning to profit but I can't quite see how current price is going to provide me with a decent dividend or gain in share price over the next 2-3 years.

    From a TA point of view, there is nothing too scary in the chart and it looks like there will be more upside. I just don't understand how earnings are going to grow to justify price in the $3-4 range. What earnings do you guys forecast they will deliver this year, and then next?

  2. #662
    always learning ... BlackPeter's Avatar
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    Quote Originally Posted by Nasi Goreng View Post
    I sold my NZR shares after the recent earnings announcement for $2.60. After digesting the numbers, it looked to me to be over priced and quite a risky investment.

    Even if they have a stellar year and deliver NPAT of $70M, this would be a PE multiple of about 10 which seems alright but you have to ask yourself, are these kind of earnings sustainable for the next 10 years?

    Its a great story and its good to see them returning to profit but I can't quite see how current price is going to provide me with a decent dividend or gain in share price over the next 2-3 years.

    From a TA point of view, there is nothing too scary in the chart and it looks like there will be more upside. I just don't understand how earnings are going to grow to justify price in the $3-4 range. What earnings do you guys forecast they will deliver this year, and then next?
    I guess it all depends on the oil price trend and NZD/USD exchange rate. Have a look through this thread - there is a relevant discussion (around mid February, I think). If oil stays low, NZD/USD stays as it is and refining margins stay high, than we could be in this year for EPS of 40 to 50 cents - and this should improve next year with the completion of Te Mahi Hou.

    Obviously - your guess re the development of oil price, exchange rate and refining margin is as good as mine, so make your own decisions.

    Discl: Holding (lots);
    ----
    "Prediction is very difficult, especially about the future" (Niels Bohr)

  3. #663
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    Quote Originally Posted by Nasi Goreng View Post
    I sold my NZR shares after the recent earnings announcement for $2.60. After digesting the numbers, it looked to me to be over priced and quite a risky investment.

    Even if they have a stellar year and deliver NPAT of $70M, this would be a PE multiple of about 10 which seems alright but you have to ask yourself, are these kind of earnings sustainable for the next 10 years?

    Its a great story and its good to see them returning to profit but I can't quite see how current price is going to provide me with a decent dividend or gain in share price over the next 2-3 years.

    From a TA point of view, there is nothing too scary in the chart and it looks like there will be more upside. I just don't understand how earnings are going to grow to justify price in the $3-4 range. What earnings do you guys forecast they will deliver this year, and then next?
    Hi Nasi Goreng

    Follow BlackPeters' advice and read back on this thread as all views have been canvassed. Then apply your own spin to this wheel of fortune. Don't follow my view, it is just that, a viewpoint. I think based on your current assessment and your PE of around 10 this would not be out of order.
    Regards
    -d

  4. #664
    ShareTrader Legend bull....'s Avatar
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    consensus analyst target price is 3.39 as 1/4/15 with 4 buy recommendations next 2yr forecasts

    380m/403 revenue, 10cps / 23cps div and debt 239/144
    one step ahead of the herd

  5. #665
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    I'm with you on this one snapiti. Outlook on margins, NPAT and dividends for the near and medium term look very healthy as far as I can see it. Have been buying a few in the last couple of weeks and look forward to watching this progress

    [

    QUOTE=snapiti;566972]I think you should read page 20 of the latest company forecast/outlook.
    www.nzx.com/files/attachments/208345.pdf
    The matrix on this page indicates that if current trading margins remain, even decline a bit, and the nzd stays around 75 the company is on target to achieve NPAT of 127m. Far ahead(almost double) your so called stellar result of 70m NPAT.
    Have you made a mistake in your research or have I missed something.
    The current share price is yet to price in the better margins and higher volumes of the coming new plant.[/QUOTE]

  6. #666
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    Hi Snapiti

    I've followed this thread for a few months and read the attached pdf when it came out. The table provided in the report is very handy for us to project where profits may be in the short term.

    Yes at current margins, profits could be 127m, maybe even a bit more if the margins were consistently in the $9-10 range and kiwi stays where it is. An avg of $7 over 12 months would give you around $70m and based on results from the last few years, would indeed be stellar.

    This all looks to me like its best case scenario, no cost blowouts or shutdowns that go overtime, and consistent high margins. I guess that could be why the market hasn't bought into these promises just yet. A case of show me the money!

    A share price of $3-4 to me would suggest the market is pricing in very healthy profits of $70m+ per year for the next 5-6 years in an industry that proves to be consistently volatile. Right now, we can only guess where margins may be 2 years from now and in 2 years we could be looking at massive returns or a business that is struggling to turn a profit.

  7. #667
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    I agree with the Directors intention of prioratising paying down debt during the next year but can see fast growing dividends beyond that, all dependand on good operations in this volatile industry. I have recently been looking for companies that are likely to significantly increase dividends in the next 1-3 years and NZR is one of those plays for me. Time will tell :-)

    Quote Originally Posted by snapiti View Post

    Iceman you raise a good point about the dividend as NZR has been considered a dividend stock as long as I care to remember........apart from the last 2 years when it has paid little in dividends so would of had many divi investors sell out because of this.
    However divi investors will have to be patient as management have openly said paying of a portion of debt has priority over a divi in the next 12 months.

  8. #668
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    Quote Originally Posted by iceman View Post
    I agree with the Directors intention of prioratising paying down debt during the next year but can see fast growing dividends beyond that, all dependand on good operations in this volatile industry. I have recently been looking for companies that are likely to significantly increase dividends in the next 1-3 years and NZR is one of those plays for me. Time will tell :-)

    Their last dividend was 2 cents paid in Sept 2013, if they intend to square off some of their debt, it could mean 4 - 5 years between drinks

  9. #669
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    Quote Originally Posted by waikare View Post
    Their last dividend was 2 cents paid in Sept 2013, if they intend to square off some of their debt, it could mean 4 - 5 years between drinks
    Hi Waikere
    I would put a token divi on the table just before 31/3/16 supporting $3 sp at that time.
    Regards
    -dodgy (owner/shareholder)

  10. #670
    always learning ... BlackPeter's Avatar
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    Quote Originally Posted by dodgy View Post
    Hi Waikere
    I would put a token divi on the table just before 31/3/16 supporting $3 sp at that time.
    Regards
    -dodgy (owner/shareholder)
    Actually - if this is really turning out such a stellar year, than I would expect in March 2016 more than just a token as dividend. Have a look at their dividend policy (slide 14 of their latest investor presentation):

    The aspiration is to pay top quartile NZX50 dividend returns over the investment cycle, specifically:
    • During periods leading up to and including major capital expenditure the dividend pay-out expressed as a percentage of NPAT will be in the 40-60% range unless otherwise advised by the Directors.
    • During periods of modest capital expenditure and optimum debt levels, the dividend pay-out percentage will be above 60% unless otherwise advised by the Directors.


    Based on that ... sure the directors can still do whatever they deem sensible, but I would expect a payout closer to the 40% of EPS (with the reminder going to debt repayment). This means if things keep ticking as they do at the moment and we end up with an EPS between 40 to 50 cents, than this would amount to something like 16 to 20 cents final divvie.

    Obviously - things can turn fast on the oil market - i.e. DYOR
    Last edited by BlackPeter; 09-04-2015 at 08:01 AM. Reason: closed that bracket ....
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    "Prediction is very difficult, especially about the future" (Niels Bohr)

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