MEL - Meridian Energy

[mouse]

Yeah, tht the result would've propelled the share price above $1.30 at least, especially seeing that there are big sellers at the moment around that level. Must be the latest political dirt having its effect.

The election result is no longer certain. Uncertainty in the share price, although the result is good for Meridian, the key has to lock down the latest threat. We await events.

[sb9]

Looks like this one is pushing up quite strongly, now at $1.33 and not many sellers at that level, next stop $1.40??

[Joshwnz]

Looks like this one is pushing up quite strongly, now at $1.33 and not many sellers at that level, next stop $1.40??

Looking like it may reach that today. Just gotta hold breathe for two weeks hoping no further dirty politics announcements. How many fence sitters will be swayed by these "moderate" tax cuts this afternoon?

[Sideshow Bob]

Looking like it may reach that today. Just gotta hold breathe for two weeks hoping no further dirty politics announcements. How many fence sitters will be swayed by these "moderate" tax cuts this afternoon?

Mr Dot Com has his planned announcement 5 days before the election.....but bit more confidence national will get back in power.

[mouse]

My sixpennyth. I have 3,600 MRP shares and 3,600 Meridian. My MRP shares cost $8,320. The 3,600 Meridian shares were on HP, $3,600 down and $1,800 in 2015? Yet MRP dividends for this year total 13.5 cents per share. With Meridian paying 13 cents per share.
Dividends are almost identical. Yet I paid $8,320 for MRP and will pay $5,400 for Meridian. So $3,000 more for MRP.
They are both in the same business. Why does this happen. Any ideas?

We then come to todays closing price. MRP $2.445 per share. Meridian $1.40., with another 50 cents to be paid later. I cannot see why there is such a large, 54 cent, price difference. Again, why the difference, and why is Mr. Market acting like this?

[Chaowee88]

My sixpennyth. I have 3,600 MRP shares and 3,600 Meridian. My MRP shares cost $8,320. The 3,600 Meridian shares were on HP, $3,600 down and $1,800 in 2015? Yet MRP dividends for this year total 13.5 cents per share. With Meridian paying 13 cents per share.
Dividends are almost identical. Yet I paid $8,320 for MRP and will pay $5,400 for Meridian. So $3,000 more for MRP.
They are both in the same business. Why does this happen. Any ideas?

We then come to todays closing price. MRP $2.445 per share. Meridian $1.40., with another 50 cents to be paid later. I cannot see why there is such a large, 54 cent, price difference. Again, why the difference, and why is Mr. Market acting like this?

2 main reasons why.

- MRP has ex-dividend, so the 8.3C a share has been already allocated to holders of shares. New buyers will not get this dividend.

- MEL is currently trading on 1.40 but is based on installment so is actually +0.5 = 1.90 each share. They have not paid out dividends as of yet. Their ex-dividend date is on the 26/09 with 6.82 normal div and a special of 2. So in essence buyers now will actually only be paying 1.90 - 0.0882 = 1.8118.

Now base that on the market of both companies currently and their most recent profit and forward looking profits and the numbers start to stack up.

- MRP has a market cap of 3.36 billion yielding 5.52% in dividends.

- MEL is based on installment so actual value is 1.90 * 2,563,000,000 = 4.8 billion market cap yielding 6.52%. Note however buyers of MEL now can still get the upcoming dividend increasing the yield as follows = 0.1239/1.8118 = 6.838%.

So the market is pricing Meridian at a higher "worth" than Mighty River when both companies released similar results Meridian delivering slightly higher EBITDAF than Mighty River and also delivering slightly more attractive yield for investors.

The higher earnings and more attractive yield gives MEL a premium over MRP based on market cap.

Don't just look at the share price and difference in price. You need to take into account the shares on issue for both companies and their current and future looking profits.

This is how I look at it anyway..

[mouse]

Many thanks Chaowee. We still have 6.8% returns for MEL and 5.5% for MRP. HOWEVER, MRP is nearer to its customers plus has two major generation systems, hydro and geothermal. So I suppose MEL, only hydro really, does have a higher risk. Both are of course purchased for income and I think for this reason will continue to do well. Again, many thanks Chaowee for your analysis.

[horus1]

The excessive profits of all the electricity cos show the failure of the market in NZ for the consumer. They hold the votes and in the finish this will lead to either regulation or substantial changes to the market. The votes of the public will finally win. Be very wary of the shares of MRP,Meridian ,Trustpower and Genesis.

[Beagle]

The excessive profits of all the electricity cos show the failure of the market in NZ for the consumer. They hold the votes and in the finish this will lead to either regulation or substantial changes to the market. The votes of the public will finally win. Be very wary of the shares of MRP,Meridian ,Trustpower and Genesis.

I strongly disagree. Returns based on the replacement value of assets are quite moderate. I am a happy holder of Genesis which is arguably the best diversified from a generation point of view.

[Harvey Specter]

The excessive profits of all the electricity cos show the failure of the market in NZ for the consumer. They hold the votes and in the finish this will lead to either regulation or substantial changes to the market. The votes of the public will finally win. Be very wary of the shares of MRP,Meridian ,Trustpower and Genesis.

Excessive profits? I would hardly call a yeild of 5.52% and 6.52% excessive, especially given their is a risk premium currently factored in should Greens/Labour get over the line. If National wins, yeild will drop to below 5%! You can get term deposits for close to that.