MCY Mercury NZ ( MRP Mighty River Power)

[blackcap]

........bought more at $2.01, gotta be a healthy dividend return on that?? (anyone worked it out?)

Dividend might be cut.... very likely if profit targets are not met due to decreasing demand...

[J R Ewing]

Here's a question for you. If Cunliffe and Norman actually DID commit to buying back these shares, would you vote for them as a means of recouping some of your losses?

[silu]

Realised I had a big order in there for $1.99. Luckily was able to remove that just in time.

[Vaygor1]

Here's a question for you. If Cunliffe and Norman actually DID commit to buying back these shares, would you vote for them as a means of recouping some of your losses?

I am not sure to what losses you refer. No one loses a cent until they sell, meanwhile the dividends roll in. If an MRP shareholder does sell then he/she is out, and MRP is removed from their voting criterion. MRP are buying back shares anyway thus increasing my ownership for free. Current price presents an opportunity.

Best ask again in 3 years time when the chance of Labour getting in is minuscule instead of zero, and MRP have had 3 years of results behind them to establish the beginnings of a medium term trend.

[Bobcat.]

I was more interested in MRP than Meridian but have you seen today's price of MELCA?

Now that's getting very tempting. Perhaps on Monday which is normally more of a buyers' market...

BC

[Vaygor1]

........bought more at $2.01, gotta be a healthy dividend return on that?? (anyone worked it out?)

i make it out as a 50% roi over a 15 month period (equals approx 40%/annum) plus dividends. This is based on mrp = $3/share buy feb 2015 which i think will occur.

Edit.. Sorry gr8day, my response above is on capital gain not dividend return. Can look this up later in the week.

Okay, here is the calc on Divvy returns.

Last year Dividend was 12c/share (4.8c before the IPO, and 7.2c after).
The 7.2c/share fully imputed was paid out on 13-Sept-2013

Using by Mum's (bless her heart) token purchase by way of example:

• She bought 1600 Shares at IPO price of $2.50
• She received $107.20 in the bank, plus she got $44.80 in Imputation Credits. WHT was $8.00
• Gross Dividend of $160 minus WHT of $8.00 minus $44.80 ImpCred = her $107.20 received.
• $160 out of 1600 parcel = exactly 10 cents per share or 4% return on the IPO price of $2.50

The MRP literature informs me that next year's dividend will be 13c/share fully imputed and if buying at NZ$2.00/share instead of $2.50/share and MRP has completed buying back 2% of the dividend-paying stock and for simplicity, assume the whole dividend payment is paid in mid Sept 2014:

• 4.000% x (13/7.2) = 7.222% to cover the increase in dividend aspect.
• 7.222% x ($2.50/$2.00) = 9.0278% to cover the buying at $2.00 instead of $2.50 aspect.
• 9.0278% x 1.02 = 9.208% to cover the 2% reduction in shares eligible for dividend.
• 9.208% x 12/9 = 12.2777% to cover only 9 months until payment.

So buying at $2.00/share now equates to a Gross Dividend return of 12.28%

So at $2.00/share now, the market is saying investing in MRP has over 350% the risk profile of government stock.

I am also confident that the Labour/Green electricity bulk-buying policy (If they even form a government and subsequently implement the policy) will have zero impact on MRP's profits except to allow them to make a killing in the year the transition from the old pricing model to the new one occurs.

[Harvey Specter]

• 9.0278% x 1.02 = 9.208% to cover the 2% reduction in shares eligible for dividend.
• 9.208% x 12/9 = 12.2777% to cover only 9 months until payment.

I dont agree with these two.

- The div will still be 13c per share. it does mean they will retain some cash they would have otherwise paid but then they bought shares so far in excess of that amount.
- Yield is an annualised number so you cant use part periods. I also assume they will pay an interim and final dividend.

[Vaygor1]

I dont agree with these two.

- The div will still be 13c per share. it does mean they will retain some cash they would have otherwise paid but then they bought shares so far in excess of that amount.
- Yield is an annualised number so you cant use part periods. I also assume they will pay an interim and final dividend.

The 1.02 is in fact 1/0.98 = 1.0204 but you are right, it will add to retained earnings instead of dividends.
The 12/9 is correct from the view that you will get this return in 9 months, but I understand your point. I also qualified the interim dividend out in my post. At least the basis is there for you to tweak to your needs.

[Harvey Specter]

One quite big assumption there ...



That was then ... this is now ... the board (in their infinite wisdom) can find all sorts of very good reasons why the 13c could be come 12c, or 11c, or even less.

The 51% shareholder has that in their budget so they will require it to be made unless something major happens.

[Snoopy]

I am also confident that the Labour/Green electricity bulk-buying policy (If they even form a government and subsequently implement the policy) will have zero impact on MRP's profits except to allow them to make a killing in the year the transition from the old pricing model to the new one occurs.

Interested to hear why you feel that Vaygor.

MRP has made no secret of regularly valuing their hydro assets upwards as power prices overall increase. If these asset revaluations are reversed to some historic norm, then the price of power that a single state buying agency will be prepared to pay to MRP will be rather lower than today, based on whatever reasonable 'return on asset' formula is used.

Other power companies have not regularly increased the value of their hydro assets like MRP has. IMO of all the power companies listed, MRP has by far the biggest downside risk from a Labour/Greens energy policy. And it will hit them from day 1 like a sledgehammer.

Of course if a National lead government is returned, MRP is likely to emerge out of the current flat power pricing into the future scenario better than the other electricity generators. This is because of the balance they have achieved between hydro and geothermal generation and their proximity to the largest power market (Auckland).

SNOOPY

discl: hold MRP