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  1. #671
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    Good yield also, with another special divvy announced...makes it 8.4c+2.5c = 10.9c for this period.

  2. #672
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    Yes special dividend was a bit of a (good) surprise, everything else average at best... but I still think long term MRP is best positioned power company (with the exception of maybe MEL)

  3. #673
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    Default Buffett Test 2/ Increasing eps 2015 trend (one setback allowed)

    Quote Originally Posted by Snoopy View Post
    Mighty River Power currently has 1,400,012,517 shares on issue. Just prior to listing there were only 377,560,546 shares on issue, held by sole shareholder the NZ government.. The government decreed that more shares be issued just prior to listing to bring the total share count up to 1.4billion. For ease of comparison I have adjusted the eps figures before listing as though the 1.4b of shares currently on issue had been on issue throughout the entire comparison period. The financial year for MRP ends on 30th June.

    'Earnings' used are normalised operational earnings, excluding one off gains/losses and asset revaluations.

    FY2010: $115.3m/ 1,400m = 8.2cps
    FY2011: $161.6m/ 1,400m = 11.5cps
    FY2012: $148.1m/ 1,400m = 10.8cps
    FY2013: $167.9m/ 1,400m = 12.0cps
    FY2014: $186.5m/ 1,400m = 13.3cps

    Conclusion: Pass Test
    The FY2015 results came out on Friday. So time to do the annual statistical overview update.

    For ease of comparison I have adjusted the eps figures before listing as though the 1.4b of shares currently on issue had been on issue throughout the entire comparison period. The financial year for MRP ends on 30th June.

    'Earnings' used are normalised operational earnings, excluding one off gains/losses and asset revaluations.

    FY2011: $161.6m/ 1,400m = 11.5cps
    FY2012: $148.1m/ 1,400m = 10.8cps
    FY2013: $167.9m/ 1,400m = 12.0cps
    FY2014: $186.5m/ 1,400m = 13.3cps
    FY2015: $155.5m/ 1,400m = 11.1cps

    Conclusion: Fail Test

    SNOOPY
    Last edited by Snoopy; 11-01-2018 at 08:50 AM.
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  4. #674
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    Default Buffett Test 3/ 2015 view Return on Equity >15% (one setback allowed)

    Quote Originally Posted by Snoopy View Post


    Whatever the explanation, it looks to me as though the annual MRP asset revaluations are being treated as though they will be a perpetually occurring benefit over and above the net profit for every year. The asset valuations, as I see it, are effectively new capital that goes onto the balance sheet out of thin air! This is a good thing for shareholders. But it artificially decreases the ROE figures if you calculate these at declared asset value. That's because the capital that arose out of thin air was never contributed by shareholders!

    If we redo the ROE calculations, removing the 'thin air' capital I have described above, then the ROE results are very different.

    FY2010: $115.3m/ ($2,689.0m - $2342.0m)= 33.2%
    FY2011: $161.6m/ ($2,906.5m -$2,710.2m)= 82.3%
    FY2012: $148.1m/ ($3,104.2m -$2,239.2m)= 84.6%
    FY2013: $167.9m/ ($3,181.7m -$2,831.4) = 47.9%
    FY2014: $186.5m/ ($3,219m -$2,844m) = 49.7%

    Conclusion: Pass Test, with flying colours!
    FY2011: $161.6m/ ($2,906.5m -$2,710.2m)= 82.3%
    FY2012: $148.1m/ ($3,104.2m -$2,239.2m)= 84.6%
    FY2013: $167.9m/ ($3,181.7m -$2,831.4) = 47.9%
    FY2014: $186.5m/ ($3,219m -$2,844m) = 49.7%
    FY2015: $155.5m/ ($3,337m -$3,204m) = 116.9%

    Conclusion: Pass Test

    SNOOPY
    Last edited by Snoopy; 11-01-2018 at 08:51 AM.
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  5. #675
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    Default Buffett Test 4/ 2015 Perspective, Ability to raise margin Above rate of Inflation

    Quote Originally Posted by Snoopy View Post
    Margin = Normalised Net profit / Normalised Revenue

    Note: all revenue figures are exclusive of line charges

    FY2010: $115.3m/ $1,104.6m = 10.4%
    FY2011: $161.6m/ $1,163.9m = 13.9%
    FY2012: $148.1m/ $1,520.6m = 9.7%
    FY2013: $167.9m/ $1,382.4m = 12.1%
    FY2014: $186.5m/ ($1,705m -$431m)= 14.6%

    While not increasing year on year every year, it is clear the ability to raise margin is there

    Conclusion: Pass Test
    Margin = Normalised Net profit / Normalised Revenue

    Note: all revenue figures are exclusive of line charges

    FY2011: $161.6m/ $1,163.9m = 13.9%
    FY2012: $148.1m/ $1,520.6m = 9.7%
    FY2013: $167.9m/ $1,382.4m = 12.1%
    FY2014: $186.5m/ ($1,705m -$431m)= 14.6%
    FY2015: $155.5m/ ($1,678m -$422m)= 12.4%

    Conclusion: Fail Test

    SNOOPY
    Last edited by Snoopy; 11-01-2018 at 08:51 AM.
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  6. #676
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    Default Buffett Test Conclusion: FY2015 Perspective

    Quote Originally Posted by Snoopy View Post
    This share should be valued over the long term on its ability to pay dividends only. The low ROE figure is not sufficient to be sure of growth given a ten year timeframe. The Warren Buffett style growth model won't fit as a result. Yet actually, there is something wrong with this analysis as I have presented it. It deserves a closer look. But that will have to wait until tomorrow!
    Thanks to the 'Thin air' asset value correction applying to the FY2014 result, the FY2014 data does support a Warren Bufffet style growth projection calculation. However, what a difference a year makes.

    The increasing earnings trend is no longer discernable. Neither is there any pattern showing an ability to increase margins accross the years. The culprit? FY2015 was the worst on record for water inflows into the Taupo hydro scheme. But just a few years before that there were two more 'worst year since the company was formed' events: The Waikato river system drought of FY2008, and the second driest autumn in 80 years in FY2010. When the abnormal becomes the new norm, this is where many company valuation techniques break down.

    SNOOPY
    Last edited by Snoopy; 11-01-2018 at 08:52 AM.
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  7. #677
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    Quote Originally Posted by trader_jackson View Post
    Yes special dividend was a bit of a (good) surprise, everything else average at best... but I still think long term MRP is best positioned power company (with the exception of maybe MEL)
    One thing that caught my eye was the increase in the carrying value of assets profit of $504m before tax. In a time of relatively flat demand, this struck me as an extraordinary amount to once again pull out of thin air. It's MRP's biggest asset revaluation profit in eight years.

    If you believe the Property plant and equipment sensitivity notes, +$504m is equivalent to revaluing all industry profits up by over 6%. Given that this was a 30th June figure, made before the subsequently announced closure of two large thermal stations (Contact's Otahuhu B and Genesis Energy's Rankine units at Huntly), we MRP shareholders could be in line for another large revaluation bonus next year. That's because the baseload renewable power stations that do remain become consummately more valuable!

    SNOOPY
    Last edited by Snoopy; 01-12-2020 at 08:27 PM.
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  8. #678
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    What is the call then Snoopy buy, hold or sell?
    Is your concern is an ability to grow earnings above the rate of inflation. Wouldn't the only restraint be rules provided by govt. these should surely include an allowance for inflation. Or are they restrained by competition. I only ask because my own understanding of the company is limited but I like a good yield.

    Current dividend (incl special) of 15.139cents (incl imp crs) and assuming they match last March's dividend of 7.778cents I calculate a before tax yield of 9.2% based on a purchase price of $2.50.

    I guess I need you to tell me if this is sustainable.
    Last edited by Aaron; 30-08-2015 at 04:11 PM.

  9. #679
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    Quote Originally Posted by Aaron View Post
    If your concern is an ability to grow earnings above the rate of inflation. Wouldn't the only restraint be rules provided by govt. these should surely include an allowance for inflation. Or are they restrained by competition. I only ask because my own understanding of the company is limited but I like a good yield.
    The ability to grow margins above the rate of inflation is one way to measure a company's ability to recover from a bad patch in the market. If they don't have the ability to do this, then there is every chance that competition will result in a race to the bottom. Competitors chop prices to gain market share, others do the same and before long the margin for the whole electricity generating industry is cut to the bone. If you are a consumer you might say "Great". But ultimately these companies have to generate enough profit to allow reinvestment in power generation plants to take place.

    Opportunities exist in electricty generation markets beyond just price competition. Shifting the time of day that power is required will allow more profit to be generated from the same infrastructure. Ultimately good for the consumers and good for the gentailers if they play their cards right.

    AFAIK, there is no government restraint on the gentailers. It is only the lines companies, the local monopoly, that have government mandated acceptable rates of return. The fact that most companies are not able to increase their margin (by cutting costs or increasing prices) all the time is the reality of a competitive market.

    SNOOPY
    Last edited by Snoopy; 12-10-2016 at 02:59 PM.
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  10. #680
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    Default Normalised Earnings Scenario: FY2015 Perspective

    Quote Originally Posted by Aaron View Post
    Current dividend (incl special) of 15.139cents (incl imp crs) and assuming they match last March's dividend of 7.778cents I calculate a before tax yield of 9.2% based on a purchase price of $2.50.

    I guess I need you to tell me if this is sustainable.
    In general a 'special dividend' is not sustainable. If it were, it would be part of the regular dividend. The last five years is IMO the best yardstick we have of what the potential for regular income might be. This includes good and bad years and is, in my view, a better way of looking at things than trying to guess what weather conditions will be like "next year". The eps record is as follows:

    Year eps (normalised)
    2011 11.5c
    2012 10.8c
    2013 12.0c
    2014 13.3c
    2015 11.1c

    I get an average of 11.74cps. Buying on a 6% gross yield that I regard as 'about right' given current interest settings and a low to no growth demand environment gives an implied share price of:

    11.74/ (0.06 x 0.72) = $2.72

    I note the current trading price is $2.77. So even if the current dividend yield is sustainable, I don't believe the share price is cum an 8.4c final dividend combined with 2.5c special (ex dividend price is an implied $2.66).

    SNOOPY
    Last edited by Snoopy; 31-01-2018 at 03:23 PM.
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