GNE - Genesis Energy

[Traderx]

I guess that the interest on the borrowings would be tax deductible against the dividend income, so maybe a slight increase in effective carry return

Ok so taking rogers 60% imputation is the calc for a 33% tax payer who tax deducts a 5% mortgage on an investment in GNE today looks like this in my layman analysis of say a $100k leveraged investment

$100k at $1.84 = 54,644 shares.

Cash distribution at 16cpl = $8,743 (NB assuming no nominal increase in distributions)
Imputation credits $3,400 or $2,400 at 60% (NB am ignoring RWT as its largely a timing effect so just slightly negative to the overall proposition)

Income $8,743
Expenses $5,000 (100k at 5%)
Net income $3,743
Tax payable @ 33% $1,235
Less imp credits $2,400
Net tax credit $1,165

Total net "carry" $4,908 or 4.9% on $100k.

Have I missed something?

NB not recommending this at all - DYOR.

[Beagle]

If a 16 cent dividend is fully imputed it carries a 6.22 cent imputation credit (16 / 0.72) = 22.22 - 16.0 = 6.22 cents.

If its imputed to a level of 60% then your imputation credit becomes 3.73 cents per annum and on 54,644 shares this gives imputation credits of $2,038.22.

You net return is thus reduced by $361.78 from your calculated figure to be $4,546.22 or 4.546% assuming you can claim the excess imputation credit. Return would be slightly higher if done through a company investment vehicle as tax rate is 28% or if income is under $48,000 and your tax rate is 17.5% your return would be slightly higher again.

Worth risking the security of your family home ???????????

[Traderx]

If a 16 cent dividend is fully imputed it carries a 6.22 cent imputation credit (16 / 0.72) = 22.22 - 16.0 = 6.22 cents.

If its imputed to a level of 60% then your imputation credit becomes 3.73 cents per annum and on 54,644 shares this gives imputation credits of $2,038.22.

You net return is thus reduced by $361.78 from your calculated figure to be $4,546.22 or 4.546% assuming you can claim the excess imputation credit. Return would be slightly higher if done through a company investment vehicle as tax rate is 28% or if income is under $48,000 and your tax rate is 17.5% your return would be slightly higher again.

Worth risking the security of your family home ???????????

Ah yes thanks - i move the 4 up one spot incorrectly.

[Beagle]

At the half year they paid out 87% of free cash flow to maintain the 8 cps divvy forecast in the IPO, this while enjoying forward cover on their oil production at circa $100 barrel. 2H FY15 profit is forecast lower so they might be at 100% of free cash flow to pay out their promised 8 cps final divvy to save face.

But what about FY16 and FY17 profits given that their oil hedging runs out and given the ever increasing intensity of retail competition ? Good divvy payer or classic value trap ?

I see we've busted down through the previous support line of $1.80 established after the IPO. Anyone thinking about betting "the ranch" on this one should mull their decision very carefully IMHO.
Is leveraging the security of your family home to invest in this or for example the Auckland property market really a prudent decision ?

[bull....]

putting the house on gne at ipo made sense but not now, very bearish price action today next week could be particulary nasty for gentailers if te wai point announcement is made and is bad

[Traderx]

putting the house on gne at ipo made sense but not now, very bearish price action today next week could be particulary nasty for gentailers if te wai point announcement is made and is bad

Does the market know something we do not on Tiwai outcome? Agree very negative action in the sector today.

One other piece of news is that Todd is progressing another 100MW gas plant as a "short" for its "long" gas position that it maybe can't find a better use for. Which is negative for existing high opex cost generators like GNE

[IAK]

Hmmm makes you wonder doesn't it. Genesis would be the last Gentailer I'd bet the house on.

[Beagle]

The widely criticised Government sale process regarding GNE might not look so under-priced in due course.
People have short memories and forget that Rio Tinto were bribed into keeping the smelter going at the behest of the Govt for no other reason than it suited them to maximise their IPO proceeds.

[couta1]

Most of the market looked pretty hammered today Roger, I don't think this downturn is specific to power companies more the macro environment in play and as you know no shares are safe and certain but long term I reckon the power companies are good stocks to hold for the average punter.

[Beagle]

Mate I'd definitely concede the point that its been bloody hard work "making hay" in current general market conditions but it is a worry that GNE has breeched the key technical support level of $1.80 which was established post IPO.