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08-04-2019, 02:41 PM
#2541
Originally Posted by BlackCross
Morningstar has a valuation of $2.20 (reduce) on GNE with the main reason being "..At current prices, Genesis is overvalued. Our main concern is that 25%-30% of EBITDA comes from Kupe, which has volatile earnings and will deplete over the next decade or so...."
Kupe has a limited life. So the correct way to value Genesis is to work out the present day value of the Kupe field, both the oil and gas components, while modelling the declining cashflows and using an appropriate discount rate. Once you have a present day dollar value for Kupe take that off the Genesis share price. I will call the result of that the 'Kupe Subtracted Share Price'. Now work out the non Kupe earnings of Genesis and divide the 'Kupe Subtracted Share Price' buy the 'Non Kupe earnings of Genesis'. You will then get a PE ratio that is the true underlying long term PE ratio appropriate for Genesis. And guess what? It will be rather higher than the PE ratios you see bandied about in the newspaper.
SNOOPY
Last edited by Snoopy; 27-09-2020 at 10:32 AM.
Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7
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08-04-2019, 02:47 PM
#2542
Originally Posted by Snoopy
Kupe has a limited life. So the correct way to value Genesis is to work out the present day value of the Kupe field, both the oil and gas components, while modelling the declining cashflows and using an appropriate discount rate. Once you have a present day dollar value for Kupe take that off the Genesis share price. I will call the result of that the 'Kupe Subtracted Share Price'. Now work out the non Kupe earnings of Genesis and divided the 'Kupe Subtracted Share Price' buy the 'Non Kupe earnings of Genesis'. You will then get a PE ratio that is the true underlying long term PE ratio appropriate for Genesis. And guess what? It will be rather higher than the PE ratios you see bandied about in the newspaper.
SNOOPY
hope your using an appropriate discount rate in your valuation which takes account of declining interest rates forward. makes a big difference to valuation of cashflows.
one step ahead of the herd
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10-04-2019, 12:11 AM
#2543
Originally Posted by Snoopy
Kupe has a limited life. So the correct way to value Genesis is to work out the present day value of the Kupe field, both the oil and gas components, while modelling the declining cashflows and using an appropriate discount rate. Once you have a present day dollar value for Kupe take that off the Genesis share price. I will call the result of that the 'Kupe Subtracted Share Price'. Now work out the non Kupe earnings of Genesis and divided the 'Kupe Subtracted Share Price' buy the 'Non Kupe earnings of Genesis'. You will then get a PE ratio that is the true underlying long term PE ratio appropriate for Genesis. And guess what? It will be rather higher than the PE ratios you see bandied about in the newspaper.
SNOOPY
You still read a newspaper?
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10-04-2019, 06:15 AM
#2544
https://www.bloomberg.com/news/artic...d=premium-asia
IMF Cuts Global Growth Outlook to Lowest Pace Since Crisis
get your income why you still can
one step ahead of the herd
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10-04-2019, 07:54 AM
#2545
Originally Posted by SilverBack
You still read a newspaper?
Interesting you picked up on the 'newspaper' reference. I did pause for thought before I wrote it.
I could have written
"It will be rather higher than the PE ratios you see bandied about elsewhere on the internet."
That wouldn't be true though, because the internet does steer people towards others with similar views. So I am sure there are other places on the internet that uncritically support investment in Genesis Energy for income.
Or I could have written:
It will be rather higher than the PE ratios you see 'bandied about on the nzx website'.
That would mean I was indirectly saying that one web reference was more important than another. Or 'my idea is better than yours'. Whatever the relative merits of two differing web views it doesn't make for a convincing argument.
A newspaper, without identifying any particular one, is under editorial control and does not publish reactive brain farts. So I used the word 'newspaper' with the idea that what is written in there is double checked and not as wedded to one or other side of the argument. If you figure out a more 21st century way of saying the same thing I am all ears.
To directly answer your question, I do favour reading the printed word at night, because too much 'blue light' makes it harder to sleep.
SNOOPY
Last edited by Snoopy; 10-04-2019 at 08:05 AM.
Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7
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12-04-2019, 07:19 AM
#2546
Many banks rush to cut term deposit rates, leaving few outliers and fewer options to lock in what were already considered low rates before they are trimmed even lower
Some of the cuts are substantial, exceeding -30 basis points
https://www.interest.co.nz/personal-...-fewer-options
get your income while you can
Last edited by bull....; 12-04-2019 at 07:24 AM.
one step ahead of the herd
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12-04-2019, 08:39 AM
#2547
How sustainable are Genesis's Profits (2016 Perspective)?
Originally Posted by Snoopy
It is now 'normalised result' reconciliation time. I am basing this calculation for the normalised profit of the whole of Genesis Energy on the published "Consolidated Statement of Income", on p31 of AR2016
EBITDAF |
$335.3m |
less Emission Unit Trading Net Gain {$21.0m-$15.5m} |
($5.5m) |
less One off Gain on value of Turbine Parts |
($6.9m) |
Total: Normalised EBITDAF |
$322.9 |
less Net Finance Expense ($2.0m - $65.2m) |
($63.2m) |
less Depreciation, Depletion & Amortisation |
($127.5m) |
Total: NPBT (normalised) |
$132.2 |
less Income Tax @ 28% |
($37.0m) |
Total: NPAT (normalised) |
$95.2 |
Note that the declared after tax profit for Genesis Energy over FY2016 was $184.2m. Yet the ' normalised profit' (repeatable profit, pulling out one off events), is only a little more than half this figure!
The above is an exercise I did on the FY2016 results. It is now two years out of date, and not being a shareholder any longer, I haven't repeated the exercise. However, it was clear at the time that the profitability of Genesis as declared was approximately twice the underlying profitability. That means that in the medium term, I would have expected Genesis's imputed dividends to halve. Of course this hasn't happened (yet). The lack of hydro storage has meant a very profitable time for Huntly. But this kind of weather event is not guaranteed to repeat and large capital expenditure is looming for Genesis if they wish to remain a top four gentailer. The further you look to the future the worse the picture looks.
Originally Posted by bull....
Many banks rush to cut term deposit rates, leaving few outliers and fewer options to lock in what were already considered low rates before they are trimmed even lower
Some of the cuts are substantial, exceeding -30 basis points
https://www.interest.co.nz/personal-...-fewer-options
get your income while you can
"Be greedy when others are fearful and fearful when others are greedy"
(Warren Buffett)
SNOOPY
Last edited by Snoopy; 28-04-2019 at 11:13 AM.
Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7
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12-04-2019, 09:49 AM
#2548
Originally Posted by Snoopy
The above is an exercise I did on the FY2016 results. It is now two years out of date, and not being a shareholder any longer, I haven't repeated the exercise. However, it was clear at the time that the profitability of Genesis as declared was approximately twice the underlying profitability. That means that in the medium term, I would have expected Genesis's imputed dividends to halve. Of course this hasn't happened (yet). The lack of hydro storage has meant a very profitable time for Huntly. But this kind of weather event is not guaranteed to repeat and large capital expenditure is looming for Genesis if they wish to remain a top four gentailer. The further you look to the future the worse the picture looks.
"Be greedy when others are fearful and fearful when others are greedy"
(Warren Buffett)
SNOOPY
look at the profits you have missed by selling gne on your analysis. as pointed out gne has returned 27%/yr to shareholders since listing according to the posted report. cashflows are are much better way of analysis than npat in my opinion.
one step ahead of the herd
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12-04-2019, 07:51 PM
#2549
Originally Posted by bull....
look at the profits you have missed by selling gne on your analysis. as pointed out gne has returned 27%/yr to shareholders since listing according to the posted report. cashflows are are much better way of analysis than npat in my opinion.
Yes and the share price is on the up..again
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13-04-2019, 09:18 AM
#2550
Member
I would not own these shares and I am in the Industry.
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