Forum Archive Index - September 2002

[Holden Glova <dsafari@paradise.net.nz>]

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Thanks for a thoughtful response representing a bout :)

I'll try to fill in some blanks as I go.

On Sat, 07 Sep 2002 21:28, tennyson@caverock.net.nz wrote:
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> >What is GTP?
> >~~~~~~~~~~~
> >Great Southern Plantations (GTP) core activity is plantation
> >forestry with operations in Western Australia, Victoria and New
> >South Wales. The company manages investments in plantation
> >timber.
>
> It sounds like the nearest thing on the New Zealand market to GTP is
> something like Nuhaka or Evergreen.  My view is that maximum
> profitability from forests will be obtained when the company that
> owns the forest can add value in downstream processing.  So in New
> Zealand this means I favour those forestry companies that also own
> processing factories like Fletcher Forests and Carter Holt Harvey
> over Nuhaka or Evergreen.  However I don't have any evidence to back
> my view up.  I just feel it should be so.  Perhaps you can prove me
> wrong?

I'm not sure what downstream processing encompasses. From reading on their 
website they say all the wood which is plantation grown Eucalypt, which they 
claim is of a higher quality then native grown Eucalypt. The timber is to be 
chipped and sent to Japan. Also from their website they say that woodchip is 
used to produce fine quality paper used for photocopies, faxes, magazines, 
and a range of other products. Does this count as downstream processing? Or 
does downstream processing mean they would be the ones actually making the 
paper?

> >What made this stand out for me?
> >~~~~~~~~~~~~~~~~~~~~~~~~~~~
> >What made this stand out for me initially was that it wasn't much
> >above it's 52 week low of 0.50 with it's current close of 0.65.
>
> 65c is, in percentage terms, quite a bit above 50c.  It is 30%
> higher!   Nevertheless GTP has historically been much higher
> again quite recently.  But there is no guarantee that it will ever
> get back there.  Nevertheless I agree with your basic premise Holden.
>  Better to buy low than high, particularly when a company is in the
> commodity business.

Yes, I was looking for a company that was also low so hopefully I could buy in 
at a good price before value was realized.

> >I was looking for a company that wasn't performing well because I
> >read that value companies often performing badly. A look on
> >the chart does show that it has been on downward trend for about
> >the last 4 months.
>
> The 'forestry industry cycle' (if there really is such a thing,
> sometimes I wonder!) tends to run in years rather than months.
> Nevertheless you seem to have found a company in GTP that has been
> through the turning point.  However, do I detect some sort of
> resistance point on the chart at near 70c?  

Yes, in the past 4months (approx) it seems to have hovered around that area 
and then faded away slowly but surely.

> I wonder if it is really
> in an uptrend now or just going sideways?  For the pure value
> investor of course, the answer to this question doesn't matter.

Good point! Something I guess I should watch over the next little while.

> >Some Numbers
> >~~~~~~~~~~~~
> >On to some numbers, this data is based on 2001 figures, is that OK?
>
> That depends whether those figures are strictly relatable to the
> company 'GTP' that you see today.  Has there been a big rights issue?
> Has there been a very large dividend payment?

I wasn't sure what that meant.
rights issue - A privilege granted to shareholders to buy new shares in the 
same company, usually below the prevailing market price.
I haven't seen any mention of this in the news at stockness or on the company 
website http://www.great-southern.com.au/news.cfm

- From the news there was a "special dividend payment" (not sure why it is 
special) of $0.30 on April 15 2002. Is that a very large dividend?

> > Asset backing per share = .859913
>
> Yet the price is only 65c.  This means the price to asset backing
> is 65/86 = 76%
>
> But Carter Holt is even cheaper trading at only around 62% of asset
> backing.  A point to CHY.

New figures came out only yesterday so I'll revise some numbers. Assets had 
increased according to the balance sheet giving a new asset backing per share 
of 1.03093847. The asset backing ratio is about the same as CHY now at 
0.6207936 or 62.07936%

> > EPS = 16.3   <-- I didn't calculate this one
> >- what is a good EPS?
>
> EPS stands for 'earnings per share'.   This should be compared with
> DPS or 'dividends per share'.   If the earnings per share is greater
> than the dividends per share, then this means that some of the
> profits are being retained within the company for reinvestment.  This
> is a good thing which should lead to share price appreciation over
> time.

Ok, then here is both the EPS and DPS
EPS = 16.3
DPS = 9.0

> > P/E =6.02 Sector average P/E =19.24
>
> By this measure Carter Holt is expensive.  It sits on a P/E of 30.
> Score one to GTP.
>
> >The dividend yield confused me. One site (an aussie one) said
> > it was 30% but the NZHerald said it was 55.38%
>
> One of them must be using outdated information for the dividend.  The
> dividend yield is:
>
> (dividends paid over the last 12 months per share)
> /(current share price)
>
> >P/E Growth Ratio = 10.00   <-- This
> > I'm told is good the more it is above 1.00
>
> Sometimes abbreviated to just PEG, this is a way of normalising the
> expected growth of a company in relation to its current share price.
> And yes, ten is good, but it is based on a forecast for earnings over
> the next year.  The accuracy of this figure depends on the accuracy
> of the forecast.
>
> > Charts
> > ~~~~~
>
> No comment
>
> > Misc findings
> > ~~~~~~~~~~~
> >- The balance sheet shows 2001 as having the highest shareholders
> >equity over 2001, 2000, and 1999.
>
> The highest shareholders equity, period?  Or the highest
> shareholdwers equity in relation to debt?

Not sure what you mean here. Shareholders equity as follows:
2001 = 171 741 000
2000 = 160 863 000
1999 = 82 218 000

> > Do I have the right idea?
>
> You most certainly do.  Was that really a first effort?  If so it was
> a remarkably fine one!

Yes, first time - thank you for the compliment.

> >>Could this be a possibly ripe undervalued
> >
> >stock?
>
> It might be.  But you haven't convinced me to sell my Carter Holt
> and switch to GTP yet ;-).  There is something very strange about
> that GTP chart
>
> I've included a chart that I have drawn up with this post, comparing
> the share price movement of CHY and GTP on the Australian market
> over the last year.   They are in the same industry so, all things
> being equal, you might expect them to follow a roughly similar path.
> If you look at the chart both shares are rising until April 2002 when
> GTP suddenly plunges in value.   It looks like this is a company
> specific factor rather than an industry factor.   Your task, Holden,
> is to peruse the company news releases on or about that date and find
> out what happened  ( perhaps a share placement? ).  My feeling is
> that it will have a significant effect on the company's likely future
> fundamentals.

March 10 - Announcement of the re-activation of the divident re-investment 
plan (DRP). The average closing price for the last 30 trading days would be 
used for the calculation.

March 22 - Gov announces a new tax law "12 month rule". Apparently this is the 
industries favour as they can claim more tax deducations.

April 15 - Trading halt request to the ASX. GTP goes into a "pre-open" (not 
sure what that means. The trading halt was requested by GTP pending on the 
release of an announcement. This was issued on Monday the 15th and would last 
until Wednesday the 17th or until the announcement was made, which ever came 
first. 
Could this possibly be the reason for the sharp decline? I'm not sure why the 
market would fall out of favour with this news though.

April 15 - Special dividents of $0.30/share. I don't understand what this 
press release means. Talks about franking credits and some sort of discount.
 http://stocknessmonster.com/news-item?S=GTP&E=ASX&N=214387

May 1 - Appendix 3b, conversion of options. 460 000 shares where allotted 
through the exercise of options at $0.88/share.
Could this possibly be the reason? I'd imagine that supply has just increased 
by a rather large amount that this would lower the markets perceived value of 
the stock. Supply and demand, no?

May 3 - Change of directors interest. Don't really understand this document, 
looks like the director had options which got exchanged for ordinary shares.
http://stocknessmonster.com/news-item?S=GTP&E=ASX&N=215635

And that pretty much wraps up the news area for that approximate time frame.

> Nevertheless, an interesting contest so far.

Indeed - I thank you for taking to make a contest even exist.

> SNOOPY

- -- 
Signed,
Holden Glova
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