Forum Archive Index - February 2004

["david.gibson" <david.gibson@k.co.nz>]

Chatters,

 

It seems the great sin that SEA are guilty of is daring to cross interests with GPG and to come out on top.

 

There is nothing in their conduct of management of TTP.NZX that gives me any great concern.

 

- Under their stewardship a couple of "basket case" property companies have been merged and the combined entity is now looking very healthy.  The management skill required to bring this result about has required the long term focus of the major shareholder.

 

- Fees for related party services are benchmarked to Australasian industry norms.

 

- As long as I have been a shareholder (~3yrs) the advised strategy of the company is to pursue growth through selective development projects.  These activities have been very successful.  It is clearly inconsistent with this strategy to payout large amounts of cash as a dividend.

 

I am more concerned with the practice, throughout the listed property sector, to payout dividends in excess of actual income (though the process of paying dividends in shares, minimising the cash outlay).  This practice diminishes shareholder value when the shares are issued at less than NTA.  The practice is partially mitigated by the fact that the apparent high yield drives share prices into the stratosphere and it is these high priced shares that are issued instead of cash (issued at higher than NTA).

 

I must confess - the analysis of TTP.NZX cashflows lead me to believe that they are building up cash for some reason.  (I presumed a dividend, I was wrong).  However, the best thing they could do with the available cash resources is to start a share buy back.

 

- Buying shares at better than 60% to NTA is better for the remaining shareholders than a dividend.

 

- It is more tax efficient for all concerned

 

- It is the easiest way to achieve the advised growth strategy objectives.

 

Finally, I think SEA have conducted themselves with high honour as the TTP.NZX foundation shareholder.  The 2003 year end financial results stand to endorse the strategies of the past 9 years.

 

The TTP.NZX strategy has been consistent - growth through managed development.  Hence, the lack of a declared dividend is simply consistent with this strategy.

 

The one area the strategy seems to be changing is the extension of the scope of business to asia.  I will attend the annual meeting just to understand the scope of this change in company strategy.  However, I do not fear the change; nor do I suspect the motives of SEA.

 

Disclosure:  TTP.NZX shareholder

 

/dbg