Forum Archive Index - March 2004

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi Harley,
 
>
>Regarding LPC, I see in the 6mths. to Dec 03   -     
> 
>Profit              $5590006
>Div. paid        $7395000 ( note 5  of annual report  
> = Final div for 03 ? ) 
>

Yes.  Rather than paying out more then they are earning, this is a 
delayed payment from earnings retained in the previous half year.

>
>Borrowings + $15,000,000  to $38,077,000 
>

Yes borrowings are up but so are the assets in tandem.    They have 
been spending the money principally on automizing of the coal port, a 
productive asset so the cash hasn't disappeared into thin air.

debt ratio is  (47.65m+13.0m)/ ( 99.9m+ 8.7m)= 55%

Not 'low' (whatever that means), but not of concern either.    IMO a 
sound utility should be encouraged to have substantial borrowings as it 
improves ROE.

However, unlike the Auckland Airport, Ports of Tauranga and Ports of 
Auckland, LPC have never significantly revalued any of their assets.   
Doing any revaluation like the northern ports did would reduce the debt 
ratio.

As far as ability to repay long term debt goes, assuming they funnelled 
all net profit after tax to do just that:.

$47.6m/$11.6m (forecast)= 4.1 years

I see that as very conservative.

>
>Also  talk of further infrastructure  requirements in the near 
>future. Are you happy with this ? 
>

Am I happy that they are proposing to invest in decaying infrastructure 
to ensure future business?  Yes, very happy.

>
>While  I don,t expect LPC  to  go broke  can they maintain the
> dividend at a reasonable level ?
>

Have a look at my post on 20th February on that subject.  The only 
thing I will addd to that is that the majority shareholder is the 
Christchurch City council.    Like all councils they are money hungry 
and will not want to see the dividend reduced.  However, let's say dthe 
dividend is cut from say 11c to 9c (a 'worst case' scenario).

9c on $1.62 is still a gross yield of 8.5%, which is pretty good in my 
books.

> 
>I hold  SPN which has a much more conservative balance sheet 
>although it does not have the strategic position of LPC.and does not
>pay the same high level of dividend.
> 

I don't follow Southport closely.    Have they used the trick of revaluing 
their assets to improve their balance sheet?

SNOOPY

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