Forum Archive Index - April 2004

["Hans Van der Voorn" <vandervoorn@xtra.co.nz>]

Snoopy,

Is it fair to say that as WRI is essentially completely ungeared and trades
on a low PE, the directors could easily increase the earnings and cash flow
per share (and RoE) by gearing up the company, via a share buyback or share
cancellation + capital return.

Presumably RPI would see that as a future option to mitigate their own
likely debt levels.

Personally I am happy to remain as a shareholder in the expectation that
this is likely to occur at some point in time.

Hans

disc: held WRI since they were 60c.
----- Original Message ----- 
From: <tennyson@caverock.net.nz>
To: <sharechat@sharechat.co.nz>
Sent: Wednesday, April 07, 2004 12:41 PM
Subject: [sharechat] WRI, why now?


>
> Hi Macdunk,
>
> >
> >The norgate  consortium I would ask the question why?. Lets ask
> >ourselves the  question for Instance why did they not do it earlier
> >when the share price was more favourable for a move.
> >
>
> Good question.  Only Norgate can answer that for sure but I will make
> an educated guess.  The original offer was for 20% of the company at
> $1.45 per share.  There were 136,181,393 shares on issue so that
> means
> a total purchase price of $39.5m.  Now Norgate may be rich, but he is
> not *that* rich.    Perhaps the McConnons (Norgate's 50% business
> partners) are that rich.   But considering they are only 50% partners
> it is doubtful that they have put more equity into RPI than Norgate
> himself.
>
> That means RPI is likely to be heavily geared, and that means a large
> interest bill to pay, much larger than Norgate can afford.     So
> rather than pay the interest bill himself, I think Norgate planned to
> use the strong dividend flow from WRI to pick up the interest tab.
>
> Remember when you explained your investment strategy for Auckland
> property last year Macdunk?     Put down a few dollars yourself, let
> the tenant pay the bank loan and then sit back and rake in the capital
> appreciation for yourself, using the bank's capital to do it?    Well
> my pick is that Norgate read your post and realised he could do the
> same thing, but on a scale that was fifty times bigger with WRI
> shares.    Substitute 'WRI shares' for 'Auckland Property' and
> 'dividends' for 'rent' and Norgate is wearing your shoes.
>
> So take a bow yourself Macdunk.  You gave Norgate his investment
> strategy!
>
> >
> >What do you reckon snoopy put yourself In norgates place you
> >would never have done It that way surely.
> >
>
> Norgate might have been able to buy the shares cheaper if he had
> moved
> earlier, true.   But you are assuming he had the money to do it.   My
> guess is that he didn't.
>
> By waiting Norgate was able to convince the banks that his prey was
> able to pay high enough dividends to cover his leveraged buy in
> strategy.    He wasn't able to do that when the share price was
> cheaper, but the dividend payment record was patchier.
>
> SNOOPY
> --
> Message sent by Snoopy
> on Pegasus Mail version 4.02
> ----------------------------------
> "You can tell me I'm wrong twice,
> but that still only makes me wrong once."
>
>
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