GTP - Great Southern Plantations

[Duckman#72]

.... can just tweak some of the rules relating to the cream that financial planners get......

No offence Portfolio.

 

[Sultan of Swing]

I do have some added insight in that I use their products for my clients. Therefore I get to see mgt when they come to town and get to do site inspections annually with large clients.

Part of the research process for their products is understanding the company as this is the biggest risk factor with MIS fund managers.

Thanks for that Portfolio.

Knowing from which angle you're coming from is useful. I'll take it on board and hold for now in the hope that what you say about it rallying will come to pass.

As you can see, me taking advice from a stock forum shows I still have a lot to learn.

I've more than likely bought them for all the wrong reasons in the first place. Eg; low PE; they were down off a high, etc etc. For a while there I was nicely in profit but still have to figure out when to take a profit and when to hold. (Paid 3.07, watched them climb to 4.20, and at ~2.50ish am still holding. )

Cheers

 

[Nicks]

Now is the time to buy GTP. This is a good price, excellent PE and unlikely to get any lower.

The reasons:
- The net profit dropped this last year due not to revenues dropping but to cost increasing. These costs are due to setting up investment projects, which are what will return in 2007 2008.
- wait till 2007 2008 and the share price will reflect the value by then
- The PE is fantastic, ridiculously cheap
- The dividends are great, so imagine what they will be when the projects they are investing in now start returning.
- Its blue chipped and gearable at 60% I think (because the lenders see this as low risk)

Buy more if you have the capacity!

 

[Julia]

Now is the time to buy GTP. This is a good price, excellent PE and unlikely to get any lower.

The reasons:
- The net profit dropped this last year due not to revenues dropping but to cost increasing. These costs are due to setting up investment projects, which are what will return in 2007 2008.
- wait till 2007 2008 and the share price will reflect the value by then
- The PE is fantastic, ridiculously cheap
- The dividends are great, so imagine what they will be when the projects they are investing in now start returning.
- Its blue chipped and gearable at 60% I think (because the lenders see this as low risk)

Buy more if you have the capacity!

Nicks,

This level of ramping is a bit over the top, isn't it?

Julia

 

[Vainglorious]

Now is the time to buy GTP. This is a good price, excellent PE and unlikely to get any lower.

The reasons:

- The dividends are great, so imagine what they will be when the projects they are investing in now start returning.

The goal of a MIS company is the management fees and let the suckers ("growers") who invest in agricultural products for tax reasons take all the risks. There is unlikely to be much profit change from maturing projects (I could be wrong about the specifics of GTP) Don't get me wrong, I made a tidy profit holding TIM over the past few years but not once did I give much thought to how much money any of the actual commodities would make.


Disclaimer: I hold no interests in any MIS company

 

[2020hindsight]

Now is the time to buy GTP. This is a good price, excellent PE and unlikely to get any lower.

Didnt I hear that they were recommending planting grapes recently - and then a few months later, grapes were being ploughed into the ground?
Sounds like smooth salesmanship to my untrained ear.

 

[GreatPig]

My technical interpretation:

GTP is currently trading in a band between the $2.40 ish level that was support back in early 2004 and the $2.70 ish level that was support in late 2005 and briefly earlier in late 2004, and is now acting as resistance.

I think it's currently forming a bearish triangle, with similar bottoms but lower highs, in an overall downtrend.

Personally I'd want to see movement up towards $3, perhaps with a retest of the $2.70 ish support level, before I'd consider it an investment buy. A drop below about $2.20 would indicate a continuation of the overall downtrend.

Trading within that $2.40 to $2.70 band would be wait-and-see for me.

All just my personal interpretation and opinion of course. Not intended as advice.

Cheers,
GP

 

[Sean K]

I agree GP.

I think there's every chance this could see $1.50 if it doesn't hold at $2.50. Upward resistance at $3.00, then $3.25, a break above this would see it perhaps move out of the sideways and downward pattern it's been in since Feb 05. Needs to clear $4.00 really to be confirmed upward move, which is a long way off.

 

[Out Too Soon]

GTP is currently forming a round bottom with a head & sholders a round square pattern to a pointy iscosce---
woops sorry! :

GTP is heading up with the rest of the ASX as it has done previously, hopefully it will again push towards $4 then I will take tidy profits & laugh at the posts months later when the dreaded tax rumours have knocked the sp down again.

 

[Nicks]

GP its broken 2.70.

I was looking through the Annual Report a couple of weeks ago, and thought, hmmm well they have accumulated more expenses/debt over the previous financial year and my first reaction was crap. But then I thought, well this is due to the investments they have been preparing, which are due to start returns next year. This is textbook good business strategy, they are investing (which has associated costs) funds for future return.

I think with its PE, divs and the projects that are about to start bringing good returns has caused investors to sit up and start taking notice of GTP, and the buying now reflects thos who are prepared to wait for 4-6 months or so for excellent returns at low risk, for if we wait till 2007 the sp will not have waited.

$4 again by Feb / Mar, and it has done it before in the same pattern, and it will be worth it more than it was last time it hit $4 early this year. Nice opportunity now for a stable 30%+ return, but at an opportunity cost of 4-6 months.

 

[Nicks]

and as expected up a steady 1.5% today, as it reliably has been for the last couple of weeks now.

 

[Out Too Soon]

Hi Nicks! where on a winner here, I'll be getting edgy around January/february tho when hopefully we could see highs well above $4 (maybe $5?) This stock is great to hold medium term i.e 3-4 months, it will fall by some amount leading up to tax time next year again tho.

 

[grumpee boi]

Just an interesting anecdote about GTP. A colleague of mine told me of one of his good mates and his bonus scheme at GTP. He was a business development manager and had a base of 130k. The worst bonus he ever earned at GTP was 300k in one year. Had he been there the previous year it would have been 750k. BDM's develop business with advisers. Huge commissions in agribusiness - advisers can get up to 10%. Speaks volumes about the profit margins.

 

[Out Too Soon]

Looks like GTP's one of those contrary stocks that like to confound everyone. While everyone was taking profits elsewhere on friday GTP continued slowly upwards. I do believe the trend will continue into early next year but I am surprised there wasn't a slight correction on friday along with the rest of the market.

 

[savtin]

That is because GTP is so undervalued its not funny......treasury is soon to release their resolutions on the tax treatment of forestry MIS and i think it will be favorable for GTP....and once that uncertainty is out of the way until 2013 at least..............you will see a large re-rating of the stock....IMHO.

I got out of this stock when it was $3.80 (before the huge tumble) and got back in recently below $2.40 as it was starting to move up.......things looking good.

 

[Out Too Soon]

I got out at $4.01 in April Bought back in in Sept @ 2.58, lokking forward to the ride even if it's not as exciting as a Zinc stock.

 

[123enen]

Don't be felled by the timber glut
The Intelligent Investor, 21/08/2006

The offer of a tax break has led to a huge rise in timber production, and it could spell trouble for investors.

Leaving aside English referees and Italian left wingers, there are few things that'll put an Australian's back up more than a tax bill. As a nation we'll seemingly do anything to avoid paying the taxman a share of our hard-earned cash, but to let tax matters dictate investment decision-making is to let the tail wag the dog.

Most investment propositions sound wonderful on the day they're presented to you, but rarely work out as well as the initial forecasts suggest. But when the primary purpose of an investment is to bypass the taxman, promoters seem to get away with even more outlandish forecasts than usual.

Agricultural products appear to sell best. The tax laws allow a 100% deduction for the upfront investment, after which the revenue is 100% assessable (as opposed to spreading the cost of the investment over its earning life as with most other businesses). The key to making a stack of money as a promoter is to put a lot of time between the punters making their investment and realising they haven't made a return.

Tidal wave of supply

In the late 1990s, vineyards were the tax deduction of choice. The number of hectares planted each year jumped from 7,825 hectares in the 1996-97 year to 16,048 hectares in 1998-99, a 205% increase over two years. Vineyards take a number of years to start producing and then a number more before they reach maturity, so the promoters were able to keep on selling while a tidal wave of supply was already on the way.

The full effects are only now being felt, with prices for wine grapes down 14% in 2005 to chalk up their fourth annual fall in the past seven years. We don't know of any specific project details but, given the highly publicised troubles of McGuigan Simeon and Evans & Tate, it's unlikely investors have too much assessable revenue to worry about.

These disastrous returns have put vineyards on the nose, so the tax 'savvy' are looking elsewhere. We think they'll lose money there too.

Timber plantations have been around since the mid-1990s. Great Southern Plantations, the country's largest promoter and manager of timber plantations, sold its first woodlots in 1994. Investors put their money in a managed investment scheme (MIS)-typically a one-third hectare timber plantation-and receive the proceeds of the timber harvest after a number of years. The vast majority of plantations in Australia are hardwood chip plantations with a standard life of 10 years.

Demand for deductions

Ten years gives the promoters a huge head start, significantly more than the vineyards, before the economic realities of their actions hit home. And they've certainly taken advantage of it. The number of hectares planted to hardwood timber plantations grew astronomically in the late 1990s, reaching 126,211 hectares in 2000. Investors' demand for deductions waned a little following the stock market slump of 2002-03 but it has returned in force over the past couple of years.

As with the vineyards, the effect of increased supply isn't known until the projects are harvested-but you don't need to be an economics professor to work out it won't be pretty.

Dr Judy Clark from The Australian National University's Centre for Resources and Environmental Studies presented some numbers in a recent submission to Treasury. According to Clark, Australia already accounts for a third of the global hardwood chip trade (at the moment mostly from native forests). Hardwood plantation chip exports, though, are expected to grow from 2.2 million cubic metres a year in 2004-05 to an average of 10.8 million cubic metres a year from 2010 to 2014. Including native forests, that will more than double the amount of hardwood chip available for export. It's an enormous increase in supply, and the Japanese, our main export market, must be rubbing their hands with glee. For investors, though, the results could be disastrous.

Great Southern and similar companies, including, to lesser degrees, Timbercorp and Willmott Forests, have made extraordinary profits over the past decade on the back of a tax-driven boom. Investors are about to start realising their returns, though, and our expectation is that they won't be coming back for more.

Act of generosity

Note 33 to Great Southern's 2005 annual accounts contains the following statement: 'On 29 July 2005 … a wholly owned subsidiary of [Great Southern] purchased all of the timber from the 1994 project for $6.4m.' That amount was a 'significant premium to the investors over and above the return they would otherwise have achieved'.

The after-tax expense of this act of generosity was $3m, so we estimate that Great Southern sold the wood it had just bought for about $2.1m-less than a third of what it had paid for it. That doesn't sound too smart, but in the context of Great Southern's overall business it makes a lot of sense. That's because, in 2005, the company sold $304m worth of woodlots and generated a profit of $124m. If the 1994 investors had announced to the world that their returns were a mere third of the forecast returns, we doubt sales would have been anywhere near as high.

This solution won't work, though, when the bigger projects start to be harvested. The company is predicting the timber yields on later projects will be much higher but, if our predictions about future prices are right, investors are still going to be very disappointed.

We're not financial advisers, but we suggest you think long and hard about these agricultural products. Approach the forecasts with a healthy dose of scepticism because no tax deduction will compensate you for a serious loss of capital.

Great Southern is already moving into different areas such as almonds and beef cattle. No matter what happens to the plantation industry, there will still be plenty of people willing to lose enough money to avoid the taxman.


DISCLOSURE Staff members own shares in Great Southern Plantations but they don't include the author, Steve Johnson.



http://www.moneybags.com.au/article.asp?id=368

 

[Out Too Soon]

So don't buy GTP's products, buy GTP
I started off believing The Intelligent Investors line on the stockmarket.
Flight Centre Croesus Gold
Their info can be useful but I certainly wouldn't pay for it.
GTP the co. is a great investment, but you have to know when to get in & out of it. Also even if the timber doesn't turn out to give a great return, which I don't understand, (have you bought some timber at the local hardware store lately?) the land that the timber is grown on is owned by GTP & must be worth a mint.

 

[Nicks]

and as expected up a steady 1.5% today, as it reliably has been for the last couple of weeks now.

Still more of the same.

AND as for the Intelligent Investor - they have performed so poorly with their info and recommendations. I think they are the worst performers of the 'report' / 'newsletter' crowd. Im with Out Too Soon on this one. I certainly dont pay for their advice, if they want to send me free newsletters no probs, but fortunately I didnt think their info was very valuable, or I would have lost alot of opportunities.

GTP is set for a nice year next year with good returns on the products they have spent the last 12 months or so setting up for. Check out their news and Annual Report and web site and see for yourself. Plus an awesome PE ratio and dividends. Add this to a $4 stock value early next year and youve got great CG as well.

 

[Ken]

this is a stock i am looking at getting also within the next few days.

how many units are you guys holding..