GTP - Great Southern Plantations

[Jackob]

Does anyone think a bounce back is on the cards tomorrow or havent we seen the low yet? I understand the news was potentially bad however has there been the usual over reaction?

I reckon a resistance line is just waiting overhead at around $2.24.

More downside risk.

 

[pch]

AT least now Jackob we can stick to analysing the forestry aspect of GTP

 

[Jackob]

At present, no one seems interested in any “analysis” any more.

We must wait until it cools down to do any meaningful things.

 

[Duckman#72]

Ouch that bites!

Australian stocks:

"Agribusiness Stocks: Great Southern Plantations Ltd., which manages vineyards and forestry plantations, slumped 51 cents, or 20 percent, to A$2.02. Timbercorp Ltd., an agribusiness investment manager, plunged 84 cents, or 31 percent, to A$1.87.

The Australian Taxation Office is preparing a ruling that investors in non-forestry agribusiness managed investment schemes will no longer be able to claim upfront taxation deductions for their contributions with effect from June 30, Timbercorp said in a statement, citing a government minister. "

"Great Southern said 70 percent of its sales last year came from forestry, and weren't affected by the ruling. "

yeah right, will be a great AGM today, imagine all their pretty powerpoint slides will be madly being edited as we speak..

Still, GTP are much less affected by this than TIM

It will be interesting to see where Great Southern goes from here. As per Great Southern announcement this morning - last year 70% of sales came from forestry related lines. In 2006 only 24% of Timbercorps new MIS sales were forestry related. (I'm not sure about GTP's new sale %).

I'm not sure that I would want to be in an avocado grove with Great Southern now that this announcement has come out. Are GTP going to keep their eye on the ball? I think non-forestry projects will just get the boot. The Gov's backpeddling on Carbon Credits is an interesting one.

I went to a FEA information session last week and they were very hopeful getting in on the action if either Labor was to win power or Coalition wants to be seen as "Climate Friendly". It could be something that is a win-win (tell resource sector to suck it in and transfer some cash across to Agribusiness). Resource sector continues along merrily and agribusiness gets some money in it's pocket after being hit on the head concerning non forestry products)

 

[pch]

"Managers wanting to issue non forestry investments post 1 July 2007 will
need to look for other structures such as unit trusts. "

Thats from the "Australian Agribusiness Group".

I think the tone of GTP announcements will be how wonderful forestry was the whole time .. For what its worth I'm out of TIM now for the first time since 2001, as I really feel they are in a deep hole. I'm not convinced that a unit trust model is going to work for them..

GTP were already trading at a bigger discount and the fact they were still heavy forestry has influenced the relatively smaller drop than TIM had.. I look forward to re-examining them with people like Jackob in the coming weeks to see if they are worth sticking with..

 

[Portfolio]

I cant believe how little this stock has fallen on the news. Yes GTP is big in timber BUT its whole strategy was moving away from timber as it will be forced to publish returns in the next few years (without propping them up).

Target for this stock is $1.30......Thats the NTA.

 

[michael_selway]

I cant believe how little this stock has fallen on the news. Yes GTP is big in timber BUT its whole strategy was moving away from timber as it will be forced to publish returns in the next few years (without propping them up).

Target for this stock is $1.30......Thats the NTA.

Hm could be

Earnings and Dividends Forecast (cents per share)
2006 2007 2008 2009
EPS 41.6 39.1 40.5 39.4
DPS 15.0 15.0 15.5 15.5

thx

MS

 

[pch]

I think the fall was on the premise of the % of their product range directly affected. Hence why a lot of investors dumped TIM more.. (Wilmott Forests went up on the bad day for TIM and GTP)

The 'propping' up test will be answered this year I think. Last year they made particular mention to this under provisions in the books and claimed that it will not happen again.

Boards have lied to me before though.. so I leave it to you to judge the validity of their assertions.

I cant believe how little this stock has fallen on the news. Yes GTP is big in timber BUT its whole strategy was moving away from timber as it will be forced to publish returns in the next few years (without propping them up).

Target for this stock is $1.30......Thats the NTA.

 

[Jackob]

... The 'propping' up test will be answered this year I think. Last year they made particular mention to this under provisions in the books and claimed that it will not happen again.

Boards have lied to me before though.. so I leave it to you to judge the validity of their assertions.

I cant believe how little this stock has fallen on the news. Yes GTP is big in timber BUT its whole strategy was moving away from timber as it will be forced to publish returns in the next few years (without propping them up). ...

Hi Portfolio and Pch,

Interesting to know that GTP “will be forced to publish returns in the next few years (without propping them up)” and "The 'propping' up test will be answered this year...".

Would you please explain a bit more about the "propping" and "propping up test"? Why and who will force GTP to do such test? When did GTP know that it would have to do such test?

Thank you.

 

[TheRage]

I cant believe how little this stock has fallen on the news. Yes GTP is big in timber BUT its whole strategy was moving away from timber as it will be forced to publish returns in the next few years (without propping them up).

Target for this stock is $1.30......Thats the NTA.

Can you please explain how you arrived at this amount? NTA according to my data is 682 million on 310 million shares outstanding giving a NTA of $2.2 per share. Do you have more up to date information than me?

 

[Jackob]

Can you please explain how you arrived at this amount? NTA according to my data is 682 million on 310 million shares outstanding giving a NTA of $2.2 per share. Do you have more up to date information than me?

I reckon $2.20 per share is the "net asset", not NTA ("net tangible asset").

 

[pch]

Hi Jackob

I don't have the annual here, but buried in the July one (i think) under provisions was some millions of dollars that was used as a payout to 1996 investors as the returns were crap.

There is a specific note about it. I posted on the presumtion that is what Portfolio was talking about.

They say something to the effect that at that early time in their development they outsourced the actual forestry management to a 3rd party and the results were not satisfactory. They say in the note they do no expect this to be an issue from post 96 projects..

regards

 

[TheRage]

I reckon $2.20 per share is the "net asset", not NTA ("net tangible asset").

Balance Sheet as follows:
2006 2005 2004
Cash 286.83 118.29 35.55
Total Current Assets 609.96 394.70 198.06
PP&E 147.30 388.75 279.53
Intangibles Ex. Goodwill 13.33 2.11 -
Goodwill 60.85 36.89 -
Non Current Investments 511.95 16.72 4.20
Total Assets 1,607.87 1,180.78 646.56
Short Term Debt 173.12 58.42 16.53
Total Current Liabilities 582.30 334.16 194.70
Long Term Debt 234.58 73.25 -
Total Debt 407.69 131.68 16.53
Total Liabilities 851.63 418.93 197.65
Net Assets 756.24 761.84 448.92
Net Tangible Assets 682.06 722.84 448.92

Net Assets "756 million",
Net tangible Assets "682 million"

Net Tangible assets is calculated as Net Assets minus intangibles which in the case above is 756.24 - 13.33 - 60.85 = 682.06

Net Tangible Assets per share = 682.06/310 million shares = $2.20

Current share price 2.38 is only trading slightly above NTA.

 

[Jackob]

Hi TheRage,

You might quote numbers from GTP Annual Report for the FY ending 31/6/2006.

If we look at the latest GTP “Annual Report” (issued on 22/12/2006, for 3 months from 7/2006 – 9/2006),

Net asset = $682.8M
Goodwill and other intangible assets = $73.5M
NTA = $682.8m - $73.5 = $609.3M

Thus, the NTA per share = $609.3/315s = $1.93/s
(Note the total number of issued shares is 315,192,398 at present)

It is remarkable that GTP’s NTA has reduced by $0.27 per share in the above 3 months.

 

[Out Too Soon]

Wish I'd been on the ball & bought some under $2 a few days ago.

 

[Portfolio]

Going off the latest Macquarie research (I dont have copy of the annual report in front of me):

1. Land $647.8 million ($1.56 per share)
2. Cash -$114.0 million (-0.27 per share)

Therefore the company is worth $1.27 per share.

Note: I have not attributed any value to the "distribution business" as Great Southern will not be selling anything in 2 years. This announcement has effectively killed off any non-forestry projects and forestry projects will be killed off by the "propping up" issue.

 

[Duckman#72]

Going off the latest Macquarie research (I dont have copy of the annual report in front of me):

1. Land $647.8 million ($1.56 per share)
2. Cash -$114.0 million (-0.27 per share)

Therefore the company is worth $1.27 per share.

Note: I have not attributed any value to the "distribution business" as Great Southern will not be selling anything in 2 years. This announcement has effectively killed off any non-forestry projects and forestry projects will be killed off by the "propping up" issue.

I agree with the other guys Portfolio. Westpac research (which uses Huntleys) has the same shares outstanding as Rage is using.

Duckman

 

[Jackob]

I agree with the other guys Portfolio. Westpac research (which uses Huntleys) has the same shares outstanding as Rage is using.

The total number of shares outstanding was 310m before 12/12/2006. On 12/12/2006 GTP issued 5m new shares due to DRP and the total number became 315m.

As I mentioned, during the 3 months of 7-9/2006 GTP lost $0.27/s in NTA. If extrapolating that rate over another 6 month to 3/2007, then it would lose a further $0.54/s and its NTA would be $1.93/s - $0.54/s = $1.39/s, which is not far from Macquarie’s $1.27/s.

I understand GTP’s “assets” will have a sudden increase just before 30/6 every year due to the flood of investors’ funds, but they are not really GTP’s assets, they are investors’. GTP temporarily takes these investors funds as its own “assets”, but these “assets” will quickly disappear during the year. So all depends on by which month you calculate GTP’s “assets”, which can vary from $1.20 to $2.20 or so. To me, I believe Macquarie’s $1.20 can be closer to GTP’s true value.

Any way, the assets in GTP’s book are most likely overstated by valuing the lands at $7000/ha. Many would argue the land price have been pushed up by GTP’s own huge scale buying. If GTP has to sell them one day, the price would certainly drop.

 

[pch]

Any way, the assets in GTP’s book are most likely overstated by valuing the lands at $7000/ha. Many would argue the land price have been pushed up by GTP’s own huge scale buying. If GTP has to sell them one day, the price would certainly drop.

I think this is right (the price drop bit) but I did the math on this in previous discussions and right now they are valued less than $7k. It takes them 3 years to get their land bank revalued so there will always be a lag (but i wonder if they are tempted to fast track this in FY08/09 when the horticultural stuff theoretically becomes harder to sell..

Actually I dunno if I mentioned, but I remember reading TIM's annual and noting that their valuation methodology was more aggressive than GTP's..

 

[Jackob]

I just quote a few lines on land price from the article at the following website.

http://www.theage.com.au/news/business/howard-seeks-an-mis-compromise/2007/02/12/1171128899492.html

… Liberal MP Wilson Tuckey warning that land prices will plummet if the schemes, supporting a range of agricultural investments including nuts, olives and wine, are scrapped. “I am deeply concerned that if this were to proceed, there would be a big reduction in land prices in rural areas," he said.

…

Mr McGauran agrees that the schemes have pushed up land prices, but refuted Mr Tuckey's suggestion that land prices could fall if the tax concessions were removed.

"Some farmers have done very well out of selling to MISs and good luck to them.

"But you can't structure agriculture on the basis of tax-driven investment rather than market-based investment. Already there are strong signs that olives, almonds and avocados will be in overproduction in the near future," Mr McGauran said.