GTP - Great Southern Plantations

[Guff]

I read somewhere in their annual report that the company has setup an indemity for the Directors, hence the company indemnifies the directors in the case of legal action against them.

So, I guess legal offences that have been discussed here and by others will need to consider this first.

 

[wooduk]

what a rip,apart from some wankers that reckon this is good for them to take the share deal because this is the best that colesy reckons, that's it virtually,then why then is gtp still promoting mis schemes and why are they possibly going to hang onto the cattle and why can not the directors stand on their merits without gsp having to indemnify them against being litigated.
if it is true that the banks have got a caveat,how does the bank gaurantees kick in and save gtp-gsm,what about the debt escalating,big reason not to hand over your investment that you own for shares that will be taxed if youconvert to shares and then you are going to hang on and hope and pray that they will come back,and that is all you have because no body in their right would buy shares that are massively diluted----remember the so called clout if everybody exchanged for shares the investors would have 72% of share holding of a companythat has a debt ratio to assets that is escalating and a massive cashflow problem to the extent that staff are being sacked.can anybody tell me that what that entity in the report that got millions of dollars who they are plus the 4mill that was on aussie forum for one of the dictators === ooops imeant directors


if you read the report as others have reported there is a thread of intimidation on part by the company,with a weak gutless independant reprts from big name auditors and as shown at the roadshow a feeble dcf graph projecting a low return at the time of the grab,that pathetic year 8 simplistic graph with no substance and based on i believe the 1998 scam of trees


there reports are confusing and can be easily mis interpreted,and though there may be conjecture istrongly suggest and urge you to vote




no no no no no no no

just vote no no no no no






tat is what i reckon your shares will be worth

 

[Investor1]

To all concerned Forestry MIS Investors,

I am a significant investor in forestry MIS and also have had many years experience in forestry. I provide below insight from many years in the forestry sector.

It is important not to be emotional about the Great Southern offer and what is the current share price.

Should you vote “NO” have you really understood the issues?

From reading the commentary of those that intend to vote “NO”, it is generally either because they consider the deal is:

1) too good for shareholders (easily managed for the benefit of MIS investors (see below)); or
2) they consider they will realise more for their trees by Great Southern failing and the schemes harvesting the trees themselves;
3) you don't like the management.


Firstly, the MIS investors will own the majority of Great Southern if they vote “Yes”. (See more discussion below).

But more importantly, as Great Southern indicates the proposal brings the following together:

Land
Forestry management
Sales contracts
Harvesting capabilities
Trees. (The asset of MIS investors)


From my years of experience in forestry, the first four are more important than the trees. If Great Southern fails, the schemes will have to manage the first 4 themselves, but they will not own the land. A significant risk issue should the trees not be harvested and sold in time. Remember, the trees must be exported and cannot be sold locally as there are no local markets.

In reality, the schemes will find it almost impossible (that is if it is possible) to sell their trees for any real value. The schemes will have to arrange a new manager to manage the trees until they are ready for harvest, establish markets in overseas jurisdictions (who will fund and do this?), will need for some projects to develop infrastructure (i.e. port facilities), will need to establish harvesting contracts and haulage contracts, etc, etc.

Accordingly, the first issue is all the scheme investors will have to dish out more money to keep their scheme afloat. But how does that work if not everyone wants to contribute more? Who will coordinate the process? The last person a scheme investor wants to manage the process is a receiver or company administrator that charges by the hour.

Secondly, the schemes will be dealing with many parties in much stronger positions than they are in. The schemes will be dealing with professional forestry companies. Don’t think owning a plantation is simple. You would not consider running an iron ore mine as basic. On top of that, the schemes do not own the land. If Great Southern fails there will be new owners of the land. How will the schemes interact with such new owners? I have worked in a company which buys MIS land from failed scheme managers and inherits the trees for free from the MIS investors because the MIS investors thought they could market and harvest the trees themselves. It is very difficult for scheme members to become an organised “plantation business”.

If Great Southern fails, the schemes will have to pay a new manager for their services (i.e. additional fees to be paid by the current investors) and those new managers have little incentive to maximise benefits scheme investors. If it is an existing MIS manager, that manager has priorities in selling their scheme investors’ timber. If not a traditional MIS company, the new manager has an incentive to maximise their fees. In addition, the trees may become worthless if the lease term expires prior to harvest.

I note that a person commented on how Great Southern being a desperate seller may find it difficult to sell the cattle assets. The forestry MIS investors may find it much, much more difficult selling their tree interests without owning the underlying land and if Great Southern fails. Selling cattle at cattle auctions are much easier than selling timber direct to a handful of overseas buyers during a world recession. Seriously, the forestry MIS investors are likely to walk away with nothing like shareholders if Great Southern fails.

BUT, even more importantly, the general view that is coming across is the shareholders are getting a great deal. If that is the case, and Great Southern’s market capitalisation is $40 million, BUY MORE SHARES!!!!!!!!

Put simply, the MIS Investors have invested more than $1billion for their forestry interests. The trees are worth what they are worth, either in the hands of Great Southern or the investors (subject to comments above). If each MIS investor invested less than 5% more (based upon the current share price) they collectively could own outright the company and the MIS investors can take all the gains that the structure proposes for shareholders.

This logic is based upon the simple view (ignoring relative ownership valuations) that the combined value of trees and land is worth more than their separation. There are other synergies including future carbon valuation benefits and operating cost savings.



In reality, the problem of the proposal is the benefits for MIS investors of the proposed structure have not been explained well enough and MIS investors have been distracted via the falling share price that is not based upon the success of the restructuring. If the scheme is good for the shareholders, scheme investors should buy many more shares and vote “YES”!!!!!!

Only vote “NO” if you know with certainty how you will sell your trees for the value you think they are worth or you think Great Southern will survive!!!!!!!!! The tree valuation on which the share offer is based was determined utilising many assumptions. The same values may not be able to be realised by the MIS investors acting in isolation of Great Southern. Factors that can significantly reduce MIS investor returns are:

- Offtake prices for timber. Only large managers can secure higher prices.
- Ongoing plantation management fees. Who will pay for these?
- Timber marketing costs: Who will pay for these?
- Ongoing rent? If new owner of the land.
- Harvest costs per m3. Only large managers can secure lower harvesting costs.
- Transport costs per km. Only large managers can secure lower transport costs.
- Processing Costs: Great Southern owns 50% of a processing facility.


IT IS EXTREMELY HARD FOR A MIS GROUP OF INVESTORS TO SELL THEIR TREES AND REALISE VALUE WITHOUT A MANAGER!!!!! HOWEVER, THE RESTRUCTURE GIVES MIS INVESTORS THE OPPORTUNITY TO ARBITRAGE THE BENEFITS OF THE RESTRUCTURE WITH GREAT SOUTHERN’S CURRENT LOW SHARE PRICE!!!!

If you consider the scheme benefits shareholders and the offer price is to low for MIS investors, buy more shares. But if you vote “NO” be absolutely confident how your trees will be sold for value for you.

I advise:

- Don’t vote “NO” and realise nothing in the future.
- Even worse, don’t vote “NO”, then have to pay a new manager to take over from Great Southern and then subsequently, realise nothing in the future (i.e. don’t realise a bigger loss).

Voting “YES” is in my opinion the better option. The real question is: should you buy more shares in Great Southern to benefit from a possible appreciation in the share price due to the increased assets that Great Southern will acquire? If so, how many more shares?

Finally, if you don't like the management, the MIS investors after the vote will be able to vote out the management and Board and replace them with a completely new team.

If you don't agree with the above, please explain how voting "NO" will add value to your MIS forestry interests.

I have shares in Great Southern. But, I see the situation as potentially a win for MIS investors if they are also share investors. MIS investors can by buying more shares be on both sides of the fence and possibly win as a shareholder if shareholders are the winners under the scheme.

No commentary I have seen above indicates how an MIS investor actually wins if Great Southern fails and the MIS investor has to sell collectively their trees.

I see value in Great Southern in a few years time once Great Southern is significantly into its second rotation of plantation schemes. In a few years time, Great Southern should not need to purchase as much land annually (i.e. it will be replanting on its owned land). At that time, Great Southern should be able to repay its bank debt and begin generating positive cash flows.

 

[Guff]

To all concerned Forestry MIS Investors,

I am a significant investor in forestry MIS and also have had many years experience in forestry. I provide below insight from many years in the forestry sector.

Sorry, I smell a rat and don't think you're at arms length here - what is your connection to Great Southern??

There is no way you can say in your right mind that this is a good deal. Firstly GSL has spent hundreds of millions of dollars (probably billions) in developing an unprofitable business. They overcharged for the development of woodlots and STILL have not achieved it, basically what they have achieved is to run up debt and wipe out all the capital they raised on the ASX - now they want our money to help them continue to do the same.

A huge proportion of funds have gone into management and agressive commissions, you cannot simply say this is a good deal -- its like someone offering you a couple hundred dollars for your new car and telling you its all going to be alright in a couple years.

What that amounts to is 1) accepting your current investment valued today is nearly worthless, and 2) you really like GSL as a compny and you want to invest in its shares.

Accepting 1) may be one thing, but everyone has better things to do with their money than invest in GSL shares, IT IS BARELY A GOING CONCERN!! They're on the brink on liquidation because their cash flow is critical!! If you accept 1) above then why wouldn't you simply go elsewhere and invest in a company that actually has a strong future?

The ONLY option is VOTE NO, GSL needs to go under and move to a new manager. "Investor1" is simply a GSL employee, perhaps the forum mods can note the IP and this one can be traced as a misleading conduct by a director or employee.

 

[Forenth]

Investor1, it's really quite simple for me:

My trees after tax are worth over $2600 / woodlot when harvested as per the contract. That's using GSL's own figures (which I have reckoned are within the ballpark using the forester's reports, prices etc) and also using my own individual tax situation. By taking shares I will have around $400 / woodlot, due to:

- low share price vs the $0.50 price minimum GSL are using.
- less than 6 months to arrange any tax implications.

Its not a hard calculation at all. Anyone who disagrees with my figures (for the 2000 project) is free to query how I got them.

Everyone can see that once hundreds of millions of shares are issued to former investors who now have taxes to pay that the market will be flooded and the share price is most likely to drop. This has nothing to do with investor confidence but simply that a lot people with no other semi liquid assets now have to pay huge taxes. Remember this was to be ongoing income for a lot of poeple's retirements. A lot of investors will be destroyed by this. They have to sell. That's a forecast that's easy to make. Usual trade is less than 500 000 shares/day. What happens when maybe 500 000 000 shares are issued?

If GSL don't get the majority then they will still survive long enough to harvest the projects affected. It would be surprising if they didn't. I really don't care if they survive any longer than that. I invested years ago for my own reasons, and for my own reasons I want my return. I voted no because its in my interest. If it coincides with others' interests then we all vote no. If anyone believes its in their interests to vote yes then go ahead. The idea that investors will have to try to harvest and market their own trees is alarmist and unlikely for projects up to 2003. But I wouldn't want to have invested in 2008.

These are comments I would expect GSL to put forward. Rather than work on any real merits of their scheme (of which I can't find any) they have been making comments of how if we don't vote yes then they will collapse and we'll lose everything, or cattle project investors will have to pay big fees if they vote no. GSL have been saying these things!

They can run around like Chicken Little all they like, yes the sky is falling but it won't hit their heads until after our projects are completed. GSL will limp through to then thanks to selling a few things, maybe a cattle project or two, maybe some fancy banking agreements and also due to those investors who for some reason have voted for their individual agreements.

For me a no vote is the best thing.

 

[Forenth]

I forgot to add:

GSL will get some assets from individual investors even if they don't get any projects. But if the assets of the company increase this will have no effect on share value. Why do I say this? GSL's own figures show net assets / share have been steady around $2 while the share price fell from $5.00 to $0.17. With all projects being a yes this assets/share would fall to under $1.00. So why would getting more assets and issuing many more shares, diluting assets/share, actually cause share price to increase? It's already proven that it has no effect on share value at all.

Earnings based valuation is important. Since GSL basically have no net earnings they have no net value, which is reflected in the $0.17. Remember the first substantial project to mature will be in 2011 and even that cashflow is unlikely to be enough. Then the following projects are smaller and so even less helpful. But GSL aren't likely to get these projects anyway!

I don't see how getting a few assets, even those they can sell, will help GSL without major restructuring. Is the Managing Director worth his $800 000/year when the company has been put in this position? Maybe the directors can repay their company loans once and for all. Why is GSL loaning cash to directors when GSL has no cash? From the interest received they don't seem to be paying usual interest rates, but I bet GSL is. So it appears shareholders are subsidising the personal loans of directors. Now there's a restructuring that will increase company value.

IF GSL get their house in order and IF they EVER make a profit THEN it might be worth buying some shares, but until a healthy net profit exists then they aren't. This Project Transform isn't going to provide it, investors are just the easiest income stream to grab regardless of how it affects them.

 

[Portfolio]

Investor 1 - thanks for the shareholders view. Of course you want the MIS investors to bail out the company. Given you are a shareholder you should step back and take a look at your shares. I think you have until the 19th of January to sell before you lose the lot.

 

[Investor1]

________________________________________
Thank you Guff, Forenth and Portfolio for reading my views.

I am a shareholder, an MIS Forestry investor and have no connection with Great Southern as an employee or otherwise.

Two opinions have been expressed as to the future of Great Southern. One Great Southern will survive for several more years and the other, it is all over on 19 January 2009. If the latter view is correct, MIS investors begin considering how to market your timber and cattle for value without Great Southern. As indicated, MIS investors that have invested in more recent years may have even more to loose than shareholders. For example, building a port at Kangaroo Island, Tiwi Islands, etc. As I indicated, MIS investors have invested more than shareholders. But Great Southern currently owns the land. Once the ports are build the parties that acquire the land from Great Southern after its failure will have the benefits of the infrastructure, not the plantation MIS investors that need the facilities in order to sell their trees. No facilities and no timber sales.

Also, currently shareholders have about $50 million of market cap at stake, but collectively MIS investors have way over $1billion invested.

As an MIS investor, even with reading the valuation reports, do you really understand the timber market and how to sell timber? Like equities, commodities have experienced significant volatility in recent times (consider the price of oil over the last 12 months). 6 months ago you may consider if you had interests in oil projects, your interests were worth $X, but today they may be substantially less. Not all timber is worth the same, nor is its price always the same (like oil). For example, location relative to markets impacts transportation costs and fuel costs impact transportation costs, etc. So, what the valuation facts were in the past do not necessary reflect the valuation facts of today or tomorrow. Particularly, if you don’t have the marketing capabilities to sell timber and particularly if you will have additional costs to incur!!! Also consider the volatility in BHP and Rio.

In my view, Great Southern has potentially a very valuable asset in its very large forestry land bank. The other assets (cattle land and horticulture projects) have no interest for me. Sell them. In my view Great Southern should never have entered into such projects and the cattle projects and horticulture projects are bringing everyone down in my opinion.

The forestry land bank may become very valuable in the near future. Particularly, now that Australia intends to introduce the Carbon Reduction Pollution Scheme by July 2010.

I recommend you read the ABARE Report October 2008 "Analysing the economic potential of forestry for carbon sequestration under alternative carbon price paths." It is easy to Google the report. As the carbon price increases over time the value of the carbon in timber also increases.

Basically, Treasury sees in the future forestry as a carbon sink to significantly outperform many forms of agriculture and timber as an investment. Great Southern with its land bank is well placed to benefit under a carbon constrained world that imposes significant costs on carbon pollution. Politically, a significant issue regarding MIS has dealt with the land use and it being acquired from traditional farmers. A carbon regime will increase the transformation of agricultural land to forestry land.

By unwinding the schemes, Great Southern shareholders (including MIS investors) collectively can own the net assets of Great Southern. The company can sell the horticulture and cattle projects. Offer the cattle and horticulture MIS investors the right to buy their land from Great Southern or together trade sale the assets.

Again, it is my view the sum of the assets (land and trees and assets to be sold) is greater than Great Southern’s market capitalisation and the sum of the MIS investors’ interests, even if Great Southern’s debts are included.

As indicated in my previous comments, if people are so concerned with the management of Great Southern, after the restructure call a shareholders meeting and replace the Board and management. MIS investors will control the vote. All the high salaries can thereby be eliminated for the future.

THE BIG ISSUE is nobody really is coordinating the story. Based upon the views expressed above, many later MIS investors will be burnt if Great Southern fails. Collectively, potentially much more than Great Southern shareholders! What are those MIS investor groups (i.e. annual groups, 2005, 2006, 2007, 2008) doing to maximise the future value of their investment? Including considering how they will fund infrastructure for ports and ongoing management. If they are not organising themselves now when many of you seem excited that Great Southern will fail, will these investors organise themselves quickly enough when bank receivers are appointed?

How certain are you that voting “NO” will benefit the vast majority of MIS investors, including yourself?

It is certain many MIS investors do not like the management but they can be replaced in the future.

In addition, if Great Southern can be revalued overtime to reflect net assets (including the realisation of the trees for their value), MIS investors may receive over time their proportionate value in the assets via share appreciation. That could result in the future gains being subject to the CGT regime rather than income tax. This may provide for the CGT 50% discount on the gain or may enable the ability to utilise capital losses to offset the gain. In this regard, if Great Southern is getting trees at a significant discount to value, Great Southern may increase in value by that amount.

I guess the issue is whether Great Southern has any hope of survival.

If it has none, then in addition to just saying vote “NO”, rally the troops now and determine your strategy of how you will sell your trees in the future. Be certain voting “NO” does not mean seeing both Great Southern and the MIS investors failing. Based upon my reading, many of those that recommend vote “NO” still consider Great Southern will harvest their trees. Others, who see Great Southern failing, have not indicated how they consider they will realise value for their trees.

 

[prawn_86]

I have no finacial interest in GTP, but why would anyone accept/buy soemthing for 50c when its currently worth 17c?

No economic sense. I would rather lose any invested money or at least have a chance of selling it myself then doing that

 

[Guff]

Investor1 -- you are still not getting the basics fact. It would be FAR better to buy the shares at 17c or GSL raise further capital - why do you think GSL won't do that (again)? Probably because that has happened many times before, and for much more capital raising than this.

Why not buy more shares you ask? Because the company is poorly run and the business model has not worked -- it is unprofitable. Selling assets, and in this case aquiring trees as assets and selling those, plus the land is then un-encumbered and sell that -- will NOT make GSL profitable. It is simply selling assets to meet cash flow requirements.

I'm sorry, the only thing to do is VOTE NO as far as I can see. Even if we have to pay someone the management fee (we have to pay GSL management fees every year), it would be better to get another company to harvest and sell -- FAR better than paying 50c for a 17c share.

 

[Investor1]

Thanks Prawn_86 for your comments.

Exchanging forestry MIS interests for GTP shares is not identical to paying 50cents for a GTP share.

After the exchange the GTP share will have an interest also in the forestry MIS interests transferred to the company.

I think this is an important point.

Let’s ignore GTP’s offer.

If all MIS investors vended their shares into a new company that currently had 2 $0.01 shares for 99.999999% of the shares post transfer, would that mean they were receiving $0.01 or less for their interests. No, they are basically transferring an MIS interest in a scheme for a share in a company with the plantation assets. They would be receiving their proportionate interest of the value post transfer, not the value of a company share pre transfer.

As I indicated before, MIS investors will have the majority of the company post transfer. Would their decisions be different if they had 99.9% of the company rather than 70+% post transfer?

MIS Investors are likely to need to be prepared to invest further money to manage their MIS investment should Great Southern go into liquidation. The amount could possibly be vast (new managers, new contracts, infrastructure spend on ports and roading to enable harvesting, possibly new lease agreements, etc). These costs generally must be incurred pre harvest revenues, particularly as to receive harvest revenues the trees must be harvested and exported.

These additional contributions may not even be recoverable from future timber proceeds if the MIS investors cannot manage the process well.

However, collectively, the MIS investors based upon the current market value of Great Southern could do an absolute take-over of Great Southern for circa $50 million.

The argument for voting “NO” proposed by Prawn_86 would indicate he considers the deal is too good for the shareholders and Great Southern is not receiving any appreciative value for the injection of the MIS interests. If the deal is good for shareholders, become a shareholder and buy more shares. Or the MIS Investors together do a take-over of Great Southern.

In any event, the MIS Investors should consider themselves currently the majority owners of Great Southern based upon the offer being made by Great Southern’s management.

MIS investors should recognise this situation (after the restructuring) rather than think they will loose their forestry interests.

In the future, MIS investors will need to work together if they intend to sell their trees without Great Southern. They will have to establish a leadership team and manage their plantations within the terms of their leases. Would it not be easier taking control of Great Southern and replacing the management of Great Southern. By taking control of Great Southern you access control of the land bank and timber markets established by Great Southern.

It is my view, MIS investors will have a better capability of realising value for their forestry interests collectively if they:

1. Own the land
2. Have access to plantation management
3. Timber markets
4. Harvesting capabilities
5. Etc.

I may be a shareholder, but MIS investors practically own Great Southern under the proposal and may by voting “NO” reduce the value of their own beneficial interest. I think MIS investors will loose much more than Great Southern shareholders. We are to be significantly diluted in any event.

Rather, than think it is us versus them, think of it as how to maximise value for MIS investors.

Maybe, the solution is wait for Great Southern to fail and collectively try to buy the assets from the banks’ receivers. However, I do not believe the MIS investors are organised enough to achieve such an outcome.

Again, in my opinion combining the company and investors' assets adds value.

I don’t believe MIS investors will really gain should Great Southern fail, particularly based upon the offer, the MIS investors are practically the majority owners of Great Southern.

 

[Forenth]

Investor1, what are your views on:

- Those investors who are at or coming up to retirement with large MIS investments and will have large tax liabilities to pay this financial year, and

- The effect on the share price if they have no other option but to pay this tax by selling their newly acquired shares.

In this instance they will no longer own GSL shares to benefit from any increase in share price. As Guff as said, any realisation of value from project acqusitions will only go to pay interest, salaries, and sustain cashflow.

You mention carbon trading. My understanding is if you plant a tree you get credits, you harvest a tree you lose credits, ie. only those trees currently standing have credits. If you simply cut it down and replant a new crop your carbon trading is stagnant. Relying on an unproven and still nonexistent carbon credit system as a source of increasing value is just that, unproven. Should we wait years to see if any value at all comes of it as value to GSL shareholders?

GSL said a lot of things when they were selling these projects. My prospectus talks glowingly about the future carbon market however years later there has been no value added as there is no carbon market. Whether its 2010 or 2050 investors shareholders can't rely on if's about what might happen, when they actually have timber on the ground. GSL promised a lot and didn't live up to any of them. Now they promise again and this time we can see the problems. Bad business model, bad management, no cashflow, undervaluing our investments and then charging 50c for 17c shares.

I prefer to wait for GSL to harvest my trees and then if at that time they have a profit I might buy shares, at 17c.

You say if GSL are getting a discount on the trees then GSL shares may increase by that amount. They're getting that increase from investors' pockets! We already own that value right now. Why should we risk it on the share price increasing substantially? By substantially I mean four times. KPMG's break even price of 40 odd cents doesn't work for me. The directors collectively have tens of millions of shares, they stand to benefit personally from our donation of value. Their promises about share price increasing have no basis other that speculation. They still have a bad business model, bad management, and will not have sufficient cashflow.

Without big changes within GSL they will survive to complete our projects and then who knows? Completing the projects is what matters to most of us who have to vote. At the investors meetings no one was asking how can we help the company or shareholders, they were asking where is our investment?

If carbon trading and land assets make shareholders rich then good luck to them, but that's a risk I'm not willing to take. My view is GSL shares won't make anyone rich other than those who get bonus issues. Even those dilute the share value.

 

[Investor1]

Guff,

I understand your position.

I think it is better for MIS investors to take control of Great Southern (i.e. even without buying more shares).

After MIS investors have the majority vote, vote out the Board and management.

It is practically better than appointing new MIS managers for each scheme post the failure of Great Southern. The MIS investors also will have control of the land.

Great Southern's debt is high, but combining the trees with Great Southern's assets should enable the debt to be managed.

Trying to manage separate schemes without ownership of the land will be awefully difficult. It is likely the lease terms will expire for many of the schemes prior to the schemes being able to appoint a suitable alternative manager. Do you really know the cost of managing each scheme without Great Southern?

Take control of Great Southern and in time, replace the management team without the fear of lease terms expirying.

 

[prawn_86]

This whole thing reminds me of the saying:

"If you cant dazzle them with brilliance, baffle them with bullsh1t".

Which appears to be happening here. If it was a good comapny thier shares wouldnt be floundering and have had heaps of rights issues etc. Seems to me management just want to keep their cushy overpaid salaries for a bit longer

 

[Investor1]

Forenth,

Thanks for your enquiry. You have made some very good points.

I will respond to them via a number of replies.

The first comment I would like to make, which seems to be lost in everyone's interpretation of the offer.

If the MIS interests collectively are worth $398.4 million and 816 million shares are issued, why will Great Southern's share price remain at $0.17. That would value the injection of $398.4 million in additional assets as only incresaing the value of Great Southern by $138.7 million.

The share price today does not necessarily reflect the value of Great Southern post restructure.

If Great Southern received $400 million in cash today, the market would be valuing Great Southern at a different share price.

 

[Grumpy Old Man]

Investor1:

1) You repeatedly suggest that a tree owner will have more market power as GTP are the landowner. No matter who owns the land, I understand that the tree owner has the same rights - the scheme & scheme manager have the same obligations and powers irrespective of whether GTP survives or falls.

2) Every major plantation growing region in Australia (other than Kangaroo Island, Tiwi Islands) are already well serviced by export woodchip companies that offer competitive stumpages to growers - and almost all include harvesting operations and planning. This includes two operators at Bunbury WA, four in Albany WA, one in the Green Triangle for hardwood (and two for softwood), two in Tasmania (5 mills), and one in Geelong, Eden, Newcastle and Brisbane. To suggest that growers would have trouble marketing wood is simply ridiculous, and if as you suggest you have involvement in the industry, is also seriously misleading.

3) If a grower owns shares, rather than trees, and GTP fails, the grower loses everything. If grower retains trees, then they have a marketable product that just received the biggest % annual FOB price increase in 2008 for over 10 years.

4) You suggest that there is no domestic processing of plantations in Australia. Also ridiculous, and misleading. Australian Paper own a pulp mill at Maryvale - within 100km of Great Southern's Gippsland estate (Reflex copy paper). FEA own a hardwood plantation sawmill at Bell Bay, within close proximity of many of GTP's Tasmanian plantations. Ta Ann have developed a rotary veneer mill in NW and SW Tasmania close to several large Tasmanian GTP plantations. There is currently new investment in domestic mills in WA, the Green Triangle and N NSW in HW plantation processing facilties.

I do not own GTP shares, or woodlots, but have been following this thread and "doing my own research". The sale of logs or chips from HW plantations in Australia could not be easier to arrange. I am not so confident about Kangaroo Island or Tiwi Islands, but everywhere else GTP have trees is in existing plantation harvesting regions and there are companies like Gunns, or WAPRES amongst others, that I am certain would happily work with growers to resolve a commercial harvest and processing or export arrangement for most if not all plantations.

DYOR & dont believe this GTP spin.

 

[Grumpy Old Man]

Oh and I forgot Norske Skog in Tasmania and Albury, plus Visy Industries at Tumut NSW.

Sure there are others.

 

[Forenth]

Increasing assets of a company doesn't increase share price because those assets aren't making any money. Not yet. They're costing money to be maintained. They will only make money as they're harvested in future years, and the net revenue generated isn't that great compared to GSL's debt and low cashflow. If I recollect correctly they have interest payments greater than most project returns. These assets will be harvested and money used to keep GSL running, not to return to investors and not to reduce debt. It just disappears.

Also, to obtain these assets investors are not getting as much as they would as investors at harvest. Why be happy to be given $50 for a $100 investment just to hope that helps GSL in the future and then that flows back to me? Again my example: To help GSL with their cashflow I forego a $2638 post tax return for a $398 one (per woodlot). Then hope GSL don't spend it all when harvested just to keep themselves afloat. That does leave me with nothing.

 

[Investor1]

Forenth,

Based upon your situation, I think you should seek advice from a financial planner or accountant regarding how you can manage your tax liabilities this financial year and in future financial years.

They may also be able to assist you in determining what may be the required future share price for you to break even or for you to be ahead relative to holding onto the MIS interests and awaiting harvest (i.e. consider the logic raised by KPMG in their opinion).

From your comments, you may not be 100% certain as to which option is in fact better.

However, the lower the market trades Great Southern's shares, the more the market may be assuming Great Southern will fail in the near future which could result in MIS investors having to manage the process themselves. Managing the process themselves may involve contributing additional funds in the near future.

If Great Southern survives into the future and, if the injection of $398.4 million in new assets adds value in Great Southern by even say $300 million rather than the equivalent of $0.17 per share (i.e. $138.7 m), acquiring additional shares may assist in an investor's return calculation and what could be a break even position.

Naturally, acquiring additional shares involves funding considerations and investors should seek advice regarding the same.

Carbon and trees is a complex issue, but Great Southern's estate may be able to generate significant credits and at $20+ per tonne that may be substantual.

If you are an MIS investor in more than one scheme, you could also consider voting differently for different schemes. It seems to me that the longer before a scheme is to be harvested, the greater is the chance Great Southern will fail before that harvest time.

 

[Investor1]

Grumpy Old Man,

Thanks for your research comments.

1) It is important to differentiate between hardwoods and softwoods. For example, the Norske Skog and Visy facilities process softwood and not hardwood woodchips.

2) It is important to understand the cost of transport and its interaction with stumpage prices.

3) If there is only one or a few processing facilities near where a plantation is located, the plantation owner can often be a price taker, particularly when there is an economic downturn.

4) MIS companies such as Great Southern, ITC and Timbercorp have been developing processing facilities and export facilities.