GTP - Great Southern Plantations

[Forenth]

Investor1,
Those are not the questions I asked and not answers to them.

I am not asking for any advice, on tax or anything else. I am asking for your views on share price as we have all been discussing for weeks. The current share price does not yet factor in any effect of investors selling shares as these shares have not yet been issued, if they ever are. The current share price reflects the overall average view of the financial market of GSL's value and possible future earnings. They don't seem impressed.

I am not saying the share price may be low as investors have to sell shares, I'm asking your view on the future direction of price if it is their only source of revenue to pay the capital gains tax they would incur. The shares issued could be 800 million, something like 2000 times an average day's trade. If a number of investors have an urgent need for cash then the effect on share price would be detrimental. You don't agree?

As for long term value that is something entirely in the eye of the beholder. I don't see any value realised from these projects ending up as long term value in the company. The cashflow deficits will use these up long before any second crop will be able to contribute anything. Second round plantings may not incur land purchases but still require all the maintenance costs that GSL have been saying in their plantation reports are so expensive. I would not be surprised to see GSL sell cleared land to keep funding themselves, as low as that price would be.

 

[Investor1]

Forenth,

I have no actual view on what the stock market is actually thinking regarding the future value of Great Southern.

Comments, if I had a share that may have originally cost me $5, and the share price is now $0.17. I would sell it and crystallise a CGT or revenue loss of $4.83 and therefore generate the ability to shelter many future gains. I would have plenty of time to buy it back even if it began to rally again. The capital loss generated could be worth over $2 to me.

If I was another investor in the same situation, I may not like to rally the share price too quickly, as I too may want to generate some capital or revenue losses.

Also, GTP is now not in the ASX 200, so many funds need to exit GTP due to the terms of their fund deed. This overhang may depress price for a period. Maybe moreso than new MIS investor shareholders having to sell to pay tax.

GTP does seem to do more than 100% of its shares in turnover per year. So a reasonable share of GTP's shareholders are traders and not necessarily long term capital investors.

GTP's Management and Board have indicated in their public documents they may not be a going concern by the end of the year and there are risks it will fail its Banking Covenants.

I think the risk of them selling less MIS has increased this year due to people's interpretation of the offer and the fact the share price has fallen, like so many other company' shares.

 

[brty]

Hi,

I've been a keen observer of this thread for quite some time, and I am chuckling away at some of the things that 'Investor' is saying..

such as....

I think the risk of them selling less MIS has increased this year

Ya think?? A person would have to be mad to take up a MIS from a company that is screwing over investors in older schemes. Care to give the name of any FP or accountant that recommends them now???

The issue for Great Southern in my opinion was it was not charging enough to investors

I think you mentioned $8000/ha somewhere else, yet the industry standard cost for planting is about $1500/ha. Yet elsewhere you acknowledge that the initial schemes harvests have been subsidised by including 'other' trees to give an adequate return.
Your arguments smack of someone with a great deal to gain by selling the 'yes' vote, and probably a lot to lose by a 'no' vote.

The price of land in the Green triangle has doubled in the last ~4-5 years because of the buying of the timber companies. Dairy country in this area will fall in price due to falls in the prices farmers will get for milk (20%+). With the timber companies trying to offload 'assets', land in particular, then the 'value of this land can only fall.

What you say is a good deal for MIS holders, is only a gamble. The choice is between swapping for shares, that might go to zero anyway, or hold on and sell the timber to another party to realize some return that will certainly be worth more than zero, and likely worth a lot more than ~$398 worth of GTP shares.

Also judging by what goes on around here, there is not much 'management' going on in the woodlots over 2 years old. (I live in the green triangle with quite a few of these treefarms nearby)

brty

 

[sugar3157]

Hi I have just discovered this thread...I bought 9 lots of trees in 1999 at $3k per lot and they are supposed to mature next year. Does anyone know whether I will lose or make a profit on these. I do not understand what is happening to GTP...please help...thank you...

 

[Grumpy Old Man]

Hi I have just discovered this thread...I bought 9 lots of trees in 1999 at $3k per lot and they are supposed to mature next year. Does anyone know whether I will lose or make a profit on these. I do not understand what is happening to GTP...please help...thank you...

As to whether your woodlot investment will be profitable or not, I suggest seeking independent advice from a forestry consultant. Institute of Foresters of Australia, or Association of Consulting Foresters of Australia can provide one for you (Google either one).

A majority of others on this site seem to believe that accepting GTP offer of shares for your woodlots would result in a signficant loss and that you should vote NO to their current scheme proposals.

But do your own research and make your own mind up. I have no view either way - and your decision will (and should) be determined by your own personal circumstances.

 

[Investor1]

:dunno:

Brty,

I actually am not sure whether I will end up better financially with a "YES" vote or a "NO" vote. (I may at a later date provide details regarding my trading views).

However, I do honestly believe for the MIS investors they are better off that Great Southern does not fail and probably will make a better return via accepting the offer (I do consider the share price is likely to appreciate if the restructuring succeeds and some time in the future I am sure many other companies in the ASX will begin having an increased share price). I do consider the offer was made at an unfortunate time. I am not certain the shares would be trading at $0.17 if the offer was made 12 months ago.

I consider Great Southern is not likely to fail until at least after June 2009, but that does not mean they will be harvesting the trees expected to be harvested in 2010.

I wonder how many are voting "NO" with the expectation Great Southern will actually fail. I don't believe they really know what that means for their MIS investment.

I also consider the MIS investors should give KPMG at least a degree of professional respect and that KPMG may actually be providing a geniune opinion. Before anyone accuses me of being connected with KPMG, I have no connection with KPMG.

Again, I don't consider MIS investors should consider they are being screwed over when they are being basically offered 70+% of Great Southern for their trees. They are rejecting their ability to manage the business. Yet, they generally consider they do not need Great Southern. Maybe each of the Schemes should pre-empt the Bank receivers and offer to buy the land from Great Southern in advance. However, I am not sure leadership has developed amongst the scheme investors. Otherwise, that person may be stating vote "YES" and lets sack the management.

Possibly, everyone's returns could actually be improved via enabling the harvesting revenues be distributed by way of a fully franked dividend from Great Southern. It has a huge amount of franking credits available.

Finally, a thought for Forenth to ask his accountant,
1) Take the KPMG market valuation assessment
2) Sell your trees to your wife.
3) Taxable as income on market value
4) Your wife keeps the trees until the trees are harvested and realises future appreciation in the value as a capital gain.

Could such a concept improve your retirement returns? Even better, could you sell your trees to a DIY Super fund?

 

[wooduk]

Hi,

I've been a keen observer of this thread for quite some time, and I am chuckling away at some of the things that 'Investor' is saying..

such as....





IThe price of land in the Green triangle has doubled in the last ~4-5 years because of the buying of the timber companies. Dairy country in this area will fall in price due to falls in the prices farmers will get for milk (20%+). With the timber companies trying to offload 'assets', land in particular, then the 'value of this land can only fall.


Also judging by what goes on around here, there is not much 'management' going on in the woodlots over 2 years old. (I live in the green triangle with quite a few of these treefarms nearby)

brty

Hayyyyy brty go easy on my tree investment,I like the place and the people are great and when I become a mini gtp I expect to be able to come there
and sit in the shade of the blue gum tree.

 

[Forenth]

Finally, a thought for Forenth to ask his accountant,
1) Take the KPMG market valuation assessment
2) Sell your trees to your wife.
3) Taxable as income on market value
4) Your wife keeps the trees until the trees are harvested and realises future appreciation in the value as a capital gain.

Could such a concept improve your retirement returns? Even better, could you sell your trees to a DIY Super fund?

My accountant is still laughing over this scheme. It could be some time before she can finally hold a straight face. Selling my trees to anyone at current market value, which is close to full value since the project is mostly complete, does guarantee that anyone will have all tax liabilities rolled into one year. That's just not going to work for me and as bad as GSL's scheme. Also any capital gain in value of trees will be minor from this point. This would only be of any benefit those whose projects are about halfway to harvest by giving them 2 different years in which to pay their tax.

If the belief exists that investors can't organise themselves to sell and market their projects to another agribusiness or mill if GSL fail (which I don't think they will), then does anyone believe they can organise themselves to vote out management if they become shareholders? One kinda excludes the other with a degree of certainty. Remember Cameron Rhodes (and perhaps others) have a 12 month severence payout. I wouldn't mind getting $800 000 to be told to get out. Either way he wins, but who would give him a job after the history of GSL?

GSL's share price has been falling long before any world financial crisis happened. It was falling during the boom times too. It reflects GSL's overall poor performance. This is also reflected in GSL's topping up of early project returns.

As for KPMG, they are paid by GSL. Does anyone believe that if they had decided to say this was a bad deal that GSL would have published it? Or would they have gone to another mob and another until someone said yes. I wonder what Price Waterhouse would have said as a former director of them has said this deal is crazy. That's John Hassen by the way, a pre 2000 GSL director as well. He's probably the most knowledgeable and financially experienced investor in any project and I've spoken with him personally. Everything we discuss on this forum is just a part of the problem, he can talk almost endlessly of the problems and losses this creates for investors. But when my accountant tells me the same stuff then I reckon its accurate.

GSL have some investors who have agreed individually, they think they'll get a cattle project to sell so they'll be around for a while. I believe GSL talking about failing and investors getting stuck in the mud is scaremongering such as GSL have tried to do in its literature and informations sessions. Anyone else at those sessions get 90 minutes of GSL diatribe followed by only a few minutes of investor questions before they packed up and left? Bit one sided just like the recommendations of their 'independent' directors who all have lunch with the rest of GSL's directors. The same as my wife and I are 'independent' when we have lunch.

I know what this offer is and when it looks like it and smells like it then I'm not going to believe GSL when they tell me its roses. Basically, this whole thing relies on a huge improvement in the share price of a company that has demonstrated its inability to do anything right or achieve any of its goals and forecasts to its investors, or provide value to shareholders either.

 

[Investor1]

Hi Everyone,

I cannot help myself as at least some people seem to be reading what I write.

So further thoughts:

1) Best Reason For Voting "NO" I have heard.

A friend of mine is in the 2003 scheme. He initially wanted to destroy Great Southern due to the offer. Anger, but I don't think really well founded. He may have contributed the offer as the major reason for GTP's share price fall.

Anyway, his thoughts now are:

"Ideally, you want every other scheme to vote "YES" and yours to vote "NO". "

I think that has sense. He considers the trees are worth more than the share offer, however he does not consider he will be better off if Great Southern fails and his "Scheme" will have to manage the process themselves.

2) My view as worst preferred option for an MIS investor of the following 3 options:

a) Great Southern manages the tree harvest and marketing and I remain an MIS investor
b) Exchange trees for shares.
c) Great Southern fails and the MIS scheme manages the process.

Option c would be my most least preferred.

Therefore, I may vote "NO" but I would minimise the amount I am slagging off the company. I would like the company to survive as a minimum until after harvest date.

3) I would not like to have been a client of Opes Prime. What liabilities would MIS investors have to a liquidator of Great Southern?

4) Grumpy Old Man knows more than me about the forestry industry in Australia. Is he being helpful to enable you to make an informed decision? Maybe not. Regarding valuations, can he help you by giving you guidance on next year's timber prices? Please, Grumpy Old Man provide some real commentary for these genuine MIS investors. I note you commented how in early 2008 there was a very large increase in export timber prices. Many things were looking good at the beginning of 2008, but are not necessarily expected to look great in 2009. There are many variables in making a future valuation assessment of the value of plantations. As my wife would say to me, "It is not always what you want it to be".

Grumpy Old Man, have you an interest in the forestry sector? Or seriously, as you previously indicated, your knowledge is just because you liked reading this thread before I commenced contributing?

5) Do I really think MIS investors are being screwed by GTP. I am not sure I believe a person is being screwed when the offer is basically:

"take over my company and keep the value of the trees in the company you are taking over".

6) For Grumpy Old Man who refers regularly to the Institute of Foresters. One major issue for them is not many young people are applying to study Forestry at university any more. I think if Great Southern fails and also MIS forestry sales across the board are low this year (possibly made worse by the likelihood of horticulture projects being again available), even fewer young people may desire to become foresters in the future.

7) If Great Southern fails, rural employment cannot be particularly benefited. Nor land prices. Some in the rural sector may consider that is a good thing. It may however not encourage Bank's to be overly supportive of lending to the rural sector in the near future. I am not sure if I was a farmer I would like rural prices to fall, unemployment to increase and bank's to become less supportive. For many it may be a bit like being a retiree and seeing their super balance fall because of falling share prices. It also may be like seeing your house fall in value, if you lived in the city.

8) Who I consider may end up owning the MIS investor land? Not MIS investors. How will they manage a competitive bid for land? Who will they trust to manage any further contributions they will need to make in order to bid for the land? Amongst many other issues.

9) Will lower rural prices significantly improve the likelihood of local farmers acquiring their neighbour's property if a neighbour is financially forced off the farm? Maybe not. Lower prices for top quality farm land may encourage a lot more off shore investors searching for cheap rural land anywhere in the world. Particularly, if the Aussie dollar keeps falling. Bank's may also not lend to the Australian buyers. Offshore investors also may have much more money to develop their farms in order to be worldwide competitive. Competition in the various agricultural sectors may actually get worse for the smaller traditional Australian farmer.

10) People who I don't think are respecting the "Aussie Stock Forums"? Those people who are neither MIS investors or shareholders and are not adding any valuable thoughts to this thread. Stupid worthless comments makes me wonder how are they respecting the Forum or their fellow members.

9) Who will gain out of the situation? Whether it is a "Yes" vote or a "No" vote? Hopefully me. But you don't anyway believe any of my thoughts.

 

[Grumpy Old Man]

1. Please, Grumpy Old Man provide some real commentary for these genuine MIS investors. I note you commented how in early 2008 there was a very large increase in export timber prices.

2. have you an interest in the forestry sector? Or seriously, as you previously indicated, your knowledge is just because you liked reading this thread before I commenced contributing?

3. For Grumpy Old Man who refers regularly to the Institute of Foresters. One major issue for them is not many young people are applying to study Forestry at university any more. I think if Great Southern fails and also MIS forestry sales across the board are low this year (possibly made worse by the likelihood of horticulture projects being again available), even fewer young people may desire to become foresters in the future.

Investor1:

All of the information posted by me on this site is freely available on the Internet via Google. Not sure how perceived involvement in industry would make any difference anyway? If you have any concerns regarding info presented regarding industry, feel free to check it.

Who knows what the future price for export chip (or any other product will be)? Historical information on commodity pricing is freely available via ABARE (www.abare.gov.au) - this includes hardwood and softwood woodchips. Shows a rise in prices every year since 1999 - but will this hold true this year? Your guess is as good as anybody elses.

In terms of forestry enrollments, not sure how that makes any difference or is of any relevance to this thread?

 

[brty]

Hi investor1,

From the annual report, explaining how GTP could become insolvent.....

or should the 2009 MIS sales result be low

I quoted this several hundred posts ago.

I believe that the chances 2009 MIS sales being low is very, very high. I noticed that you have not replied about this aspect.
That in itself is a good enough reason for most MIS holders to vote NO.

brty

 

[wooduk]

just to break the theme a little bit,does anyone know what lignor ltd is getting from gsp?

I have noticed that gsp was to supply 200,000 tonnes of timber for value adding to make or process into timber structural beams and that a multi million dollar processing plant was or is to be used in Albany WA.

The latest I see is that the timber is now being sourced from another grower called ITC,reading this on the web I get the impression that this company Lignor can not get enough of the primary resources, that is trees and that they are or will approach independant growers,which I assume are local small growers.

The statement says that the future looks bright and this is 2009

So the question that I am asking,is gsp providing the 200,000 tonnes plus filling the order books that it has contracted for pulp with the Japanese.

 

[Investor1]

Hi brty,

I refer to my comments earlier:

"My view as worst preferred option for an MIS investor of the following 3 options:

a) Great Southern manages the tree harvest and marketing and I remain an MIS investor
b) Exchange trees for shares.
c) Great Southern fails and the MIS scheme manages the process.

Option c would be my most least preferred.

Therefore, I may vote "NO" but I would minimise the amount I am slagging off the company. I would like the company to survive as a minimum until after harvest date."


Restructuring may not require Great Southern to rely predominently on MIS sales into the future.

If Great Southern fails, what I am trying to indicate is existing MIS investors may have an additional cost should they desire to harvest their trees.

As Grumpy Old Man indicates, we can all have a guess as to the future value of timber.

Those that vote "NO" and don't understand the timber market risks may have to spend more money to manage their trees going forward. They may also find out their trees will not generate them enough money to cover their additional funding.

brty, maybe if Great Southern is going to fail soon, as you imply, is take any money and run the best option?

At least Forenth has adopted a clear position, Great Southern will not go bust prior to his trees being harvested.

If you are in the 2003 scheme with a harvest date in 2013 are you also taking such a position? How prepared are you to contribute additional risk expenditure to determine whether you will realise value for your trees? How much are you relying on the valuation report, when you at the same time are not relying on the KPMG recommendation?

As Grumpy Old Man indicates everyone needs to do their research. But, unfortunately, freely available research regarding future timber prices and plantation operating costs (harvesting costs, transport costs, processing fees are not that readily available), even on google. Nor the costs of bringing the MIS investors together.

Again, how certain are the MIS investors about the real future value of their trees? The valuation report was provided to them by the same party they don't trust regarding any other information.

Or should they take some money and run, if Great Southern is to fail within the next year or so?


In my opinion, the fact it seems Great Southern has generated such a bad PR position as a result of the anti Great Southern campaign, and MIS sales may be negligible, is even more reason to accept the offer. Or quickly research what it means to them if Great Southern fails. As I stated earlier, by all means vote "NO" but don't actively campaign to destroy the company until after you have received your harvest distributions (i.e. until after your trees have been harvested).

It is unlikely 6 months ago you would think oil would be about US$40 per barrel today. I continue with the view, other than wishful desire as to a value for their trees, the MIS investors have not really analysised the value of their trees to them should Great Southern fail. I would propose the outcome may for many be a negative value relative to accepting the offer. If Great Southern fails, they are likely to test their views by a request to fund more expenditure.

I also think funding a law suit is not much value if you think the company is broke either.


I think my comments regarding:

"As I stated earlier, by all means vote "NO" but don't actively campaign to destroy the company until after you have received your harvest distributions".

By the No vote campaigners not adopting such a position, I think they are not acting logically and thus, don't think they are doing themselves any favours.

 

[Grumpy Old Man]

GTP released an information sheet on their website in 2008 called "Understanding Your Investment Returns". (http://www.great-southern.com.au/Plantations_Investors.aspx)

Having read this carefully, I believe their summary of the value of the trees is pretty good - in that it gives a range of possible outcomes for all the variables - certainly seems consistent with other information that is freely available.

GTP explained that the worst case scenario return to growers for their plantations would be $1630 - $4010 per woodlot by harvesting and selling the trees. Best case is significantly higher.

Brty etc, what do you reckon the share offer is worth to you under the 'best case scenario'? Realistically?

Could investors look at it as the difference in these two numbers (worst case stumpage less best case share value) x the total number of woodlots out there, as the amount that investors can afford to spend on consulting advice and representation independent of GTP?

Any estimates of this number from the peanut gallery?

 

[Investor1]

Thanks Grumpy Old Man for your input.

There are also additional variables including a discount for time value of money and GTP's deferred management fee percentage, etc.

But that is a great starting point.

MIS Investors in assessing share price should also consider whether the injection of assets will actually add value to the share price, overtime. This is the point KPMG may be trying to indicate. It may not be the price on any particular day that counts, but the price the shares may trade in during the period from acceptance to what would have been the harvest distribution date.

 

[Grumpy Old Man]

Investor1:

You seem to be ignoring three pretty fundamental things:

1) Shareholders & not MIS growers are responsible for GTP debt (current liabilities plus interest bearing loans around $1.1bn at 30.9.08 according to GTP);

2) Share value is a function of the number of shares on market - current proposal would massively dilute pool of shareholders;

3) New shareholders - many of whom would sell to liquidate their new asset would push share price down further (for short to medium term anyway);

Ultimately 70% * $0 = $0

GOM

 

[Investor1]

Grumpy Old Man,

You have disappointed me so much.

You have been so technically correct until now.

I had so much respected your input up to this time.

Now, you let yourself down with 3 simplistic statements.

I was going to comment on each of your statements in my lengthy way, but you have just disappointed me so much I am too angry to respond.

 

[drsmith]

Those three simplistic statements are very valid.

If GTP has got itself into a position where it needs the physical MIS assets, whose to say it will manage the value of those assets any better than existing shareholder capital.

While the MIS assets in the hands of GTP would keep it alive for longer, the nature of the new relationship would in my view be parasitic.

 

[brty]

I do not own either shares or woodlots, I have stated such earlier on in this thread.

I do however have knowledge of the MIS industry and live very close to many 'woodlots' from various companies.

In this area (where I live) there would be no trouble selling the trees to be harvested to other companies.

The market is valuing GTP shares (the offer) much lower than the price expected at harvest, less all associated costs. As an investment, current MIS holders would be better off paying $400 to buy some shares in GTP and voting NO (gives a bit each way), rather than just voting yes.

Really investor, Why should someone give up $1600-$4000 value for just $400 worth of shares?? If you want $400 worth of shares, just buy them and keep the higher valued trees.

brty

 

[Wally1952]

I know I haven't posted much here, but I am looking from the sidelines with great interest and reading every post. There were many of us from my employ that entered into this, and similar schemes, many years ago from advice given by a financial advisor. I was lucky, or unlucky as the case may be, I only bought into bluegums. Many of the others got involved with tea-tree oil, lemons, grapes etc and have been subsequently burned! I am relaying the relevant info that is posted here to my friends. I'm afraid "Investor1" they all have the same opinion as I do, and that is, they smell a rat! They feel you are pushing the "Yes" vote a little too strongly to be totally independant of Great Southern. I bought into GS and have 12 woodlots. It was to provide a few years of holidays for my wife and I after retirement. I doubt that is the case now. I DO NOT want their shares and neither do my friends. In fact some are getting so sick of this company they would be happy to see it go under! I would rather not see that happen, but as some say "they are a bunch of crooks"!