GTP - Great Southern Plantations

TheAnalyst said:

I have been looking at the stock and have been wondering myself....i noted that the net profit for this year is 119.6 million which is down on the forecast and Mcquarie bank has down graded next financial years net profit to 151.0 million but even at these figures and compares to other companies earning and P/E ratios the stock is under valued....so what is the problem...well firstly i looked at how many ordinary shares are on issue and realised that the market which means the big players who make up the majority of share ownership (Banks, Funds and other corporates) rated the P/E for the stock maily between 6 and 8 %.

Then I realised if this is the case then the stock on the 119.6 million net profit would be valued at roughly $2.80 and as i have noticed that slowly and cunningly the stock has been off loaded as the major players get the best price for the stock without causing a fast collapse by the volume of sales.

Then on the Mcquarie banks forecast of a net profit of 151.0 million that means with the P/E ratio of between 6-8% the most it can go to is $3.60.

So i reckon and this is my opinion it will go below $3 and then collapse. Eventually if the market decides it should earn a higher P/E ratio then that will help lift its price.

Warning: do not rely one my opinions go elsewhere

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TheAnalyst said:

Anyone done some specific research on GTP warrants, particularly installments?

Would love to hear of it.

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Kauri said:

Having flipped around a few sites found this alternative P/E workout...

Owners earnings =depreciation+amortisation + net income +- one offs - capex.
In 2003 this gave ratio of 8
Currently gives 30

Also the net increase in cash held came from the share issue, so with diluted EPS and costs of ( as yet ) non producing assets purchased this has resulted in ROE going down.

Having said that, on the tech front it may be in early stages of cup/saucer.

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Kauri said:

TheAnalyst...
OK.. fundamentals aren't one of my strong points I might be confusing myself here.
What I am trying to figure out is what were their basic earnings. I note they raised $140 million through a share issue and $40 million through proceeds of TREES, ( this increased their share base by approx 65% ).Against this they bought Sylvetech and Environwest. Med term both good but short term I dont think they contribute much to the bottom line. So instead of 225 million shares they now have 400 million shares, against this assets have increased but ROA/ROE isn't? Is any of the cash left over from the above raisings minus the asset purchases show up in the books and if so does it affect some of the fundamental ratios? Basically, how did the business perform stripped of the raisings and purchases and how will it perform in the immediate future? .......Now I've given myself a headache. :hammer:

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abucs said:

Hi guys,

have enjoyed the discussion on GTP and hope to continue to hear all the views.

I have owned GTP for 4 or 5 years now and have been continually increasing the stake.

I'm still quite bullish but things i think that impact the shareprice negatively are :

1. Low return from GTP's first harvest.
2. Low dividend payout.
3. Capital raisings.
4. Lack of surety on future government legislation (deductions and tax rates)
5. Lack on surety that the business will contine to sell it's schemes.

To address these issues respectively.

1. (Low return from 1994 scheme) GTP says that they have learned a lot from the first scheme and future returns (quality and quantity of wood) should increase. This concern though is fair enough. The only other thing i would say is that the entry price for each woodlot ($3300) has remained fairly stable over the last few years while the price of woodchip continues to increase. So the returns for subsequant investors in the woodlots (subsequant to 1994) should be guaranteed to increase. And this increase on return should continue each year.

2. (Low dividend payout) ha ! growth verse 'money in the pocket'. GTP continue to invest for the future and they expect sales to continue to increase and thus keep buying more land. It's good that the company is so bullish on the future but this continual re-investment hides just how well the company is going and lowers the EPS. If you look at the continued amount of land that GTP is obtaining you see that the profits they are not paying out in dividends, together with large amounts of cashflow are being used to buy land. Of course GTP could stop buying the enormous amount of land and make more profits and pay higher dividends. The question is when will they decide they have enough land ? For example buying 35,000 hectares of land each year costs well over $100 million. (30c per share). The rotation of the land will cut CAPEX dramitically in the future.

3. (Capital raisings). Ditto from above. The buying of Sylvatech and Environest is a good example. The extra shares issued dilute EPS straight away but the advantages are in the medium to long term. The 100,000 hectares from the Tiwi islands will cut CAPEX over the next several years. The cattle project that will be sold through GTP's large network will provide more and more re-curring income in future years as the cattle schemes are progessively expanded. It also provides some diversication and targets the agribusiness investor that wants a return not in ten years but much sooner.

4. (Lack of future Government Support). Well this could cause problems although all of the talk has been positive to date and the government wants to support the industry as it is 'more green' (planting new trees against cutting native bush) and helps with the balance of payments (we currently import more wood products than export) and helps rural communities (more jobs and wealth). With tax cuts (present and future) it will be interesting to see how they impact sales and this could affect the share price quite dramatically (in either direction).

5. (Continuing to sell schemes). This of course can be affected by 1. and 4. above or by competition from other investment alternatives. If you look though at how much plantation land GTP owns now, and what the forecast future earning of that wood will be, GTP could cease selling schemes and still be quite profitable down the track. Of course you'd have to wait 10 years for GTP to make the wood sales in their own right but the amount for sales will be huge so that is the fundamental that underpins anything that could go wrong. As the years progress and GTP continues to own more and more plantation land, vineyards, olive groves and cattle, their position will continue to get stronger and stronger in my opinion.

Sorry for the initial long post on this one.

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abucs said:

Hi Julia,

yes, i do own GTP. I have about half my portfolio in GTP at an average entry price of $2. I have added quite a few since it's latest fall buying from $3.78 down to $2.77.

I guess the answer for how much of the portfolio to invest in 1 stock is a personal matter. I am not looking to buy any more but i wouldn't be selling for anywhere near these prices either.

If i could only pick one stock though, this would be it. My own thoughts are to sell a third of the stock somewhere between $5 and $6 and to hold the rest indefinitely.

Happy investing.

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abucs said:

Hi Julia,

yes, i do own GTP. I have about half my portfolio in GTP at an average entry price of $2. I have added quite a few since it's latest fall buying from $3.78 down to $2.77.

I guess the answer for how much of the portfolio to invest in 1 stock is a personal matter. I am not looking to buy any more but i wouldn't be selling for anywhere near these prices either.

If i could only pick one stock though, this would be it. My own thoughts are to sell a third of the stock somewhere between $5 and $6 and to hold the rest indefinitely.

Happy investing.

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abucs said:

Hi TheAnalyst.

You could be right. I don't tend to go in much for derivative trading.

Regards,
Abucs.

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