Mighty River Power share offering - ANYONE?

[Super_BQ]

Anyone pre-registered and with recent news, have any intention on buying the shares?

They've released an indication on the IPO price between $2.35 to $2.80. I've been doing some due diligence on MRP annual report and crunching some figures.

The big question I need to find out is what is the total outstanding share float that is listed when they go IPO (quite often total outstanding shares on the financial statement is not accurate). During the transition of going public, more shares (sweeteners) can be allocated to certain groups. The amount of shares has an impact when assessing if the price is a good buy.

Going by the price band of the IPO and the 2012 annual report, i'm getting a P/E range between 48 to 58 which is insanely high. PE can be interpreted as, going by their 2012 earnings, it would take 48 - 58 years for the earnings to fully pay the price of the ipo.

[IanW99]

For anyone who is interested, you can now download the share offer document from www.mightyrivershares.govt.nz/

Ian

[Georgebulldog]

I pre registered, just in case, & now I keep getting spam e mails talking of stocks & bonds, not a happy bunny & it's funny how I was supposed to have got a call to explain this but they've never called me back either

[Super_BQ]

I'm surprised they have a ph# for new investors to call. If the subject isn't about their stock offering, I don't think they can help you on the spam emails. Anytime you give out your email to someone, there is a risk that it can get caught in spam.

Taken from here: http://www.nzherald.co.nz/business/n...ectid=10875760

This places the company on a prospective 2014 price/earnings (P/E) ratio of between 20.5 and 24.4 for the 2013/14 year at the indicative IPO price of between $2.35 and $2.80 a share. This compares with prospective P/E ratios of 19 for Contact Energy and 18.9 for TrustPower for the 2014 year.

I can't see how they get a forward looking PE of 20.5 to 24.4 when 2012 financial year PE would be closer to 50. Perhaps they're using the EBITA figures where as i'm using the bottom line (after taxes etc. ) figure. Or they're expecting a doubling in profits for the 2014 year? More comparative analysis is required. Another figure i'm getting discrepancies is the % return on investment. Again based on the IPO price range, 2012 earnings worked out to be 1.7 to 2.0%. But other news releases are saying a return yield of 4 - 6%. So if that is the proposed dividend, then a portion of the retained earnings (cash on the balance sheet) will be paid out in 2014 year to meet the expected payout on the dividend yield. Keep in mind, all major banks are paying around 4.3% for cash deposits. An IPO price of $2.35 is by far NOT a bargain - maybe someone else needs to input their findings because what i've looked at the reports, it doesn't seem the all the figures are that clear.

In regards to the Tiwai Point (Rio Tino) aluminium operation, I would be surprised if they continued operations there (or struck some sort of deal to stay). More light should be brought up to what Rio Tinto is doing overseas. The Kitimat smelter plant in BC (Canada), and owned by Alcan/Rio Tino, has a horse of a different colour of operation and ownership model. Unlike the Tiwai operation, the Kitimat smelter plant sources electricity from their wholly owned hydro dam built on site (890 MWhr capacity). They have no need to discuss deals with electricity providers (like Meridian) because the hydro them they've built is for their own use. Any excess electricity produce goes into BC Hydro's electrical grid. Quite simply, this cost savings can not be matched on the NZ level even if most of the bauxite has to be shipped across the Pacific Ocean from Australia.

http://www.kitimatworksmodernization...ernization.php

[Super_BQ]

As an update MRP shares closed the day at -5.20% $2.37 from an IPO price of $2.50

http://www.radionz.co.nz/news/politi...are-price-fall

Call it a con by the NZ gov't or what ever, the decline in share price is what I expected.

Now on for the next IPO Genesis Energy by the NZ gov't.

[IanW99]

Strange comments?

The market hasn't closed yet, although its looking like it might actually be lower than you quoted for the day.

The next IPO is Meridian Energy isn't it?

Ian

[IanW99]

...
The market hasn't closed yet, although its looking like it might actually be lower than you quoted for the day.
...

The price actually rallied and close was $2.440.

Ian

[Super_BQ]

I'm reading next IPO is Meridian. You can bet it will be valued lower than MRP due to it's recent performance but still at valuations way too high to spark my interest. As long as the NZ gov't is on the receiving end, they will try to milk the IPO price as high as possible out of the public. The question I ask is on a worldwide basis, what's a suitable PE ratio for an electric utility company? High growth companies have high PE and vice versa for low or no growth companies. Note that I say growth in this context, I mean growth in market share for the company which translates into higher earnings. A company like Facebook has a huge world wide market potential for growth and thus income, that is why it has a current high PE of 500+. On the other hand look at BP's oil stock which has a PE of 6. It may be comparable to MRP in terms of it's dividend payout. Yet, it's market growth is limited due to competition etc. Should MRP PE of around 25 (by their estimates) or (40 by my estimates) be justified?

There's also a problem in NZ where choosing shares into a company is based on how much dividends it can pay (or rather, the emphasis on buying shares in NZ is for it's dividends) and yet, having little regard on the capital gains of the share price itself. So when I looked at the MRP expected dividend payout scheme, I was surprised they were going to pay a dividend rate greater than the annual projected profit. The effect being the dividend payout in MRP becomes a pay out of capital rather than a pay out on capital - to me, I don't consider getting paid back on my own dollars to be an attractive proposition.

Can we question going in joint venture with a gov't owned operated company a wise idea? Can a gov't owned entity be as efficient as a private one? What about Solid Energy and how the CEO cooked up the books on that gov't owned operation (lack of accountability).

[Super_BQ]

http://www.radionz.co.nz/news/busine...rice-forecasts

$2.20 today - next stop ?

[batgirl1001]

If you are buying into Mighty River, you are buying for the long term and when I mean for the long term, you are looking at dividend returns and capital growth should there be any. If you are expecting to trade on speculative gains, it wouldn't happen. I certainly wouldn't be buying public-listed shares because they are hardly gains to be made here. You can expect to earn more from term deposits.

I had my own experience in this area and 16 years from now, I still own some shares in a public-listed company. The company is successful and the shares did rise in value, the dividends are good. But would I do it again, certainly not. Not if I want good gains in a short period. Don't expect to get rich on buying 1000,2000 individual shares.