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GNS - Gunns Limited

Discussion in 'Stocks 0-H' started by Smurf1976, Jun 24, 2005.

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  1. Smurf1976

    Smurf1976

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    GNS (Gunns) has taken off like a rocket over the past few days.

    I am aware that this company is controversial due to woodchipping - I'll leave judgements there to individuals to decide. It also has interests in vineyards and hardware retailing and a proposed pulp mill in Tasmania.

    One stage of the public consultation period for the pulp mill has now ended and presumably explains the share price rise.

    As part of the pulp mill proposal, GNS has announced a 550% increase in the area of land required. Officially this is for a buffer zone etc. around the mill. My personal thoughts in view of this and the location chosen for the mill is that the extra land is probably to enable the construction of a paper machine on site at a later stage. Whilst increasing the overall impact, paper production would tend to enhance the political and (for many) public appeal of the project.

    A brief summary of the objections being raised to the proposed mill and my comments (mine not GNS') on them is as follows (this is all non-financial comment so stop reading if you just want to check out the share price. As I said, it's going up):

    1. Dioxin emissions. The mill will produce small amounts of dioxin as a waste product. This will be discharged into Bass Strait via an ocean pipeline. Waste will NOT be dumped in the Tamar River as opponents assert.

    Comment: Dioxin from pulp mills has been almost totally eliminated in recent years. The emission levels would be a very small fraction of those of the pulp mill which operated at Burnie (Tas) from 1938-1998. The Wesley Vale mill also used a chlorine bleaching process (the source of dioxins) until recently and did not appear to cause problems.

    The major source of human exposure to dioxin in the Tamar Valley is thought to be domestic woodheater emissions. Air quality in the region fails national standards with domestic woodheaters known to be responsible for in the order of 95% of particle emissions. Motor vehicles are also a significant source of dioxin with desktop studies during the late 1980's suggesting that Tasmania's motor vehicles emit 10 times the dioxin that a pulp mill proposed at the time would emit. The mill proposed by GNS would emit a minor fraction of that previously proposed mill.

    2. "I don't believe that only steam will come out of the boiler stacks".

    Comment: Buring of the waste black liquor is standard pulp industry practice. It is valuable as an energy source. It is no more toxic or hazardous than the combustion of other fuels and with modern boiler designs will NOT emit visible smoke. It is generally regarded as a relatively clean energy source and does not contribute to global warming. It is renewable (unlike gas, oil, coal). The mill will be completely self powered from this source apart from during startups following maintenance shutdowns etc. Surplus energy will be fed into the grid where it will displace electricity from fossil fuels.

    As previously stated, air pollution in the region is almost exclusively the result of domestic woodheaters.

    3. The mill will use a lot of water and supplies are not adequate.

    Comment: GNS proposes a dam to supply water to the mill. 50km away from the mill site, Northern Tasmania receives the outflow of the Poatina Power Station (hydro-electric) which diverts water which would naturally flow south towards Hobart. Flows in the Tamar River are thus well above natural levels particularly during Summer. Trevallyn Dam, another hydro scheme in suburban Launceston, has available far more water than the mill could possibly use. If necessary, a 50km pipeline could connect this major water source to the mill although GNS does not consider this to be necessary on the basis that its propsed smaller dam should be adequate.

    In short, there is no problem with water - just a matter of building the infrastructure which GNS proposes to do.

    4. The mill will use native timbers.

    Comment: The issue of logging is separate to the mill itself. The proposed mill involves processing of timber that is presently exported unprocessed and does not involve additional logging. In the past, the economic solution to the loss of major development projects in Tasmania has been to increase logging as an alternative industry. 40% of the land mass of Tasmania is parks and reserves including the large World Heritage Area.

    5. The mill will impact local residents and real estate values.

    Comment: The proposed mill is located at Bell Bay. The entire area is zoned "Major impact heavy industrial" and residential development is prohibited. The aluminium smelter (Comalco (Rio Tinto)) opened in 1955, the TEMCO ferro-alloy plant (BHP Billiton) opened in 1962 and the Bell Bay Power Station opened in 1971. Also in the area are a major port, fuel terminal, and Medium Density Fibreboard manufacturing plant. An automotive wheel casting plant operated at Bell Bay some years ago. The proposed mill is on the same site as the existing wood processing mills and ship loading facility operated by GNS.

    Objections from "local" residents thus seem to be rather questionable. A bit like living next to an airport and complaing about planes. The area has been promoted as heavy industrial since immediately after World War II. Directly opposite on the other side of the Tamar River is an operating gold mine.

    6. The stack is too high.

    Comment: The proposed height of the chimney stack is 120 metres. This is the exact same height as the nearby Bell Bay Power Station and is relatively short for an industrial stack (it doesn't need to be too high when not much is going to come out). This is considerably shorter than the stack at Newport (Melbourne). The stacks at Loy Yang (Vic) are more than twice this height. Likewise that stacks at Bayswater, Eraring (both NSW), Tarong, Callide (both Qld) etc. are higher than 120m.

    7. It will look ugly.

    Comment: It's a heavy industrial zone, what did anyone expect? The power station, wood mills, fibreboard plant, aluminium smelter, ferro-alloy plant, port and bulk fuel storage aren't exactly objects of beauty either.

    As I have stated, judge for yourself the merits or otherwise of this company and it's projects. I am simply alerting those interested to the share price action and outlining the major public issues that have been raised so far, most of which seem of a political rather than factual or scientific nature.
     
  2. markrmau

    markrmau

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    Re: GNS

    I bought in at $3.60 this morning.

    The Japanese are going to need plenty of those little wooden disposable chopsticks to eat their whale meat with.
     
  3. markrmau

    markrmau

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    Re: GNS

    I closed this position for minimal ($200) profit because someone is unwinding a massive long position through a program trade.

    Looking to re-enter when they have sold themselves out.
     
  4. It's Snake Pliskin

    It's Snake Pliskin

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    GNS - Gunns

    This has really gone down this year. Does anyone see this turning around?
     
  5. Julia

    Julia In Memoriam

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    Re: GNS

    The sector has seen a significant downturn this year, particularly Great Southern Plantations which I hold. Gt Southern has taken off in the last few days (up 17%) last week. I just had a look at a chart for Timbercorp and it has also gone up, though not dramatically.

    What I'm wondering is that the sector seems to go in and out of favour, and maybe the time has come for the market to like it again. Gt Southern's rise I think was sparked by an alteration in the terms of the TREES3 issue.

    Julia
     
  6. It's Snake Pliskin

    It's Snake Pliskin

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    Re: GNS

    Julia,

    Maybe it's because of the low P/E of this sector that they are now starting to take off. Willmott forests has really dissapointed this year as has Gunns. Something is up that's for sure.

    Snake
     
  7. Smurf1976

    Smurf1976

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    Re: GNS

    The media in Tasmania has been saying that GNS woodchip sales volumes are down. Not sure by how much though (but it's enough to be news worthy).
     
  8. mime

    mime

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    GUNNS LIMITED

    Anyone know why this stock is on a downward trend? With timber becoming more and more expensive with demand growing and a PE of around 10 I would have thought this stock was a winner. Maybe it's a good buy now?
     
  9. Alfie

    Alfie

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    Maybe it was caused by the neg import figures of wood in Jap (around the 14th of Jan), and lower forecasts for Jap imports? + one of the big traders exited the market.
     
  10. Julia

    Julia In Memoriam

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    Saw a few days ago where one of the plantations was affected by bushfires, can't remember who it was except that it wasn't Great Southern Plantations which is where my interest lies. The company was trying to hose down the situation (no pun was actually intended), said they had adequate fire insurance etc., but that could be why the stock is affected. It has also been noticeable that Great Southern has risen sharply the last few days.

    Julia
     
  11. It's Snake Pliskin

    It's Snake Pliskin

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    It could be an interesting day for GNS today. :band

    Technically it could be starting to turn - long term. I`m not bottom picking but there seems to be some support of late. Yesterday`s close sets up for a good day today if volume wishes to support it. Time will tell.
     
  12. It's Snake Pliskin

    It's Snake Pliskin

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    :samurai: Bought 2500 units today at $2.86
     
  13. It's Snake Pliskin

    It's Snake Pliskin

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    :bs: Well it ended up 1.4% or 4 cents another good close. Higher lows and more volume on up days will be welcome.
    It goes ex-div on 20th March - 6 cents. Not much but a little extra incentive.
     
  14. It's Snake Pliskin

    It's Snake Pliskin

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    Another good day volume wise and price wise. Volume in the last hour was high and it ended at the high. There is a small uptrend now in place which is motivating now seeing a better volume day.
    $2.97
    3,900,000 odd shares traded.

    :alien2:
     
  15. It's Snake Pliskin

    It's Snake Pliskin

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    Sold at $3.03 today.
    Sellers are queing up.....I see $3.06 as resistance but the sellers queing may not permit this on Friday. I`m out to reassess before it implodes.:alien2:
     
  16. mime

    mime

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    They are having a legal battle with a group of greenies. If court rules in favor of gunns it could have a nice effect on the share price.
     
  17. Smurf1976

    Smurf1976

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    The Tasmanian state election is today. The outcome could have significant implications for GNS activities.

    Both Labor and Liberal are supportive of GNS and its forestry activities, including the pulp mill (though Labor support is said to be conditional on it meeting environmental approvals whereas Liberal support for the pulp mill appears to be unconditional).

    But the Tasmanian election is not simply a Labor versus Liberal contest.

    Realistically, all polls indicate that the Liberals have no chance whatsoever of forming majority government in Tasmania. Locals are still wary of the big borrowing, selling hospital equipment etc that they are associated with in this state. And no doubt some will not trust their claim that they would not sell the Hydro if elected (an issue over which a great many Tasmanians hold very strong views). It is worth noting that, contrary to conventional wisdom, the business lobby backs Labor in Tasmania. The Mercury newspaper (only newspaper in Hobart) has also backed Labor via its editorials.

    So the question is whether Labor is re-elected with a majority or loses its majority and forms government with the Greens. Whilst theoretically possible, a Labor-Liberal coalition is presumably off the agenda if for no reason other than that doing so would firmly establish the Greens as the major opposition with a future chance at majority government, a postion very strongly opposed by both Labor and Liberal.

    A majority Labor government would mean business as usual for GNS. A minority with the Greens is potentially disastrous for GNS.

    I do not intend this as a political comment as such, but the Greens have a long history of stopping at nothing to have their policies implemented and this goes right back to the very beginnings of what is now the Australian Greens. They have already stated that they will do this again if part of a minority government. Their key issue relates directly to curtailing the activities of GNS and stopping the proposed pulp mill. It is foreseeable that they would bring down any minority government which refused to meet their demands.

    Realistically, if a minority government is formed then I do not expect it to last. It will work until some critical issue, quite likely one involving GNS, makes the situation unworkable and effectively forces a new election. Probably within 30 months IMO but of course this is speculation on my part (but backed up by the history of the previous Labor-Green (1989-92) and Liberal-Green (1996-98) governments).

    Given the nature of the expected outcome, it is possible that every single vote will need to be counted before it is clear who will form government. According to the media, this could take literally two weeks given the need to count postal votes, Antarctic base occupants' votes etc. Of course they're all always counted, but with the election predicted to be close it may not be possible to assume who has won until all are counted.

    I'll update this thread later this evening according to the election results so far. Labor needs 13 or 25 seats (in 5 electorates) to win outright.
     
  18. RichKid

    RichKid PlanYourTrade > TradeYourPlan

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    Timely post considering the technical picture for GNS too, trying to take off from that bottom, looking forward to your updates Smurf.
     
  19. Smurf1976

    Smurf1976

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    Tasmanian election result as at 10:30 pm daylight savings time. 80 - 90% of the vote counted.

    In short, Labor has won majority government. Premier Paul Lennon has claimed victory. 14 seats, maybe 15 is ABC commentator's best guess. Slight fall in overall Labor vote. Made comments about health, children and Aboriginal reconcilliation as being goals in addition to maintaining strong economy, jobs etc. Also gave the football scores!

    Liberal leader Rene Hidding has conceeded defeat. Stated that "the people always get it right" and he accepts the result despite it not being to his liking. Made comment to the effect that if Labor is to be in government then it is good that they have a majority. Party leadership to be discussed. 7 maybe 8 seats is ABC commentator's best guess. Slight rise in overall Liberal vote ends 14 years of declining Liberal vote according to Senator Eric Abetz's comment on ABC TV.

    Greens have 3 seats (ABC commentator's best guess). Greens leader Peg Putt made speech accusing vested interests of campaigning against Greens and did not conceed defeat as such. Claimed that election was Gunns verus the Greens and that "Gunns has won". I do not agree with that claim since health was a far more prominent issue than forestry / pulp mill. Greens supporters waved party logo placards constantly including next to Labor and Liberal leaders during their speeches.

    So no change overall but Labor has a few new members due to retirements etc whilst the Liberals do seem to have bottomed. The fall in Greens support suggests that oppostion to the pulp mill is not particularly strong (notable that the Greens performed best in the Hobart city electorate of Denison and poorly in Bass where the proposed mill is located).

    There is now no significant political hurdle to Gunns' proposed pulp mill apart from protesters on site etc assuming that is passes the regulatory assessments and that GNS is actually serious about building it.
     
  20. bunyip

    bunyip

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    Folks

    I've come late to this discussion, having only joined the forum about two weeks ago.
    For the last nine months or so you've been discussing Gunns fundamentals, forming opinions about the company's future prospects and future stock price direction, and some of you have been taking positions here and there.
    What intrigues me is that the stock has been in a clearly defined downtrend for most of this time. Sure its put in a some rallies along the way, but these rallies have been within the context of a clearly defined weekly downtrend.
    So my question to you all is this......why the heck do you buy downtrending stocks?
    I guess your answer would be something along the lines of "Because the stock will go up sooner of later if it's fundamentals are good".
    And my response would be...."Maybe, maybe not - but why not buy stocks that are strongly uptrending RIGHT NOW, rather than stocks that may or may not uptrend at some time in the future".

    Except for the hiccup back in October, the overall market has been strongly bullish over the 9 months or so that you've been discussing GNS. In a strong bull market there are dozens, even hundreds of stocks that are powering upward in nice sustainable uptrends. It doesn't take a university degree to figure out that these stocks are likely to perform much better than a downtrender like GNS.

    Another case in point is CMQ, which is discussed in a different thread on this forum. This thread was started in 2004 when CMQ was above $2 but was in a powerful downtrend. Without going into details, suffice to say that some of our members appeared keen on this stock for a variety of fundamental reasons.
    Someone said he considered it a buy below $2.
    The stock has downtrended pretty much ever since and is now trading at around 48c.
    This shows what can happen if you buy downtrending stocks because you think they're fundamentally sound or undervalued.
    The fact is that neither you nor I nor anyone else knows the price at which a stock is good buying. The brokers don't know either, in spite of their highly paid research analysts.
    Our opinion about the future direction of a stock is completely irrelevant UNLESS the market agrees with us. Likewise, our opinion of what is 'good value' or 'fair value' is irrelevant if the market doesn't agree with us.

    Downtrends tend to continue longer than we expect, as do uptrends. Therefore it stands to reason that a downtrender carries larger loss potential than we thought, and an uptrender carries greater profit potential than we thought.
    Here is one of the most profit-enhancing pieces of advice that any trader or investor can ever embrace.........
    "Don't spend your time searching for stocks that you think will go up at some time in the future. Focus your efforts instead on finding those that are already going up RIGHT NOW."

    Bunyip
     
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