GTP - Great Southern Plantations

Queensland cattle property Chudleigh Park bought by GTP for $28.5 million with 182,000 ha of land and 18,000 cattle.

http://townsvillebulletin.news.com.au/common/story_page/0,7034,18992778%5E14787,00.html

Criterion has a buy on all these types of stocks including GTP in todays Australian Newspaper

http://www.theaustralian.news.com.au/story/0,20867,19154566-23634,00.html

I am quite suprised that GTP keeps bobbing under $4.00 mark I would have thought by now we would be heading up over the $4.25 mark.............well away from the dreaded $3's once and for all............. oh well guess we will have to wait until close to end of june................

IF TIM's numbers are anything to go by GTPs results should be satisfying.

common GTP

the market overall has been taking a flogging the last week....interest rates...dow etc...

savtin said:

I am quite suprised that GTP keeps bobbing under $4.00 mark I would have thought by now we would be heading up over the $4.25 mark.............well away from the dreaded $3's once and for all............. oh well guess we will have to wait until close to end of june................

IF TIM's numbers are anything to go by GTPs results should be satisfying.

common GTP

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Yeah the thing about these stocks is that theres always "the risk" attached it, ie laws can be put in place anytime to lower deductions, and also when there is bear market/recession, no one needs MIS cause dont have much capital gains (not only shares but property etc)?

Like this yr 2006, yeah might do really well and beat forecasts, however when there is a bear market/recession, they make hardly any sales?

So unless they change their whole business, for some reason u cant get rid of "the risk". Thus these type of shares (esp GTP) have to live with it unfortunately. Thats why GTP can never have a high PE, not a indefineitly sustainable one anyway, for now. Just a thought.

thx

MS

Chief executive of the National Association of Forest Industries Catherine Murphy said the rise in plantation woodchip exports showed the effectiveness of the Federal Government's policy, which gives tax benefits to individual plantation investors.

http://www.theage.com.au/news/busin...-imported-trees/2006/05/16/1147545327037.html

Forest industry can't see wood for the (imported) trees
Email Print Normal font Large font Chipping away: woodchips are 40 per cent of Australia's timber exports.
Photo: Erin Jonasson
Advertisement
AdvertisementBy Philip Hopkins
May 17, 2006

PLANTATION hardwood woodchip exports increased significantly last financial year, but Australia is set to record another $2 billion trade deficit in forest products.

Log removals from eucalypt hardwood plantations ”” mostly blue gums ”” rose by 58 per cent to 2.9 million cubic metres last financial year, according to the Australian Bureau of Agricultural and Resource Economics in its latest report on forest and wood products. Sales of eucalypt sawlogs from native forests fell by 4 per cent, to 10 million cubic metres.

ABARE's executive director Brian Fisher said the logs were used for woodchip exports.

Exports of hardwood and softwood woodchips totalled a record $858 million last financial year. Woodchips were 40 per cent of Australian timber exports of $2.1 billion, but this was dwarfed by forest product imports of $4.1 billion.

About half the imports ($2.1 billion) were of paper and paperboard, with printing and writing paper ($1.4 billion) the main source. Figures for this financial year's first half show imports totalling $2.05 billion, and exports $1.02 billion.

Chief executive of the National Association of Forest Industries Catherine Murphy said the rise in plantation woodchip exports showed the effectiveness of the Federal Government's policy, which gives tax benefits to individual plantation investors.

"We have been able to build a strong plantation sector on this platform," she said.

Ms Murphy said plantations would form the basis of the pulp mills planned for Australia. Gunns aims to build a pulp mill in northern Tasmania, and pulp mills are planned for south-west Victoria and south-east South Australia, based on the regions' blue gum plantations.

The high level of paper imports showed the necessity to get such projects off the ground, she said. But Ms Murphy said the figures also underlined that the native forest sector could not be underestimated.

"It's still three times the size of the plantation hardwood sector," she said.

Sawn wood exports in both the September and December quarters remained just above $31 million, about 22 per cent higher than the same period the year before. Dr Fisher said the increase was driven by the rise in pine sawlog exports to Asia, particularly Chinese Taipei.

I must admit sometimes this companies share price activities dissapoint me.

How I can value this company above $6.00 is beyond me ................especially when i look at the SP and it is $3.75...........i mean that is what price the MARKET is putting on it and who am I to argue with such a large machine.................they always know things that are beyond us..............maybe fundamentally GTP isn't so great................maybe its got its business model all wrong..............a P/E of 8 is pretty ****ty...

Savtin,

to me it has always been the cashflow position that has held GTP back.
All of the profits they make go into buying land. Not a bad thing in itself but it doesn't leave the company with much cash to pay dividends and expand.
They have needed to continually raise money to expand.

But on the positive side i like the way they have expanded and as soon as the cashflow starts coming in i expect a rerating of the PE ratio.
If you read the recent announcement they have focused on increased cashflow and a step away from the continual timber product expansion model.

As mentioned in a previous post. I hope that some of the 2.5 million hectares they own for cattle can be used for timber. I have done some research on the areas where they have bought. It seems to be next to rivers where native Eucalypts can grow, but not especially good areas for a growing season per se. So in short, i am still undecided on how much they can use this land for timber products. There is the possibility of simply planting trees (something they know all about) to improve the grazing land for the cattle by bringing water to the surface. They could always cut this timber down themselves to use for the future ?

Still, they are a big presence across the landscape of rural Australia and that should allow them to take advantage of future rural opportunities when they arise.

Regards,
abucs.

Consider in the future the value of their assets. In time, they should have a great return on equity due to the fact they can re-use the land once harvested. Their capital efficiency should also improve a fair amount too.

I am glad that there are some on here who appreciate the application of per's and why? Yer, the per is low for this stock due to the dividend payout ratio...and thats why a lot of funds stand back so if it cant rely on growth at least the dividend makes up for it.

Also the entire market is in correction pahase at the moment so the pro's can get an entry for new money into the market...so just wear it out and maybe accumulate stuff that uis truly under done and equate that on a rba cash rate of 7% and if it still looks good buy it from recent drops.

TheAnalyst said:

I am glad that there are some on here who appreciate the application of per's and why? Yer, the per is low for this stock due to the dividend payout ratio...and thats why a lot of funds stand back so if it cant rely on growth at least the dividend makes up for it.

Also the entire market is in correction pahase at the moment so the pro's can get an entry for new money into the market...so just wear it out and maybe accumulate stuff that uis truly under done and equate that on a rba cash rate of 7% and if it still looks good buy it from recent drops.

Click to expand...

actually i dont think its the divident thats holding this one back, i think its the risk to future earnings growth and sustainability

thx

MS

michael_selway said:

actually i dont think its the divident thats holding this one back, i think its the risk to future earnings growth and sustainability

thx

MS

Click to expand...

Maybe......if this is the case then what do you think the board of directors can do to lessen this risk??...but i still believe the dividend payout ratio has an enormous amount to do with it.

TheAnalyst said:

Maybe......if this is the case then what do you think the board of directors can do to lessen this risk??...but i still believe the dividend payout ratio has an enormous amount to do with it.

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See indirectly, dividends are paid out of debt. You can increase the dividend by increasing the debt. Vice versa, lowering dividend payout means less debt required. So if they want to pay out more dividend, it will actually hurt them as they may have to borrow more money (or issue more shares which dilutes earnings) to fund their projects.

Basically the risk lies in the whole industry, ie Agriculture and MIS schemes. These are tough businesses to be in.

Like last yr, economy was great and an ASX bull market (although property prices did cool of a bit), but yet GTP fell short with its sales forecasts. It just proves that even in "good yrs", earnings stability (growth) is not certain. Also most of their sales occurs in last month of finanical yr which adds to the uncertainty.

They are expanding into other areas like cattle and olives etc, which does lower the risk. But again these still fall under Agriculture and MIS. Unless they become an MBL, which also has Agricuture/MIS projects, but they also have investment projects in other areas like infrastructure, energy etc, ie a true "diversified financial"

However GTP this yr may surprise (beat consensus forecasts) with its sales, but again future yrs cant say with any degree of confidence, thats the risk.

thx

MS

Earnings and Dividends Forecast (cents per share)
2005 2006 2007 2008
EPS 41.7 46.4 58.1 63.8
DPS 14.0 14.0 19.0 18.0

michael_selway said:

See indirectly, dividends are paid out of debt. You can increase the dividend by increasing the debt. Vice versa, lowering dividend payout means less debt required. So if they want to pay out more dividend, it will actually hurt them as they may have to borrow more money (or issue more shares which dilutes earnings) to fund their projects.

Basically the risk lies in the whole industry, ie Agriculture and MIS schemes. These are tough businesses to be in.

Like last yr, economy was great and an ASX bull market (although property prices did cool of a bit), but yet GTP fell short with its sales forecasts. It just proves that even in "good yrs", earnings stability (growth) is not certain. Also most of their sales occurs in last month of finanical yr which adds to the uncertainty.

They are expanding into other areas like cattle and olives etc, which does lower the risk. But again these still fall under Agriculture and MIS. Unless they become an MBL, which also has Agricuture/MIS projects, but they also have investment projects in other areas like infrastructure, energy etc, ie a true "diversified financial"

However GTP this yr may surprise (beat consensus forecasts) with its sales, but again future yrs cant say with any degree of confidence, thats the risk.

thx

MS

Earnings and Dividends Forecast (cents per share)
2005 2006 2007 2008
EPS 41.7 46.4 58.1 63.8
DPS 14.0 14.0 19.0 18.0

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Micheal it is illegal to pay dividends out of borrowed money under the corporations Act...they may only be paid out of profits or retained earnings from prior profits.......

I agree with your sentiments Michael. I would just say that the value of a company is not always reflected in the share price, especially when fear/uncertainty is involved. The nature of GTP can swing the share price both ways.

As GTP gets more and more recurring revenue through olives, grapes and cattle income, then this fear and uncertainty will lessen as their income will not be solely dependant on selling MIS schemes.

This recurring income, together with capex savings from rotation of timber land should make GTP flush with funds in 3 or 4 years. Then uncertainty and fear will vanish and GTP will be a cash cow, if you excuse the pun.

Still, from all reports, including from other MIS companies, 2006 should see another big increase in revenue.

P.S. Nice writeup in the Sydney paper today (Sunday Telegraph page 100) on the Great Southern Cattle schemes.

TheAnalyst said:

Micheal it is illegal to pay dividends out of borrowed money under the corporations Act...they may only be paid out of profits or retained earnings from prior profits.......

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yeah, so the way around that act is being "indirect"

Eg just pay out more from "profits or retained earnings from prior profits" as normal, which will mean less cash on hand. Then "indirectly" u will need to borrow more money or raise more captital than if u hadnt paid as much dividend.

thx

MS

michael_selway said:

yeah, so the way around that act is being "indirect"

Eg just pay out more from "profits or retained earnings from prior profits" as normal, which will mean less cash on hand. Then "indirectly" u will need to borrow more money or raise more captital than if u hadnt paid as much dividend.

thx

MS

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Remember GTP has a consolidated financial statement as revenue comes from different segments......if how u put it is the case then mac bank and others are in the same boat......they make their revenue from different segemnts and from different stages of the process from the investor right down to the sale of the investors share of the product to the end customer.

So dont be to concerned.......it happens every day....so it is actual earnings...What you should now focus on is the reason for the new non executive director and his actual back ground and what the managing director John Young's startegy is and how diversification is all part of destroying the focus of limited products and reducing the risk to earnings.....its like the top analysts were always talking about how banks were not going to make it and their earnings were under threat.....yet bank were diversifying into many and different areas beyond their traditional markets...look what has happened and to those who listened and sold and got out...look at those who got out on the down grade from macquarie in regards to GTP last year and look now and look which major players accumulated and became major share holders.

I know of great investors who are very careful and highly successful in their choices and of late they have gone into GTP as well with no intention of selling longterm.....even investorweb research reports have a buy on GTP and they have a very credible record.....sell at your own peril Mick

I totally agree with you analyst and abucs........GTP is moving in the right direction.............when i had spoken to management earlier in the year the one thing they kept telling me was that their key focus in the immediate future, apart from the obvious of growing EPS is to get the market to re-rate them in the short term...........remember if they don't do anything with their earnings .i.e stays at 43 cents per share and the stock is re-rated to a higher P/E ratio (say 12 - 13)then the SP goes up to $5.17-$5.55................and add the earnings growth of say a EPS (diluted of 48-49cents) then the SP is around $6-$6.30....

I think over the next few years the focus will be on quality of earnings and the emphasis on GTP as a funds manager.......

controlled growth they have forecast previously ........and if this means capping the plantation sales to say $350-$400 million so be it and then growing the income products so that the mix is %50 - 50 that would be great.....

p.s i still feel that John Young has not yet revealled his trump card....

GO GTP

i'd be happy if he has an ace or two up his sleeve also Savtin.

Did you contact GTP directly Savtin ? Are they open to that sort of thing ?

I've spoken to some GTP officials in the past when they bring their roadshows to Sydney. I wouldn't mind contacting them for info on a regular basis if they are up for it.

I found John Young a hard man to get hold of at those roadshows but when i cornered him once i found him very passionate about the company and was impressed by his overall demeanour.

He didn't reveal that trump card to me though. )