GNE - Genesis Energy

[Raven]

Always good to see how two different "experts" can come up with radically different views.
Makes an amateur like me feel less insecure   

[mcdongle]

They are trialing some special imported wood pellet to replace coal.
https://www.newsroom.co.nz/genesis-imports-us-wood-pellets-to-fuel-huntly-renewable-energy-trial

So they need to build a factory here to make the pellets... To make it worthwhile..   wonder if that will happen.

[Basil]

Even if your are kind to Morningstar and call them "experts" and split the difference and call the target price half way between the two @ $3.15 GNE offers a gross yield of ~ 8.5% @ $2.70 that should be resilient no matter what happens in the economy.  No question the value of their reserves at Kupe have risen in value dramatically this year.

[BlackPeter]

Always good to see how two different "experts" can come up with radically different views.
Makes an amateur like me feel less insecure   

I guess there is any easy explanation. NOBODY is able to predict future stock prices (Ben Graham). Anybody who pretends they can do that is clearly not an expert.

1 year ago not many predicted that Russia will follow in Hitlers footsteps and start a war to occupy and subdue neighbouring countries (despite the signs being on the wall). Had a quite significant impact on energy prices, though.

3 years ago not many predicted a devastating pandemic ...

30 years ago nobody expected climate change to be something else than an interesting theorie of some academics in their ivory towers ..

So - how do you expect anybody can predict the future fortunes of GNE which are clearly dependant on the weather, on consumption, on energy prices, on the development of technology, on political decisions (like do we go back to burning coal) and on very human behaviour.

[Basil]

Best guide to the future is the past.  GNE have a solid track record of dividend payments going back many years which have been 80% imputed.  Gives 8.5% gross yield.  Pretty attractive yield, buy 10,000 - 20,000 shares (depending on your power use) and forecast dividends of about 18 cps in FY23 means the dividends will pay for your power.

[BlackPeter]

Best guide to the future is the past.  GNE have a solid track record of dividend payments going back many years which have been 80% imputed.  Gives 8.5% gross yield.  Pretty attractive yield, buy 10,000 - 20,000 shares (depending on your power use) and forecast dividends of about 18 cps in FY23 means the dividends will pay for your power.

Well, in the past GNE might have been a reliable dividend payer ...however - SP jumped around like a scared chicken. Have a look for yourself. SP between something like $2.30 and something like $3.90 ... and the yield will be quite different depending at which price the individual shareholder bought.

Sure - SP is currently more at the lower end and might be cheap - or it might not.

High dividend yields are typically not sustainable. Could you think about any reasons why earnings and dividends might drop?

I can: various weather events, uncertain energy prices, political interference with power prices and / or power generation, need to invest in new mega projects sucking up cash flow.

However - what we do know from history is that the future is not foreseeable ... in that regard I agree with your statements :

Discl: Gentailers (incl GNE) are on my watchlist ... however I typically buy pseudo bonds at the top of the interest cycle ... and while we might be already there I highly doubt it.

[winner (n)]

some might be interested in how GNE dividend yield has tracked over the years -- as reported no allowance for imputation creditsYou cannot view this attachment.

[Basil]

Thanks Winner, you do awesome work with your charts !
Would it be possible to overlay the 10 year Govt stock rate if you can find where to get the historical info from ?

[winner (n)]

Just for you basil but you'll have to settle with a comparison to 5 Year Govt stock (that's what I've been using for modelling GNE)

See the gap between the two is getting narrower over the last few months - why I've been mentioning a share price under $2.50 could happen(increase yield) ..... but then these days punters might be seeing GNE as 'less risky' than it has been in the pass (and accepting lower than expected yields)

No doubt otherw will interpret differentlyYou cannot view this attachment.

[Shareguy]

Thanks for those charts winner. I'm thinking the days of $2.50 are gone. Seems to be firming with good demand.

[Basil]

Thanks for those charts winner. I'm thinking the days of $2.50 are gone. Seems to be firming with good demand.

I'm inclined to agree.

Discl: Gentailers (incl GNE) are on my watchlist ... however I typically buy pseudo bonds at the top of the interest cycle ... and while we might be already there I highly doubt it  Black Peter.

That's the nub of the issue.  Has inflation peaked and have interest rates peaked ?  If they haven't I think we are close.

[Shareguy]

Fixed rates already on way down

[Plata]

The rally continues... 10 year yield is still in an upwards trend yet GNE is matching it? I thought the correlation was supposed to be inverse . Are the O&G assets getting some more value prescribed to them or has someone discovered the grounds at lake Onslow are no place for thousands of tonnes of concrete to stand. Very interested to hear how the biofuel trials have gone, if it was successful all they have to do now is figure out how to keep the antiques at Huntley running a few more decades.

[Basil]

I suspect the oil, gas and LPG assets are vastly more valuable than they were as little as 6 months ago as the price of these commodities has really taken off since the Ukraine war.  19 August is the annual result and I'm looking forward to hearing how they're tracking with the biofuel experiment and plans for new renewable generation sources, specifically their plans around large scale solar.

[Shareguy]

Forbar latest note says

The +NZ$8/MWh increase in our Otahuhu assumption to NZ$101/MWh has a material impact on long-term earnings expectations.