https://www.nzx.com/announcements/405442
Looks as though they will never have to pay tax.
Incredible.
How is it possible that a company can generate tax losses of over $190,000,000! And still be around
Perhaps a take over target by a company that could utilize those losses?
Quote from: Minimoke on Jan 18, 2023, 09:00 AMHow is it possible that a company can generate tax losses of over $190,000,000! And still be around
Perhaps a take over target by a company that could utilize those losses?
Think they go back to Hanover
PEB doing their best to do better
Quote from: Minimoke on Jan 18, 2023, 09:00 AMHow is it possible that a company can generate tax losses of over $190,000,000! And still be around
Perhaps a take over target by a company that could utilize those losses?
The ability to utilise the tax losses is dependent on continuing to meet shareholder continuity requirements of prevailing income tax legislation.
And ALF start the day with a market cap of $21.2m
Would future dividends carry imputation credits?
No.
ALF would be better to under take share buy backs.
Quote from: Minimoke on Jan 18, 2023, 09:00 AMHow is it possible that a company can generate tax losses of over $190,000,000! And still be around
Perhaps a take over target by a company that could utilize those losses?
The tax loss carry-forward ("TLCF") rules are restrictive in how losses could be utilised. There are limitations that are outlined here: https://www.dlapiper.com/en/insights/publications/2021/08/new-zealand-introduces-new-tax-loss-carry-forward-rules. Which would greatly narrow any list of potential suitors.
Pretty good result...... at least they aren't adding to the $187 million tax loss any more!!;
https://www.nzx.com/announcements/407545
The Directors of Allied Farmers Limited (ALF.NZX) report an unaudited consolidated net profit before tax (NPBT) of $2.097 million for the six months ended 31 December 2022. This is +46% percent higher than the NPBT of $1.438 million for the six months ended 31 December 2021.
This higher result reflects a record contribution from Farmers Meat Export Limited (FMEL).
Profit attributable to Allied Farmers's shareholders reflecting its 67% ownership of NZFL and 50% of NZRLM
The HY23 after tax profit attributable to Allied Farmers' shareholders was $1.585 million (HY22 $1.059 million). Earnings per share (EPS) for HY23 was $0.055 (HY22 $0.0368).
https://www.nzx.com/announcements/408504
A good out come for ALF shareholders.
The NZRLM Consideration will be satisfied by payment of $6.55 million of cash, and the transfer of $1.75 million worth of NZ Rural Land Company Limited shares owned by Allied at their 20-day volume weighted average price prior to completion date. The cash component will be funded from a combination of cash reserves and debt facilities.
I read it no ALF shares will be issued,so there will still be only 28,806,634 ALF shares on issue,and ALF's massive tax losses will be able to be carried forward.
PS.ALF's borrowings will be tax deductible,while no tax will be paid on profits [because of carried forward tax losses].
Price creeping up but still on PE of around 7.2 with excellent future eps growth prospects driven by NZRLM.
Quote from: Mos on Nov 20, 2023, 10:00 PMwith excellent future eps growth prospects driven by NZRLM
Have you seen any forecasts for NZRLM? I couldn't see any in here:
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ALF/408504/390862.pdf
My understanding is that in addition to getting 0.5% of the NAV, they also get 10% of the increase in NAV, $30k per new lease agreement and 1.25% of the value any new investment.
I'm not sure recent activity levels within NZL are sustainable given they are struggling to raise additional capital so the last 2 sources of revenue may dry up. Plus I don't think we have seen a property devaluation yet from NZL despite discount rates increasing (someone please correct me if I am wrong) - so I can't see the 10% element being worth much.
It was a great deal initially for NZRLM, but is it sustainable? And will it underpin EPS growth for ALF? If I have got anything wrong here I would be interested to know.
Agree Ferg, short term not likely to contribute to growing eps much but should over the long term assuming nz dairy/horticulture has a prosperous future. My outlook on this is long term for NZRLM component with good earnings from the other division in the meantime.
Quote from: lorraina on Jan 18, 2023, 08:43 AMhttps://www.nzx.com/announcements/405442
Looks as though they will never have to pay tax.
Incredible.
Vrong!
Quote from: Left Field on Mar 01, 2023, 10:02 AMPretty good result...... at least they aren't adding to the $187 million tax loss any more!!;
https://www.nzx.com/announcements/407545
The Directors of Allied Farmers Limited (ALF.NZX) report an unaudited consolidated net profit before tax (NPBT) of $2.097 million for the six months ended 31 December 2022. This is +46% percent higher than the NPBT of $1.438 million for the six months ended 31 December 2021.
This higher result reflects a record contribution from Farmers Meat Export Limited (FMEL).
Profit attributable to Allied Farmers's shareholders reflecting its 67% ownership of NZFL and 50% of NZRLM
The HY23 after tax profit attributable to Allied Farmers' shareholders was $1.585 million (HY22 $1.059 million). Earnings per share (EPS) for HY23 was $0.055 (HY22 $0.0368).
Annualised earnings $3.2m. 28% of zhat eez $0.9m. Tax lozzez of $190m available. Egzpected number of yearz to use up those tax lozzez: $190m/$0.9m= 211. Next year eez 2024.
Zo Allied Varmers zhould ztart paying tax again een: 2024 + 211 = 2235.
I vill organize a 'boat party' vor all descendents of current zhareholders on zhat date! (Hmmm, theenking I might have to hire a 'cruise liner' for thees.)
RB
ALF qualify as a long term investment.
Very long...lol
Positive development for ALF - more FUM
https://www.nzx.com/announcements/424986 (https://www.nzx.com/announcements/424986)
Have been following this company for a while. Trading on very good fundamentals.
Has been good growth in EPS. FY23 EPS $0.1159 which is a very attractive PE of 6.4 based on my buy price of $0.74. FY22 EPS $0.0998 FY21 $0.0857
Then there is the huge tax losses, so not expecting any dividend anytime soon. WAF have just under the 20 percent with 19.99 percent of shares.
DISC. Took a small position this morning
Looks like a solid transaction for NZL and good income generator for ALF
https://www.nzx.com/announcements/426510 (https://www.nzx.com/announcements/426510)
Quote from: Mos on Feb 20, 2024, 07:07 PMLooks like a solid transaction for NZL and good income generator for ALF
https://www.nzx.com/announcements/426510 (https://www.nzx.com/announcements/426510)
Yes will add to ALF EPS.
The result a slight miss on npat compared to last year but not unexpected given the rural decline and confirmed by PGW recent result.
However I'm expecting full year result to pass last years on the announcements made on the new transactions from NZL which will feed into second half result.
Based on last years result of eps of $.1159 Trading on a pe of 6.9 at $.80 SP.
No surprise re no dividend, given the tax loss situation.
Yes, slight reduction despite now owning 100% of NZRLM but I guess that highlights the importance of transaction fees to NZRLM income, which is lumpy and absent this half. Next half will have significant transaction fees, and the future looks promising:
"Roc Partners was attracted to NZL's sector-leading deal-flow in New Zealand and will continue to partner on funding future deals, which should lead to an uplift in assets under management, NAV accretion, and thus income for NZRLM"
Also to note
ALF have $178m in accumulated tax looses sitting there TO BE UTILISED by ALF or someone else acquiring ALF.
WAF now have just under full take over threshold at 19.9 percent of shares.
The ability to utilise the tax losses is dependent on continuing to meet shareholder continuity requirements of prevailing income tax legislation.
Therefore a takeover would mean ALF lose the tax losses.
Don't forget NPAT was reduced by depreciation of the NZL management contract. Arguably a totally meaningless expense given the contract is perpetual.
Liquidity has really dried up of late. RIP to the poor sharesies sods that sold at 69 cents today ;D. Does anyone have any thoughts on when they might resume dividends? Surely chewing through the entire tax loss will take until 2030?
Quote from: Plata on Apr 04, 2024, 09:22 PMLiquidity has really dried up of late. RIP to the poor sharesies sods that sold at 69 cents today ;D. Does anyone have any thoughts on when they might resume dividends? Surely chewing through the entire tax loss will take until 2030?
I'm not expecting dividends any time soon. In the current situation and with the current share price, I'd prefer to see buy backs if they can't find anything better to do with the cash - but I expect that they will be able to find something better. With rural sentiment pretty low at the moment maybe there's some bargains to be had in order to speed up the process of chewing up tax losses.
Or, as the Chair put in back in November, "exploring growth opportunities that leverage its core strengths in the rural and asset management sectors"
We will see. I don't hold NZ investors in particularly high esteem regarding their patience for lack of dividends. Will be impressed (and pleased) if they can get away with retaining all earnings for years on end.
Special meeting at 11am tomorrow to vote on resolution to implement new constitution that will help to preserve $186 m of tax losses through facilitating shareholder continuity measures. Will be voting in support of this resolution.
Interesting update from ALF yesterday. FY24 trading performance similar to last year plus one off gain on asset sale of $4.2 m. Not bad in context of $23.6 m market cap - likely to have eliminated all bank debt with funds left over. No danger of paying any tax in the foreseeable future with those $186 m of tax losses. Need to build flow of profits to start making a dent in them.
Prospects look good.
However I sold the wife's holding and recycled the funds into more 2CC for her.
Reason being 2CC's fully imputed divies.Currently gross yield of 13.282%.Next divie due end of November.
Quote from: lorraina on Jul 26, 2024, 10:52 AMProspects look good.
However I sold the wife's holding and recycled the funds into more 2CC for her.
Reason being 2CC's fully imputed divies.Currently gross yield of 13.282%.Next divie due end of November.
Fair enough. ALF not her stock if its dividends she is after. Long term hold for me. Now they are starting to build a cash pile it will be interesting to see what kind of profit making business can acquire to deliver value from the mountain of tax losses.
I wonder what it is they sold to gain 4 million on book value? Quite significant on a 23 million market cap, does that not represent ~13 cents per share added to NTA? Market reaction pretty muted really. It would be good if at the next result they can give some more detail on their plan to get the wheels turning here.
Looking at the balance sheet last period, after this half worth of profit + the one off sale, the company should be debtless.
Solid progress from ALF with momentum building in NZRLM and one off gain from sale of interest in saleyard. Cash on hand building towards $10 m. Next step to acquire an asset with an income stream to accelerate the utilisation of the mountain of tax losses.
https://www.nzx.com/announcements/436768 (https://www.nzx.com/announcements/436768)
Does anyone else think Richards compensation package is a bit high for such a small company? 500k p/a for 24 mil market cap?? And FY25 is even higher...
Another result, another nothing. Suddenly they are experts at pricing dairy loans and buying mortgagee property. The loan terms for both things are too good to be true, borrowing at under 4%? Loaning at 15%? And no real details given about either transaction despite both being pretty material to the company.
The question is, when will the underlying performance of the business be worth anything to anyone. The PE has stayed under 8 for ages meanwhile NPAT and NTA creep up. Are we just meant to wait 50 years or so for them to get through all the unutilised tax losses? Most companies don't even last that long. They say being early is the same as being wrong, and I think that's pretty true here. Seems like dead money.
Quote from: Plata on Mar 17, 2025, 08:52 PMAnother result, another nothing. Suddenly they are experts at pricing dairy loans and buying mortgagee property. The loan terms for both things are too good to be true, borrowing at under 4%? Loaning at 15%? And no real details given about either transaction despite both being pretty material to the company.
The question is, when will the underlying performance of the business be worth anything to anyone. The PE has stayed under 8 for ages meanwhile NPAT and NTA creep up. Are we just meant to wait 50 years or so for them to get through all the unutilised tax losses? Most companies don't even last that long. They say being early is the same as being wrong, and I think that's pretty true here. Seems like dead money.
Deafening silence response to your post Plata kind of says it all - no real interest and no near term catalyst for rerate despite pretty compelling valuation. Slow burn investment this one - I continue to hold as value is there and growing. Lack of disclosure to the market when deals are done, like the recent SPV and the sale yards transaction a while ago, is a bit cowboy and questionable in terms of continuous disclosure obligations.
Quote from: Mos on Mar 19, 2025, 06:03 PMDeafening silence response to your post Plata kind of says it all - no real interest and no near term catalyst for rerate despite pretty compelling valuation. Slow burn investment this one - continue to hold as value is there and growing. Lack of disclosure to the market when deals are done, like the recent SPV and the sale yards transaction a while ago, is a bit cowboy and questionable in terms of continuous disclosure obligations.
Exactly. Taking on debt of more than 50% of market cap with the SPV and not only saying nothing until the results day, but also never saying the addresses or any details about the properties. Assuming that whole fiasco pans out fine I agree there is value here but as you say no near term catalysts. Chances are there will be no news for 6 months until the next result, so why hold during that time period?
Rural news happy valley (https://www.ruralnewsgroup.co.nz/rural-news/rural-general-news/sad-ending-happy-valley-nutrition-faces-deregistration)
NBR link (https://www.nbr.co.nz/investment/allied-farmers-takes-on-former-happy-valley-assets/)
Bayleys happy valley (https://wairarapa.bayleys.co.nz/news/shovel-ready-site-hits-market)
I hear you. This is what I ALF now own via the SPV. Pretty interesting deal buying through a SPV for the value of the loan (no money down) with no recourse to ALF if it goes pear shaped. Also with very low interest rates payable on the loan. Seems like a deal to pick up assets cheaply which probably turned a non performing loan into a performing loan for the bank concerned, for which they were agreeable to providing the 100% funding at a much lower than market interest rate. Potentially a clever deal by ALF if the asset is worth more than what ALF paid. No downside but has upside. Doesn't change the disclosure shortcomings though.
Dragging Allied Farmers (ALF) up from page 6 to outline why I see long term value for discussion. It is an uncrowded trade which makes some sense as the current market cap (at share price of $0.75) of $21.6m is way too small for brokers or institutions to be interested. Also, the complete lack of dividends for the foreseeable future while ALF utilises its mountain of tax losses will not suit many retail investors.
In looking at ALF I am taking a 10 year view (cue brickbats from BlackPeter regarding predicting the future) of what it could be worth with what I think are fairly conservative assumptions in this base case, making the assumption that Management does not do something that is massively value destroying.
The current market cap as noted above is $21.6m. Post the sale of the NZ Farmers Livestock business I am estimating that when ALF reports towards the end of this month they will have $18m+ of cash/near cash assets, ~$3.9m investment in NZX listed New Zealand Rural Land company (NZL), plus ownership of New Zealand Rural Land Management (NZRLM) which holds an evergreen contract to manage the assets of NZL for a fee of 0.5% p.a. plus transaction fees plus performance fees of 10% of increases in NZL's NTA. I am ignoring the $10m or so of assets and loans relating to the non recourse SPV that acquired the Happy Valley assets which may offer further upside and comes with no downside as ALF can walk away if it is not in the money.
With this in mind, I see four potential sources of value in 10 years time as outlined below.
Cash/near cash of $18m+ currently. Hard to predict how this will grow in value over the next decade. Indications are that ALF plans to deploy this by buying income generating assets/business to create value and help utilise the tax losses. They have also suggested it could be used to invest in NZL (NZL has recently adopted a dividend payout policy of 90-100% which should approximately deliver a 5% net return). In this base case I assume the $18m compounds at 5% p.a implying a value from this component of $29.3m in ten years. It should be possible to generate better returns than that but the idea in the base case is to be relatively conservative.
Investment in NZL. ALF currently owns 3.933 m shares in NZL which is 2.7% of the 146.1m shares issued. The performance fee of 10% of the increase in NZL's NTA is issued in shares at a price equivalent to NTA. I am assuming in the base case that NTA increases by 3% p.a., noting that most of the lease rentals are adjusted upwards by CPI at regular intervals. So for example in the year to Dec 2025 NZL had $445m of assets so 3% of this would be an increase of $13.3m and 10% share for ALF would be $1.33m. We will get to see the actual amount for CY2025 when NZL releases it's results in late Feb. It could be higher or lower in any given year but the 3% p.a.assumption over a decade seems reasonable. If ALF's CY2025 performance fee is $1.33m and these shares are issued at NTA of around $1.60. ALF would receive another ~830,000 shares in NZL which would represent 0.56% of NZL shares. So if ALF achieves a performance fee that provides 0.5% of NZL shares every year for a decade it will own around 7.7% of NZL in 2036 (2.7% already owned plus 5%). The next question is how much is this likely to be worth? If NZL farmland assets grow by 3% p.a. (assumed land value increase with no acquisitions) they would increase from $445m to around $600m. Assuming liabilities remain the same (no new assets assumption) except for growth in the amount of ROC's redeemable limited partnership units from $76m to say $115m, then total liabilities would grow from $215m to ~$253m meaning that net assets would grow from $230m to $346m. This all assumes no net new assets are acquired which is conservative as there will be opportunities to grow the asset base as rental income grows. NZL shares are currently trading at 62.5% of NTA so if that gap does not close, ALF's ownership stake in NZL in a decade based on the above assumptions could be $346m x 62.5% x 7.7% = $16.6m in ten years.
Dividends received from NZL over the next decade. This is a minor component so I will leave out the calculations and just provide the estimate of $4.7m over the ten years.
The value of the asset management business. In all the analysis I am assuming that the 0.5% annual fee and the transaction fees cover costs but do not provide any profit, so all of the assumed profit from the asset management business is from the performance fee. In a decade if NZL assets are $600m and annual growth in NTA is 3%, the performance fee of 10% would deliver $1.8 m in profits for ALF. Applying a PE ratio of 15 to this results in an estimated value for the asset management business of $27m in ten years time.
So the components of $29.3m + $16.6m + $4.7m + $27m = $77.6m in 2036. This is 3.6 times the current market cap representing a CAGR return of 13.6% p.a. Clearly there are a lot assumptions and plenty of opportunity for Management to destroy potential value. However, to date Management has done reasonably well in my view. As noted this is my conservative case and I am hoping for a higher return if Management executes well on the opportunities.
I welcome feedback and appreciate any testing of the above along with alternative views. Being the ALF page, I am aware I may just be talking to myself.
good post...a lot to unpick there...will have a go at some point.
but ultra slow long burner this one.
the economics of the asset mgmt business are v good. but it remains to be seen how well they use their cash from the recent sale.
Quote from: Fiordland Moose on Feb 13, 2026, 07:17 PMgood post...a lot to unpick there...will have a go at some point.
but ultra slow long burner this one.
the economics of the asset mgmt business are v good. but it remains to be seen how well they use their cash from the recent sale.
Thanks FM. Agree slow burn and it is the capital light high ROIC nature of asset management that is the most attractive aspect of ALF. Also your point on the risk around how the cash is deployed is well made - I am relying to some extent on 20% shareholder WAF (Waterman Capital principals) vetoing anything daft along with the fact that the MD owns a significant chunk of the company so has serious skin in the game. I look forward to any further perspectives you have.
Quote from: Mos on Feb 13, 2026, 05:20 PMDragging Allied Farmers (ALF) up from page 6 to outline why I see long term value for discussion. It is an uncrowded trade which makes some sense as the current market cap (at share price of $0.75) of $21.6m is way too small for brokers or institutions to be interested. Also, the complete lack of dividends for the foreseeable future while ALF utilises its mountain of tax losses will not suit many retail investors.
In looking at ALF I am taking a 10 year view (cue brickbats from BlackPeter regarding predicting the future) of what it could be worth with what I think are fairly conservative assumptions in this base case, making the assumption that Management does not do something that is massively value destroying.
The current market cap as noted above is $21.6m. Post the sale of the NZ Farmers Livestock business I am estimating that when ALF reports towards the end of this month they will have $18m+ of cash/near cash assets, ~$3.9m investment in NZX listed New Zealand Rural Land company (NZL), plus ownership of New Zealand Rural Land Management (NZRLM) which holds an evergreen contract to manage the assets of NZL for a fee of 0.5% p.a. plus transaction fees plus performance fees of 10% of increases in NZL's NTA. I am ignoring the $10m or so of assets and loans relating to the non recourse SPV that acquired the Happy Valley assets which may offer further upside and comes with no downside as ALF can walk away if it is not in the money.
With this in mind, I see four potential sources of value in 10 years time as outlined below.
Cash/near cash of $18m+ currently. Hard to predict how this will grow in value over the next decade. Indications are that ALF plans to deploy this by buying income generating assets/business to create value and help utilise the tax losses. They have also suggested it could be used to invest in NZL (NZL has recently adopted a dividend payout policy of 90-100% which should approximately deliver a 5% net return). In this base case I assume the $18m compounds at 5% p.a implying a value from this component of $29.3m in ten years. It should be possible to generate better returns than that but the idea in the base case is to be relatively conservative.
Investment in NZL. ALF currently owns 3.933 m shares in NZL which is 2.7% of the 146.1m shares issued. The performance fee of 10% of the increase in NZL's NTA is issued in shares at a price equivalent to NTA. I am assuming in the base case that NTA increases by 3% p.a., noting that most of the lease rentals are adjusted upwards by CPI at regular intervals. So for example in the year to Dec 2025 NZL had $445m of assets so 3% of this would be an increase of $13.3m and 10% share for ALF would be $1.33m. We will get to see the actual amount for CY2025 when NZL releases it's results in late Feb. It could be higher or lower in any given year but the 3% p.a.assumption over a decade seems reasonable. If ALF's CY2025 performance fee is $1.33m and these shares are issued at NTA of around $1.60. ALF would receive another ~830,000 shares in NZL which would represent 0.56% of NZL shares. So if ALF achieves a performance fee that provides 0.5% of NZL shares every year for a decade it will own around 7.7% of NZL in 2036 (2.7% already owned plus 5%). The next question is how much is this likely to be worth? If NZL farmland assets grow by 3% p.a. (assumed land value increase with no acquisitions) they would increase from $445m to around $600m. Assuming liabilities remain the same (no new assets assumption) except for growth in the amount of ROC's redeemable limited partnership units from $76m to say $115m, then total liabilities would grow from $215m to ~$253m meaning that net assets would grow from $230m to $346m. This all assumes no net new assets are acquired which is conservative as there will be opportunities to grow the asset base as rental income grows. NZL shares are currently trading at 62.5% of NTA so if that gap does not close, ALF's ownership stake in NZL in a decade based on the above assumptions could be $346m x 62.5% x 7.7% = $16.6m in ten years.
Dividends received from NZL over the next decade. This is a minor component so I will leave out the calculations and just provide the estimate of $4.7m over the ten years.
The value of the asset management business. In all the analysis I am assuming that the 0.5% annual fee and the transaction fees cover costs but do not provide any profit, so all of the assumed profit from the asset management business is from the performance fee. In a decade if NZL assets are $600m and annual growth in NTA is 3%, the performance fee of 10% would deliver $1.8 m in profits for ALF. Applying a PE ratio of 15 to this results in an estimated value for the asset management business of $27m in ten years time.
So the components of $29.3m + $16.6m + $4.7m + $27m = $77.6m in 2036. This is 3.6 times the current market cap representing a CAGR return of 13.6% p.a. Clearly there are a lot assumptions and plenty of opportunity for Management to destroy potential value. However, to date Management has done reasonably well in my view. As noted this is my conservative case and I am hoping for a higher return if Management executes well on the opportunities.
I welcome feedback and appreciate any testing of the above along with alternative views. Being the ALF page, I am aware I may just be talking to myself.
I think the $77 million value in 10 years is a bit misleading even if achievable, given it does not account for time value of money or the value drag of richards extremely generous compensation package and the inevitable compound growth that will enjoy. Or any of the other expenses for that matter? 5% return on the entire cash/near cash balance just barely covers paying for richard.
I've been tempted by this one recently however was put off somewhat by the size of the compensation package vs market cap & the fact that he did not reply to my email asking about certain contents of the AGM presentation. The other thing that disuaded me was the $3 million loan (15% of company market cap) to some agricultural operation. Is ALF a more competitive source of loans than an actual bank? Are the actual banks trying to reduce agricultural exposure? Or has ALF priced the loan with a lower level of implied risk than the actual banks. The lack of transparency in numerous areas here is offputting, reading their documents I don't get the sense that they have a clear strategy other than a general "rural vibe". What happens to the cash pile will decide whether or not this company remains dead money for the next 4 years, I don't think it is possible to accurately value the business until it is deployed or a more tangible plan is outlined.
At an 8% discount rate 77 million in 2036 is worth around $36 million today.
I thought this wasn't going to go anywhere but it seems I was wrong. What PE ratio should this trade at? The fund they run NZL trades at a 40% discount to NTA despite numerous recent transations at book value. It has been said this is partially due to the high management fees and low liquidity. You could argue the same applies here, maybe to an even higher degree. I reckon this ends up back in the $0.50's