GNE - Genesis Energy

[Basil]

I had the full GNE immersive experience this week and I think its about fairly priced.  I've heard the full story and I think it deserves a lower risk premium which explains why the share price is where it is.

[winner (n)]

As 10 Year NZ Govt gets closer and closer to 5.0% by the hour it seems the GNE share price starts to fall

Spooky as eh possums

[Basil]

Craigs have released a comprehensive paper outlining that based on valuing GNE's hydro assets at the same multiple as its peers, you're almost getting all GNE's other assets for free.  I had a good read through this today and they make some excellent points and the research looks sound.
If I recall correctly a couple of years ago Jarden opinioned along similar lines.

Craigs outlined the execution risk of creating so much generation to displace legacy generation assets in the next 6 years.

Their price target is $3 but I note they are the outlier with the consensus price target at $2.58.

Interestingly in Craigs view dividend growth can recommence after the fixed period that we're currently in subject to inflation adjustments, from FY29 onward.

I am not entirely convinced and think their debt will be pushing up towards the top end of the comfort zone as the development of their full suite of ~ $2 Billion of new renewable assets reaches a conclusion in FY32.

That said, its an interesting one from a dividend hounds perspective because not only do they have the highest yield by a country mile compared to the other Gentailiers, its appears they can maintain this in the medium term after they roll out their full suite of new renewable assets and then money made from legacy assets for as long as they last is cream on top of what looks like a fairly tasty cappuccino.

I've rethought my investment thesis and come to the initial conclusion that this will probably remain a sound dividend hounds investment for the foreseeable future despite the relatively limited life of GNE's legacy assets..  I'm a real doubting Thomas about Craigs estimate of 21 cps dividends in FY32 but I believe its plausible they could maintain their current trajectory of nearly matching annual inflation adjustments for future dividends from their current lower base.

Its still a mystery to me why the board promises they will match inflation adjustments but never quite gets there.  This pattern goes right back to when they were first listed.    Its puts me off a bit however I think they're a sound hold here.  Time will tell if they can get back to $3.  I have serious reservations about that and my gut tells me the consensus analyst target price of $2.58 seems far more plausible.  I'd be very happy for GNE to prove me wrong of course.
Noting too, the chart looks pretty good and it busted out to a fresh 1 year high last Friday.  A long way to go to get back to its glory days of $3.90 though.