Meridian Unbundled
Meridian Unbundled
The Meridian offer
has closed and the allocation process has been agreed.
As
usual politicians are arguing over what we should read into
this.
Our analysis is as follows:
The Issue was
oversubscribed and there will be scaling and funds will be
returned to investors.
There where approx. 62,000
applications made (Mighty River Power $113,000) (Note: No
one knows how many multiple applications were
made).
Shareholder numbers will reduce in both. The share
registries are Smaller shareholders are generally sellers.
Larger parties (institutions) will be buyers).
All pools are scaled even the “Firm “Broker Pool (by 10%).
The
scaling on the PUBLIC POOL is progressive i.e.
None
on first $2500
10% on next $7500
15% on next
$5000
25% on next $5000
45% on the amount over
$20,000
The price is $1.50 and it is at the lower end of the scale ($1.50 to $1.80).
- The price gives a P/E
of Trailing Forecast
Forecast
Based on $1.50
13.04 20.55 18.29
- An EPS of 11.3c 7.3c 8.3c
The price compares with a valuation range
included in 4 separate valuations of $1.25 to $2.79c.
The
ONLY valuation below the issue price was based on a change
of Government to a Labour /Green Government and policy
changes being made. All other showed a price above $1.50
(highest $2.79).
Issues
Over-hang from partly
paid.
The market effectively has a liability of
$600million in 18 months.
This does not look like an
issue in today’s market; however in a tighter market this
could be significant.
Change of Government
If the policy
announced by Labour/Greens is implemented it will adversely
affect Meridian.
We believe it is appropriate that all
parties announce well in advance any policy that will affect
any investment e.g. listed share, Kiwisaver etc.
It
would seem destructive to bring in a policy which hurts
companies (3 0r 4) which the Government owns 51% or more of.
If it occurred the Government would be writing off very
significant amounts off its assets base.
Has the Government done well?
Yes it has progressed the
policy.
Yes it has raised significant cash.
Yes it has
increased the number of shares listed in NZ and the Market
size of the NZX.
Yes it has created better commercial
pressures on an SOE i.e. it will be more accountable (hard
to reduce staff if you are 100% Government owned).
No
because the price is “average “.
No because it has
created an overhang for 18 months.
No because it will
make it hard to get the total asset sales target.
No
because it has not “sold “the benefits of the
transaction to the public.
Performance Post issue
We expect the following
Less initial trades than MRP.
Less
price volatility.
More investor support.
More buying
for dividend.
Less traders looking to sell.
In summary a more orderly market with more strength than MRP.
ENDS