Forum Archive Index - October 2003

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi Barrel Scraper,

>
>My understanding of news releases from the NZE is as follows.
>

NZE is the operator of the Rainbows End amusement park in Manakau
City is it not?

>
>NZE has plans of initiating an "on-market" share buy back of 19 041
>909 shares. The bought back shares are to be cancelled. This
>represents 34% of all issued shares. Therefore if the share buyback
is
>executed to completion, 37m shares will remain. Emerald Capital
have
>indicated agreement to "accept the buyback offer for its proportion of
>shares sought" and sell more to make up for any deficit in the target
>amount of shares to be bought back.
>

This is quite a common arrangement for any listed company when a
large block of their shares is held by another company.    It means that,
in general,  the large shareholder will not increase their percentage
shareholding by doing nothing while an on market buy back goes on.

>
>NZE have a profit target (by
>there own admission not on track as yet) of 900k after tax and have
>indicated they would like to return to dividend payments representing
>80 to 90% of this value in Sept 2004.
>
>So here is a novice attempt to look at the fundamentals of this
>business:
>

Don't down sell yourself.   It looks like a fairly professional style
analysis to me!

>
> Pros:
>
> Using the forecast figures, my calculations indicate a potential
> return to holders in the order of (noting the dividend payment is post
> the potential buyback) say (.85*900k)/37m = roughly 2cps or 8%
> return on investment.
>

You don't explain where the 0.85 factor on the profit comes from.

>
> The company is debt free (for now) but has the cash flow to secure
> finance for the buyback and some capital improvements.
>

So it won't be debt free after the buyback.    How much debt do you
expect NZE to take on as a result of the buyback?   How much interest
do you expect them to have to pay for it?

>
> NTA/share from 2 sources suggests 15.36c, this figure increases to (56
> k²*15.36)/37m = 23.24cps following a successful buyback.
>

Not sure about the relevance of the above.   Do you expect the
company to be broken up after the buyback?

>
>Showing good recovery over two year period reflected in share price
>(70% increase for last 12 months).
>

So why didn't you tell us about NZE 12 months ago then? ;-)

>
>Facilities improvements on the radar with increased business
>opportunities . I am picking a hot summer  - good for traffic flows
>through the door.
>
>Cons:
>
>Historically not a liquid stock.
>
>Potential short-term loss of earnings while Front buildings (video
>arcade, merchandising area and admin building) are being renovated
>post Easter 2004.
>

What are the budgeted costs for these renovations?

>
> High $NZ affecting international tourist flows.
>

I wonder how many international toursits go to Rainbows End?  I would
have thought it would be mainly a domestic attraction, but I could be
wrong.

>
> My conclusion? – This looks like good buying  - I must be missing the
> obvious as  I can't understand why the price has remained at 25c.
>

900k on 56 million shares (pre buyback) = 1.6c per share earned.  If
they pay out 90% of that as a dividend that produces a dividend yield
of:

1.4/ 25= 5.6% or 8.5% imputed.   Not bad, but not outstandingly cheap,
especially considering this profit has not been achieved yet.

>I
> note that around 10 Oct on the release of the above news items the
> share price jumped to 30c on what I am guessing was low volumes but
> quickly returned to proposed buyback price.
>

Is this an on or off market buyback?    If it is an offmarket buy back at
25c why would anyone buy the shares on the sharemarket at more
than that price, at least in the short term?

>
> Would any of you learned share chatters out there like to comment,
> correct my figures or just shoot me down in flames?
>

I hope those comments have helped.

SNOOPY

discl: no NZE shares held

--
Message sent by Snoopy
on Pegasus Mail version 4.02
----------------------------------
"Sometimes to see the wood from the trees,
you have to cut down all the trees."




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