GTP 0.00% 12.0¢ great southern limited

TIM / GTP and why they are such a good buy.

  1. 10,543 Posts.
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    zwu, cso1, senis and stocko,

    I've picked up the trail of the last TIM thread because it is simply getting too unweildy.

    zwu said "Senis, Would you share with us the source of information of TIM’s long term debt of ~$111M and gross assets of ~$395M? I hope to keep my information accurate.

    Alpha, Indeed what a waste of time to discuss a heap of rubbish issues here, but would you also tell me how people can access the ASX table for TIM’s debt/equity ratio? From the ASX website or elsewhere?


    zwu, let me clarify why I say that what we are discussing is a load of rubbish - and I might add I have struggled to find a suitable comparision to make.

    Suppose I was an investor in, or interested in buying shares in Woolworths or Foodland. Both excellent companies with their own particular strengths.

    Then suddenly - out of the blue - some made idiot starts making widespread food poisoning threats against the two groups in their Australian stores.

    Overnight shoppers stop buying their food from these Australian stores though both continue to sell some hard goods like toilet paper etc.



    This goes on for a year though Foodlands NZ stores are relatively unaffected.

    Then suddenly the threat is over, both groups have had to make major changes to their businesses just to survive as cashflow evaporated but no-one has actually been poisoned and the perpatrator is behind bars.

    Suddenly its straight back to business as usual.

    The sharemarket prices of both companies which have been soundly thrashed recover somewhat but for the firt few months sales figures are unknown as each struggles to get staff back and fix their businesses.

    What are we left with. The last set of sales figures for a full year are from the distrupted year - so is the dividends where one company elected to conserve its cash and the other paid a dividend. The share price has moved up because some in the market remember what each company can do though there are no figures yet and the prices are moving on past memories.

    And Foodlands sales look better than Woolworths because it had NZ stores and Woolworths didn't.

    SOOOO, to cut a long story short you are no doubt thinking "This is completely stupid - what on earth is this idiot Alpha trying to do comparing the sales figures of two companies from a disaster with their share prices post the disaster, with their dividend yeilds during the disaster. (and the companies aren't even apples v's apples)

    Well zwu, what I've just done in my theoretical example is exactly what you have tried to do in your actual comparision of Timbercorp and Great Southern.

    Doing such a comparision is a complete waste of time.

    The only valid work that can be done here in my opinion (and the point I and cso1 have been making is that just as with my example you have two companies that have emerged from a frightening, but ultimately non-materialising challenge to their businesses. In all respects it is business as usual but their last years sales figures are complete irrevalancies. T

    To say that TIM's residual income during a one off industry crisis somehow makes it a better stock is ludicrous since were the situation to have persisted then both companies probably would have been finished certainly as far as their existing business models were concerned.

    Further, their dividend policies during that period clearly reflected an alternative point of comparision - TIM with its huge debt load had to conserve every cent i could to meet debt repayments thus paying no dividend whilst GTP continued to pay a dividend as it had no debt.

    Again, in the context of crisis this doesn't make one company better than the other if the crisis had not been resolved.

    What is needed for one to see the extraordinary value here is to step back and look at what both companies are capable of in a normal years trading. Then compare their current market price to what they will probably do this year (not last year) remembering that there will still be some initial unease amongst investors and then what they will do the following year when it is reasonable to presume both (and their compatriotes old and new) will hit fifth gear.

    Cheers zwu and all,

 
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