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Now off its lows. ACC, the NZ govt private sector investing agent has disclosed its buying interest. Less than 5% so no need to legally disclose but did so anyway.

 

Longer time observers of Brierley and Gibbs et. al. will have seen a shift of interest from one of profits at any price to responsible business in areas of strategic national interest.

 

It is therefore no coincidence the G is building a stake in GPG.

 

The big question is, what is it the G is looking at as being of interest to them?

 

I don't think it is zippers and thread.

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I doubt that the NZ Govt has any particular interest in or knowledge of GPG.

ACC is like any other big insurer. Premiums keep being paid, cash accumulates and it has to invest its funds somewhere. Equities are part of its portfolio and there are a limited number of larger stocks listed in NZ.

GPG is probably seen by its investment managers as being a bit oversold and so they're adding a few.

I'd be surprised if there's anything more to it than that.

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Interesting bounce off its lows, would think that's the limit for now - sold my shares today.

 

I think I got a good price. Certainly, it's not heading back to anywhere near its previous valuations of $1.50+. There's been real value destruction, rather than short term mis-valuations due to poor sentiment. That UK building products company in administration which GPG was a substantial holder in for example, is not going to go back up, ever.

 

I still stick to my conservative valuation of 44c per share. The only reason I can see why the market is doing 60c per share (including dividend, since 57c is ex div) is possibly because they're ascribing some value to Coats. This is misguided in my view, as stated below, but also - well, the market's always been sceptical of Coats even during robust economic conditions. If Coats was as valuable as management claimed it had 3 or 4 years to be reflected in the share price. I think the market's justified to be doubtful of Coat's value during the good times. Now the bad times are rolling in, one would have to think there's nothing there at all now.

 

 

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This whole recession thing is synchronized and manufactured with tools such as the naked short, removal of the uptick rule and mark to market BS.

 

The moment these things get sorted and good companies continue to book profits while paying out their dividends we will have the biggest bull market ever seen.

 

That means an instant reversal in the fortunes of GPG.

 

For example you just can't have companies like CSR and FLT paying out nearly 15% yields and expect them to stay on the price levels they are. Either the price of the stock has to change or the divi. pay out has to change or both. But whichever one it is at these levels it is just pure insanity to be buying them so cheap.

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With FLT and CSR, are those 15% forward dividend yields, or historical? :)

 

In the case of CSR, GPG has already suffered a permanent loss of value on its holding, albeit quite a small one. When GPG chose not to subscribe to a rights issue - priced at a significantly reduced price to its purchase price - it was permanently diluted. Even if the company was intrinsically worth, say, 2 billion before the GFC, and recovers to this valuation when the GFC subsides, GPG now owns a smaller share of that 2 billion value because of the dilution of its stake.

 

CSR has fairly cyclical earnings so if the economy gets much worse and they need to raise more equity that's even more permanent value destruction.

 

All this is assuming GFC has zero impact on the value of the business itself long term. This itself is questionable given the poor competitive nature of the business. They sell aluminium, sugar, and home building products - very generic products, very commodity like products. With little pricing power these seem particularly prone to deteriorating economic conditions.

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I'm not sure where the "insanity" bit comes in here.

 

Insane to be buying them, given the "warning" of their historical yield?

Or selling at an insane, ie "bargain" price at these levels?

 

Personally, I reckon the market has priced in the risk pretty well, but I won't be buying.

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They sell aluminium, sugar, and home building products - very generic products, very commodity like products. With little pricing power these seem particularly prone to deteriorating economic conditions.

 

You have passed over on the ethanol side of the business. A significant asset when it comes to the sugar side of the business. Carbon credits and sugar futures will create significant upside.

 

GPG also have MSF in their stable.

 

CSR has change management expertise on board

 

It is a classic Brierley play. Buy up complimentary assets, consolidate and cut costs. Sell off unwanted assets.

 

Could be something similar with the building materials.

 

Time will tell but GPG is sitting pretty right now.

 

 

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In that stock with voting rights.

 

What is unusual though is that there is no legal requirement for either GPG or ACC to report such a thing. There must be a resolve between the two parties to put out a particular message.

 

Can anyone tell me when is GPG ever transparent?

 

My experience is never. So why now?

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ACC has the worst sharetrading results in the world. A monkey throwing darts would easily out preform ACC's share portfolio. They are totaly relient on a team of "Wet Behind The Ears" university grads that know nothing of the "REAL' world of investing.

 

A positive I see is that once ACC have finished thier share selling program we may see a healthy bounce in the shareprice. I dont think they are finished yet but it looks like some of the selling pressure is easing.

 

I brought today purely on the fact that if you do the opposite to ACC you cant go wrong.

 

I'm sorry if this sounds a bit fruit loopy.

 

This is a short term play for me but if its breaks the 68 cent resistance then may be worth keeping a bit longer. The next day or so should tell.

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