EPW (ASX) 3 Brokers downgraded

Originally posted by Strawman68 ↑

Brumbypat - its just normal accounting 101 and understanding the tax law and taking information from EPW's announcements and google searching of LREC prices on the net
. And whilst paying taxes now to use up the tax losses to give franked dividends....now instead of say a year or twos time, I can understand but only at a particular cost - that being the cost of money for say 1 or two years. As I said the real question is how much have they paid to do this.... which we don't know yet.

Coincidentally you will notice that EPW didn't make any specific mention of the tax equivalent penalty price being higher than the $90 rather they just compared $90 (apple) with $65 (non deductible pear)... I know of many people who assumed that EPW was making a windfall gain of ~$50m - being 1.9m LRECS at $25 ($90-65) which is not correct, and you will see that EPW's tax expense this year is going to be a lot higher than 30c in the $ profit because of the above increased tax rate - which I doubt anyone was expecting - as everyone just assumes its no more than 30c in the $ profit.

You only have to read the analysts forecasts commentary to see that they all have questions re this and we will only know the answers come Thursday Feb 23... so lets see what is said and how analysts view that.

But if I asked the question - as an investor how much would you pay to get a franked dividend a year or two earlier (think as a company to make it easier) - $5m, $10m, $20m??? that's the point - getting a franked dividend now is great but at what cost long term. If you paid more than you should have, then all that means is that later on you will pay for it....

Theres been nothing said that the LREC price wont stay up at these levels for the next 3 years, so therefore what happens if there is no opportunity to buy them cheaper later and swap them back for the cash back?

As for the LREC scheme, I wouldn't be surprised that it is changed so that companies cant do this like EPW has done, hence why the Clean Energy Regulator said they might be doing an investigation.... I bet Origin, AGL and Energy Australia are complaining no end to the regulator.... imagine if they all did the same thing.... the whole renewable scheme would fail... so I think changes will be made such that maybe no more than 10% can be paid for by penalty rather than close to 100% - just my view as no governments want to see renewables fail.

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it might not be about anything more than the creation of franking credits....the dividend has been at 11/12 cents per share for four years....it is likely to be under pressure having crept to a payout of 78% in the most recent year from around 24% four years prior....so if the dividend and payout ratio is under pressure why not create franking credits for an after tax position that is the same...

3 Brokers downgraded, page-28