mecu buys more of MyState

Melbourne credit union mecu has continued to accumulate shares in MyState Limited and this week reached the five per cent mark, resulting in a disclosure by the buyer to the ASX.

MyState's annual report in September 2010 provided the first disclosure of mecu's holding, which at the time was 1.6 per cent.

Over the last year, mecu has invested A$11.9 million in a stake that is now worth $12.6 million. mecu had core capital of $251 million at March 2011.

The credit union has bought about one third of all MyState shares traded on the ASX in the last year.

Phylip Doughty, chief executive of mecu, said yesterday: "We think this [trustee] business in Tasmania that MyState has got is a strong business.

"We expect them to reap strong gains from the merger of MyState, the credit union, and the trustee business.

"We were confident they can produce returns better than if we invested the money in liquid assets.

"We had a meeting with them and told them of our intentions. We've been very happy. They've been paying high dividends, fully franked dividends. We've seen a fairly consistent gain in the share price, not that we are trading."

Shares in MyState are yielding more than eight per cent, based on recent dividends, and the current share price of $3.75.

MyState was formed from the merger of Tasmanian Perpetual Trustee with MyState Financial, itself a merger of the Island State and Connect credit unions, which together rolled up virtually all the credit unions then trading on the island.

Asked if the object of the investment was to stake out a position with a view to a future merger or to frustrate the merger plans of any other investor, Doughty said, "That would be an effect of our holding.

"We made the investment because we believe they had a good investment in a similar market."