# CEU - Connect East Group



## anniswan (14 February 2007)

Any thoughts on this stock, given they are way ahead of schedule, I am thinking that they are a good long term option.  Thoughts?


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## ColB (23 February 2008)

Bought 50k worth at 1.43 anniswan and now broken through 1.35 resistance level.  You may be able to pick them up for around 1.30 in the next week or so.


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## mrgroundwork (25 February 2008)

It is highly likely this stock will always have the speculation of a TCL takeover looming over it... which can only be a good thing... 

I live in the area and strongly believe this road will have huge volumes... people in melbourne have proved to be more than happy to pay tolls for quick trip times and this road offers a lot of people the mother of all time-savings... the growth in population in the outer-east will continue to support this road also...


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## tigerboi (5 May 2008)

*Eastlink flyover video...*

Heres the vid of the east link just followed it on my Melbourne book,never run into that part of melbourne as i always prefer the cushy runs into somerton or laverton,anyhow here it is...tb...go to home for the toll charges...

you got a better deal than us up here in sydney,you get cheaper weekend rates...wow...sydney pay same all week...

http://www.seita.com.au/pages/video-library.asp


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## de_giles111 (18 June 2008)

Interesting to see they keep declining, I thought their might of been some upwards movement with all the media coverage of the opening.


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## ColB (20 June 2008)

DeGiles, this is one reason why I'm staying in the resource/energy sector at the moment.  CEU listed at around $1.15 and hit a high of almost $2 which I think was due to speculation that Transurban might look at them as a takeover target.  They're at all time lows at the moment.  I sold a significant parcel at a 10-15% loss recently but did make a couple of small successful trades along the way.  You'd think when the thing opens in a couple of weeks that it might stimulate some interest.  Surely it won't go much lower!!


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## Kieran (29 September 2008)

3 months later we're at 85c. Assuming the current dividends hold up, it works out to a dividend yield of 10% - what do you think gentlemen?


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## bloomy88 (22 October 2008)

Im not too sure about CEU shares.
When transurban developed the monash freeway they were able to close a lot of other roads around the are so that people were more likely to travel along it. ConnectEast were unable to do this.
Also, I believe that there would be a great deal of people in the Eastern suburbs that will refuse to use the toll road by principle, since it was initially meant to be a FREEway.
Still, there should be a good flow of revenue coming in and not a great deal of costs, unless anything goes dramatically wrong....
With the dividend I think it is probably still worth a look...


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## Jikx (23 October 2008)

bloomy88 said:


> ConnectEast were unable to do this.




I think your assessment is correct. Since there are alternatives, when times are hard (indications say they will be!), trips along this toll way will be the first to go.

Still, I think it's extreme cheap if a recession doesn't eventuate!


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## oldblue (24 October 2008)

QUOTE
With the dividend I think it is probably still worth a look...

Someone please correct me if I have this wrong but I'm under the impression that the dividend is being paid from borrowings, raised on the strength of the perceived value of the asset, rather than from actual earnings.


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## mrgroundwork (26 October 2008)

Jikx said:


> I think your assessment is correct. Since there are alternatives, when times are hard (indications say they will be!), trips along this toll way will be the first to go.




true... the argument previously was that with petrol price so high, you wouldnt actually be better off taking an alternative route... however, oil is coming down and that will soon be reflected in petrol prices... 

the other thing a toll road does it shares the traffic burden... so the alternative routes now are much much quicker than they were previously... 

and yes divs at this stage are really being paid out of debt... not a good model... check Brisconnections BCSCA or RCY for proof of that...


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## Sean K (9 June 2009)

This has got TAKE ME OVER written all over it now.

LONG term, it will turn a profit. Melbournes public transport system is a joke, people have to drive. The eastern suburbs are still expanding. This toll road will be an absolute cash cow in years to come. Probably quite a few, but surely...

This is not a Bris Connections. Um, or is it??  Maybe there's some refinancing to be done, that won't appear?

Transurban must be licking their lips right now, it's a sitting duck. Not sure of the corporate structure. Perhaps too many big banks have big slices?


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## speculator101 (9 June 2009)

Hi Kennas,
Well, I have been following CEU for 18 months,
my main guide is JBwere research...
It was oh so happy... ah.. 18 moths ago! ha... when i bought..(but sold 2 months later with 12% loss)
and even though they are making money, they have yet to hit their projected goals in terms of avg distance traveled and avg toll.
but... the real issue, is debt. they have a lot.
yes, the first bit is not due for role over until 2011 and it could well be no issue by then. but, if things have not improved... jbwere says no more dividends for 3 years. 
Now im not Buffet, but an infrastructure stock that is not paying a dividend is like a car without wheels. 
oh, and Leighton has a large holding.. so not sure anyone can take them over.
anyway.. just a few thoughts.


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## speculator101 (10 June 2009)

Just an update Kennas, 
this from the Eureka Report - yesterday..(its a better explanation than mine)

"By contrast, ConnectEast is in the very early stages of its toll road ramp-up. The original prospectus forecasts for ConnectEast were hopelessly optimistic but recent revenue has exceeded Doherty’s more conservative forecasts, which of course were much lower than the prospectus.

ConnectEast’s problem is that although it reduced debt with the placement to CP2 it didn’t go far enough. For the March quarter, ConnectEast's interest bill and other costs exceeded toll revenue by about $14 million. That is not a happy situation when you have $1.4 billion in net debt and a market capitalisation of about $800 million. ConnectEast’s first major debt maturity doesn’t take place until November 2010, so the group has breathing space. Despite that, the stockmarket is very clearly concerned about the overall level of debt and its ability to continue the current 2 ¢ a share dividend.

The great comfort for ConnectEast shareholders have is that there is no way CP2 will let ConnectEast fall into the hands of its bankers because the investment group will take up the required equity to reduce debt. It will be two or three years before ConnectEast becomes a revenue powerhouse and Doherty is supremely confident the current favourable early traffic indicators will justify his confidence in taking 27% of the stock at 55 ¢.

As investors are now confident that Australia does not face the sort of downturn that was widely feared, they are looking to areas of the stockmarket that are still depressed.

The key to investing in infrastructure is, first, to ensure the revenue stream is secure and does not fluctuate widely. Toll roads are great investments on this front. Power distribution networks have a similar profile although they are subject to government regulation. The problem with the current infrastructure investments is that some of our best assets were subjected to overleveraged corporate structures during the boom and, over time, there needs to be a deleveraging process so that the asset jewel can shine.

And there is no better illustration of this than Transurban, which is basically an inflation-linked income stream that is also enjoying growth of its road users. The most widely publicised illustration of a bad infrastructure ownership structure is BrisConnections. However, Doherty believes there will be value in the third BrisConnections call because the actual project is a good one. In due course they will obviously have to have another equity call to replace the equity lost.

Meanwhile, if Doherty’s sums are right then Transurban and ConnectEast are good long-term investments for superannuation funds, although you must be prepared to invest extra funds in the companies to further lower their gearing. But the more they lower debt, the greater will be their share price because they then take on the characteristic of an inflation-adjusted income stream, a wonderful investment for retirees"


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## Sean K (10 June 2009)

speculator101 said:


> Just an update Kennas,
> this from the Eureka Report - yesterday..(its a better explanation than mine)
> 
> "By contrast, ConnectEast is in the very early stages of its toll road ramp-up.



Thanks for that, seems like a looooong term potential investment. I'm not really interested in a dividend but a turnaround story. Something that has been really heavily sold off due to short term vision. Maybe too heavily. But how low can they go, and can they go bust? I might just keep watching the chart for signs of life. Cheers.


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## oldskool (5 July 2009)

I take the view that debt is significantly high and thus requires further capital raisings. In view of this , i would see sp come down in the range of 20-25 cents. At that point, it would be a great long term investment. im still shorting.


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## Sean K (6 July 2009)

30c seems to have formed up as a bit of a floor. With general market possibly about to topple, then this will probably follow, but watching with interest for some volume and break up.


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## oldskool (6 July 2009)

mmm, kennans, you seem to be right....could be fake build up today, ive seen it happen before a sell off....but then again, it could be ready to run...someone is capping though, this i can see !!!!! will they let her run ? at 30 cents, she is cheap, no doubt about it.......i hope transurban makes an offer for her....perfect timing for it i rekn if they are astute enough. no better time imo....time will tell !


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## Busyboy50 (5 August 2009)

Thanks Oldskool, am also of the opinion it like a juicy apple waiting to be plucked by Transurban. I'm just hoping that price is higher that what it is now!! Maybe they will lets:iagree: others do the hard work of raising new equity to cover the current debt, and then pounce. Either way, I'm way, way down on this one. I'm hoping Rivercity will save my bacon......Cheers.


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## Ken Kwong (23 July 2010)

My view is that CEU's stock price has stablised.  Cashflow has improved due to increase in traffic volumes and it can only get better because toll prices are indexed annually.  The company has recently discontinued dividend reinvestment scheme and this is a good thing as it will stop diluting exisitng shareholdings.  Coupled with any plan of future buy-back from market, this share looks good for long=term.  Due to its long term "deferred tax" concession ie  no need to pay tax for the distribution, it is attractive to young and old investors.  The company has also commenced off road advertising recently ie. RACV, MacDonalds, Banks etc and this strategy will gradually help to generate revenue other than traffic revenue, which is the primary source.
If CEU's marketing department can convince MUM and DAD to buy the shares as a GIFT to their children or grand children, it would be "an up" for the share prices. 
In order for TCL or any other potential buyer to launch a take-over, there must a good reason for the take-over ie. for the cashflow, benefits from sgnergy or reduce competition.  I do not think this is going to happen soon.  In order to create an interest for the take over of the company, CEU must first be able to  generate enough cashflow to maintain its distribution policy and retain a small reserve or reduce its debts.  Watch out for such signals.
No matter what, I am holding on to my shares.  This toll road is the best thing that happened for those who live in the Eastern Suburbs.  One the bottleneck at Hoddles Streets is solved and the Frankston BYPASS to Mordillac Freeway is completed, CEU should come good.
Like Arnold Swag said..... TRUST ME


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## sptrawler (24 July 2010)

CEU is one of several disappointing toll way floats, Lane Cove tunnel, Rivercity Motorway smack of the same problem. Dodgy projections in the traffic flows pre float and then terrible results post float. I think it is going to be extremely difficult to get subscribers to future toll way floats unless there is a big turnaround in the above mentioned companies. CEU is holding its price but still a big loss for prospectus investors, Rivercity $1.00 shares look pretty sick at 0.03c  the only winner is the Queensland government, they got the tunnel and the shareholders got the pineapple. Unless they put some money in to keep it afloat they will never get a public/private float up again. Lets not forget Brisconnect what a debarcle that is and its not finished yet.
The only sensible thing to do is as you say buy shares for you grand kids, but why would you buy in the above, if they go belly up the grand kids get the pineapple too. There has to be better long term value than the above mentioned, if there isn't we are in a lot of trouble.


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## Sean K (24 July 2010)

Long term these toll roads will be absolute cash cows. There are no additional public transport plans out to the east that I know of, and we will not be beemed to work any time soon. The eastern burbs will continue to expand, cars will become cheaper to run (electric), so the only real long term risk imo is takeover.


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## sptrawler (24 July 2010)

I agree Kennas with your comments that these toll ways are cash cows and I also believe they are more important with electric vehicles(nothing drains batteries more than stop start operation). However the huge debt obligation has to be covered and there is only two ways either more traffic or higher tolls and at the moment neither is happening and that doesn't leave much for the shareholder in the way of dividends. What has to happen is the governments are going to have to pump some money in or they will all become Lane Cove tunnels where they are taken over at a bargain basement price. Shareholders loose again.


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## Greenvalley2006 (30 September 2010)

I was wondering if any posters have had a chance to eyeball the CEU 2010 Annual Report, and the August 2010 Traffic and Revenue report, the latter showing a 15.8% increase in revenue between the months of Aug 2009 and Aug 2010.

The analyst’s views seem polarised, with for example, Roger Montgomery rating CEU a C4 ie one rung up from the bottom: (Eureka Report, ValueLine: Infrastructure, 29/09/10), whilst Mike Hawkins has a positive recommendation on the stock: “ConnectEast is a different investment proposition, with its main asset still in ramp-up phase. However, the 2009-10 result was sound and its strategic attraction to Transurban will one day be confirmed. Our valuation for ConnectEast is about 50 ¢.” (Eureka Report, You Need Yield, 08/09/10).

I personally use Eastlink, and see estates and industry being planned and built along it and in the south east, and I can see that the Peninsula Link will further complement its patronage, so I have confidence per se that Eastlink will carry more and more traffic.

What I do not have enough experience in is measuring whether the traffic volume increases will generate revenue quickly enough to eat away at CEU’s debt, to then pay high divs. I think this probably lies in the annual report, and maybe where to the interest rates are heading. I am also unsure as to when Eastlink will revert back to Vic Gov ownership.

Any comments are appreciated.

I hold a small CEU parcel

Cheers

THIS IS NOT ADVICE!


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## Greenvalley2006 (23 July 2011)

A question for the Wiser Heads, now that the situation has changed with regard to CEU.

Horizon Roads / CP2, CEU's biggest holder has made an offer of 55c for the remaining shares, to be approved by the other shareholders.
Before the offer, which was made public on Friday 22/07/11, SP was approx 44c to 45c. After the offer buys and sells were approx 54c to 54.5c

This only leaves 1c to be made by the buyers if the offer is accepted, October. Seems like not much return, could do practically same at a bank with no risk that offer is voted down and status quo.

Is this a case of the market pricing in either:

1) A rejection of the offer by holders, with Horizon Roads / CP2 then having to up the original bid

or

2) A higher bid by another entity being a possibility

or

3) Something else I am not seeing

Further, in my inexperience, I am curious why the Course of Sales on Commsec shows no trades before 11.00 am on the day of the announcement, without a trading halt being in place that I can see.
From what I can see these were the first trades:
11:00:00 AM	0.540	3,687	1,990.98	XT
11:00:00 AM	0.540	213	        115.02	

Any and all help always appreciated

Cheers all

I HAVE NO IDEA. DO NOT DO IT.


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## skc (23 July 2011)

Greenvalley2006 said:


> A question for the Wiser Heads, now that the situation has changed with regard to CEU.
> 
> Horizon Roads / CP2, CEU's biggest holder has made an offer of 55c for the remaining shares, to be approved by the other shareholders.
> Before the offer, which was made public on Friday 22/07/11, SP was approx 44c to 45c. After the offer buys and sells were approx 54c to 54.5c
> ...




When there is a takeover situation announced before the market open, the share's openning is delayed to 11am as standard practice. This allows an orderly market with pre-market starting at 10:50am. 

With CEU now at 54c against 55c bid, the gap is indicating very much a done deal (as you said, the value of the gap is no more than interest in the bank). Transurban has been flagged as a potential counter bidder but based on its share price going up 2.5% on Friday it seems like the market isn't seeing that at the moment. 

If the market is confidently expecting a higher bid, you will see CEU trading higher than the bid price (see SDL or QML for recent examples). That could still happen Monday for all we know.

Obvisouly if you sell on market now you will be paying brokerage and forgoing the benefits if a higher bid comes along, in exchange of certainty of money in the bank. You should also pay attention to any tax implications (e.g. if holding another month qualifies you for 12-month discounted CGT).


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## Greenvalley2006 (23 July 2011)

Thank you SKC!!

Great answer to my learning.

When you say;
"When there is a takeover situation announced before the market open, the share's openning is delayed to 11am as standard practice. This allows an orderly market with pre-market starting at 10:50am."

Is this always? ie part of AXS rules, and will always happen in a similar situation?

Many thanks


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## skc (23 July 2011)

Greenvalley2006 said:


> Thank you SKC!!
> 
> Great answer to my learning.
> 
> ...




It's a 50 minute rule. So if a takeover is announced before the open, it's 10:50 for pre-market. If it's announced at 1:30pm, then it's 2:40pm pre-market.

http://www.asx.com.au/resources/takeovers_schemes.htm


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## JTLP (18 September 2011)

So the deal looks all but done...standard procedures in place before the shares are mopped up.

So why are the shares languishing at the 49 cent mark with a 55 cent offer?

Arbitrage play here? Thoughts?


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## skc (18 September 2011)

JTLP said:


> So the deal looks all but done...standard procedures in place before the shares are mopped up.
> 
> So why are the shares languishing at the 49 cent mark with a 55 cent offer?
> 
> Arbitrage play here? Thoughts?




Not all is well.

http://www.smh.com.au/business/connecteast-proposal-may-end-in-car-crash-20110915-1kbsj.html


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