BBI - Babcock & Brown Infrastructure

[Nicks]

yeah true, i bought a small parcel out but I guess it's not pure speculation as I went through the balance sheet fairly thoroughly, unlike most internet traders. The revenues are good, the assets are good, debt is covered, and the share price has been hammered factoring the gearing into account. Probably over hammered.

I think infrastructure is a better investment than many other areas at the moment, such as consuer discretionary and commodities. All of which can be strongly affected by a negative economic climate.

 

[BarryH]

Nicks,

Thanks for sharing your analysis on bbi. I think this stock is over sold and intend to hold it despite the negitive views that other investors have on it.
Eventially the earnings should carry the sp back up.

 

[roland]

Nicks,

Thanks for sharing your analysis on bbi. I think this stock is over sold and intend to hold it despite the negitive views that other investors have on it.
Eventially the earnings should carry the sp back up.

ditto nicks - I actually grabbed a few more at .17 yesterday, so I've done the evil cost averaging thingo.

 

[Tiles]

Thanks for your analysis, Nicks. I agree that infrastructure will be a better sector to be than some others. I'm holding on to my bbi but have resisted the buy temptation.

I'm still concerned that there has been no activity reported on the sale of assets - especially Powerco, which is a well run electricity and gas distributor with diversified networks.

 

[nulla nulla]

IMO - It is unlikely that BBI will sell any of it's assets atm, given lack of demand and retrace in asset values. Also as debt financing is locked in for the present there is no pressure to unload assets. If BBI maintains revised divvies then others will see present prices as a bargain and price will start to move up again.

 

[roland]

mmmm, Dividends suspended. I suppose that was on the cards, I was hoping for at least a cent or 2

SP will obviously suffer due to this

 

[roland]

oh well, back to trading BBI, not worth holding for div's - sold off my lowest parcel today for a profit

 

[Tiles]

Thanks for your analysis, Nicks. I agree that infrastructure will be a better sector to be than some others. I'm holding on to my bbi but have resisted the buy temptation.

I'm still concerned that there has been no activity reported on the sale of assets - especially Powerco, which is a well run electricity and gas distributor with diversified networks.

Well, at least the Powerco sale has gone through. Pity about the dividends. The board seem to be looking to long term viability, which is a plus. I'll continue to hold em.

 

[mark_au]

Hi Guys

attempt 2

Unfortunately for me i bought some just before the dividend announcement,
Ive just read the meeting report... probably should pick up some more while there 16c....
any more surprise announcements i should be aware of LOL

 

[dhukka]

I have now purchased some at 17.5c based on my analysis above. If I get a 5c dividend great, however if I get a 2.5c dividend and debt is reduced then thats great too.

How about a 0.0c dividend? Well at least they are finally selling some assets off and reducing their ridiculous levels of debt.

 

[gerg]

Nice of the management and managers to get good payments whilst the owners (ala the shareholders) get zero.

Its tuff when you bought these at $1.46 (yeah I know I should have sold earlier!)

Its still likely there is some value in the assets and when things get better it might be best to sell things off.

 

[long$$]

Nice of the management and managers to get good payments whilst the owners (ala the shareholders) get zero.

Its tuff when you bought these at $1.46 (yeah I know I should have sold earlier!)

Its still likely there is some value in the assets and when things get better it might be best to sell things off.

The Norwegians have been increasing their shareholding. On this basis it would appear that their is still value there, at least where you are able to take a long term view.

 

[roland]

Comsec's latest overview on BBI is positive in the long term but has some reservations regarding disclosure. The dividends being suspended will weaken the buying, but longer term looks reasonable if you are able to wait it out:

Babcock & Brown Infrastructure Group - Logic prevails on distributions, scepticism likely to remain though

Last Traded: $0.14 Market Cap: $451 Sector: Utilities
Summary of report dated 6/11/08
BUY / OUT PERFORM Valuation: $1.34
Summary
BBI has suspended distributions indefinitely to reduce leverage. BBI says this is not due to any poor operational or financial performance of the assets.

Disclosure however remains problematic. In addition to management agreements, disclosure of asset level ICRs is necessary to address investor scepticism that the suspension of distributions is due to underperformance from some of the assets.

Sale of Powerco demonstrated that there is significant value within the suite of BBI assets. Having said that, executing on asset sales is difficult as demonstrated by the low offers received for BBI's stake in Multinet Gas. The remaining asset sales remain on track. If a sale of 50% of WNR and Euroports is conducted BBI's interest cover ration (ICR) will move to 1.81X, still short of the medium term target of 2.0X.

While we thought Powerco would be a difficult sale to execute on (due to regulatory uncertainty), the sale of Westnet Rail and Euroports with volumes under pressure will also be difficult.

Valuation remains significantly above the security price on any reasonable metric. Our DCF valuation remains $1.34/share. The BBI share register is likely to experience a Transurban (TCL) type adjustment with retail investors having little reason to own the stock without a yield. This is why disclosure is even more crucial for a recovery in BBI's security price as it needs to attract institutional investors to the register.

We expect BBI to reinstate the distribution in FY10 at 10cps in line with our net operating cash flow forecasts (EBITDA less interest less tax less maintenance capex).

Recommendation remains Buy / Out Perform.

 

[Tiles]

BBI have gone down to 8.5c today with volume of 50,000,000. What don't we know? Who is selling at that price?

 

[Tiles]

BBI have gone down to 8.5c today with volume of 50,000,000. What don't we know? Who is selling at that price?

I was a bit premature. Last price at the moment looks like 8 c and volume over 58,000,000 but price has been below this level. The same questions apply.

 

[cbrendan]

Aren't their assets alone worth 2-3x the current SP?

From everything i can see its fear and fear alone. they are in no worse a position than they were friday when the canceled dividend announcement was priced in, yet they lose ~40%.

???

 

[bellenuit]

Comsec's latest overview on BBI is positive in the long term but has some reservations regarding disclosure. The dividends being suspended will weaken the buying, but longer term looks reasonable if you are able to wait it out:

Has anyone considered BEPPA rather than BBI? If BBI survives, each BEPPA will convert to about 1.075 BBI in 2012. Today BBI closed at $0.077 and BEPPA at $0.11. However, though the dividend is suspended for both BBI and BEPPA, BEPPA dividends are cumulative and must be paid before BBI dividends are paid. This means that should dividends be restored in 2010 as CommSec forecast, BEPPA shareholders will be entitled to all the missed dividends (Q4 2008, all 2009 and whatever missed quarters are in 2010). Their quarterly dividends so far in 2008 have each been slightly above 2 cents (about 8.4% p.a. on $1 face value) and are calculated using some fixed percentage over some bank rate (I don't have details to hand). So even allowing for an overall 2.5% fall in the underlying bank rate over the next 18 months compared to early 2008, that would imply missed quarterly dividends of about 1.5 cents each. If 7 quarters are missed, then the first new distribution in Q3 2010 will be 12 cents per share (8 X 1.5 cents). That is more than today's closing price. Additionally, BEPPA ranks ahead of BBI in the event of bankruptcy.

Any thoughts?

 

[bellenuit]

If BBI survives, each BEPPA will convert to about 1.075 BBI in 2012.

Oops, sorry. That should read:

If BBI survives, each BEPPA will convert to about 1.08$ of BBI shares in 2012. A 20 day (prior to conversion) Volume Weighted Average Price of BBI is used in determining the value of BBI in the above formula. So, if the VWAP of BBI is 20 cents, you will get 5.4 BBI for each BEPPA.

There are a few more things to consider (such as a cash option and treatment of unpaid dividends) so you should look at the Ts & Cs to get the full picture.

 

[alphaman]

Has anyone considered BEPPA rather than BBI?

IF you really want to be stuck with the company, yes BEPPA is definitely the superior choice.

I presume you have looked at AFGHA recently?

 

[Pigsy]

My guess is the sp drop is due to the downgrading of the BNB credit rating to BB- by Standard & Poors. Not released to the market until 6pm but maybe insiders new the announcement before hand. If not expect another 20% drop tomorrow.