BBI - Babcock & Brown Infrastructure

[random]

Fair enough.
I probably would have said the same myself because of the fear i would be asked every 5 minutes on top of your listed reason.

 

[hardyakka]

This could drag on forever. I am simply wanting to know how you arrive at all the different FCF's that you post.

One post made prior to the half year result says $300 million, another post made after the half year result says 10c per share ($240 million), another says $200 million.

What was BBI's FCF in the first half to Decembr? Was it approx $6 million?

Why is BBI debt funding their capex requirements if their FCF is as good as you suggest it is?

Thanks

The following numbers are available from the latest Investor Pack


Operating cash flow before organic growth capex
123.2 Actual 6 months 31/12/07
155.8 Actual6 months 30/06/08
279.0 Actual12 months 30/06/08
141.1 Actual 6 months 31/12/08
BBI’s proportionate share of organic growth capex
(67.4) Actual 6 months 31/12/07
(97.3) Actual6 months 30/06/08
(164.7) Actual12 months 30/06/08
(135.0) Actual 6 months 31/12/08
BBI’s proportionate share of debt funding of organic growth capex
53.9 Actual 6 months 31/12/07
58.8 Actual6 months 30/06/08
112.7 Actual12 months 30/06/08
64.1 Actual 6 months 31/12/08
Operating cash flow post equity funding organic growth
109.7 Actual 6 months 31/12/07
117.3 Actual6 months 30/06/08
227.0 Actual12 months 30/06/08
70.2 Actual 6 months 31/12/08

It took me 5 minutes to find that information.

Porky pies... death spirals..what next...I havent laughed so hard in a while. I think you guys need to kiss and make up...I need a beer...

BB, your research and commentary is appreciated

Cheers

NB/ Thought for the day "Man who try to pick bottom get dirty finger" (can't remember who I pinched that from)

 

[select]

The following numbers are available from the latest Investor Pack


Operating cash flow before organic growth capex
123.2 Actual 6 months 31/12/07
155.8 Actual6 months 30/06/08
279.0 Actual12 months 30/06/08
141.1 Actual 6 months 31/12/08
BBI’s proportionate share of organic growth capex
(67.4) Actual 6 months 31/12/07
(97.3) Actual6 months 30/06/08
(164.7) Actual12 months 30/06/08
(135.0) Actual 6 months 31/12/08
BBI’s proportionate share of debt funding of organic growth capex
53.9 Actual 6 months 31/12/07
58.8 Actual6 months 30/06/08
112.7 Actual12 months 30/06/08
64.1 Actual 6 months 31/12/08
Operating cash flow post equity funding organic growth
109.7 Actual 6 months 31/12/07
117.3 Actual6 months 30/06/08
227.0 Actual12 months 30/06/08
70.2 Actual 6 months 31/12/08

It took me 5 minutes to find that information.

Porky pies... death spirals..what next...I havent laughed so hard in a while. I think you guys need to kiss and make up...I need a beer...

BB, your research and commentary is appreciated

Cheers

NB/ Thought for the day "Man who try to pick bottom get dirty finger" (can't remember who I pinched that from)

Hardyakka,

Thanks for the contribution but the numbers you have provided aren't Free Cash Flow, they are Operating Cash Flow figures.

So think the 70.2 million for the half year to December that you have quoted includes $64.1 million of debt funding for the "organic growth capex".

The Operating Cash Flow was $141.1 million LESS organic growth capex of $135 million.

Thus, FCF = $6.1 million

As you can see BBI have debt funded their share of capex.

Am i wrong?

If I am right, BBI is in a very dark place.

 

[hardyakka]

Hardyakka,

Thanks for the contribution but the numbers you have provided aren't Free Cash Flow, they are Operating Cash Flow figures.

So think the 70.2 million for the half year to December that you have quoted includes $64.1 million of debt funding for the "organic growth capex".

The Operating Cash Flow was $141.1 million LESS organic growth capex of $135 million.

Thus, FCF = $6.1 million

As you can see BBI have debt funded their share of capex.

Am i wrong?

If I am right, BBI is in a very dark place.

I have had a quick look and see where your numbers are coming from, however there are two one off cash flows which are not currently recurring items as distributions are now suspended, these are:

a) Distributions paid to Stapled Security Holders 59393
b) Dividends paid to minority interests 5170
Total 64563

So your $6.1M + $64.6M = $70.7M

So you can see why I am happy with the $70M, what do you think?

Cheers

 

[skc]

Hardyakka,

Thanks for the contribution but the numbers you have provided aren't Free Cash Flow, they are Operating Cash Flow figures.

So think the 70.2 million for the half year to December that you have quoted includes $64.1 million of debt funding for the "organic growth capex".

The Operating Cash Flow was $141.1 million LESS organic growth capex of $135 million.

Thus, FCF = $6.1 million

As you can see BBI have debt funded their share of capex.

Am i wrong?

If I am right, BBI is in a very dark place.

Hmmm.. what's the definition of "organic growth capex"? I have never heard of the term being used before.

FCF should include maintenance capex, as it is money that needs to be plowed back into the business for it to keep earning the profit. But for growth capex, if they add new capacity to earn future profits, then it may be OK to omit in the definite of "FCF from operations".

Afterall, there are many different types of FCF and it depends on what purpose you are using it for.

 

[select]

I have had a quick look and see where your numbers are coming from, however there are two one off cash flows which are not currently recurring items as distributions are now suspended, these are:

a) Distributions paid to Stapled Security Holders 59393
b) Dividends paid to minority interests 5170
Total 64563

So your $6.1M + $64.6M = $70.7M

So you can see why I am happy with the $70M, what do you think?

Cheers

Let me get this right. You are saying that BBI's FCF in the half year ($6.1 million) + the distributions that weren't paid (I'm quoting YOU $64.6 million) = HAPPY?

I must be on another planet.

The distributions that weren't paid in the half year to December actually show how fragile BBI's balance sheet is. It's not something to rejoice.

Dividends come from Free Cash Flow and NO didvidends were paid and FCF was a mesely $6.1 million.

If $64.6 million had have been distributed, $58.5 million would have been DEBT funded ($6.1 - $64.6)

Here is what BBI's distribution policy is,

Distribution Approach
In August 2008 BBI adopted a new capital management policy which included a new distribution payout policy. It is expected that the policy will apply to any distributions in the future. The BBI Distribution policy is as follows:
•
Distributions are to be funded from free cash flow (FCF) (broadly defined as EBITDA less net interest cash flows, cash tax and recurring capital expenditure);
•
Funding distributions from FCF is a more prudent and sustainable approach to capital management and enables greater liquidity in the short term; and
•
BBI directors will take into consideration any significant non-recurring items in respect of either earnings or capital expenditure. This includes the equity component of organic growth capex (historically funded through equity raising initiatives e.g. DRP, SPP, entitlements etc).

 

[banska bystrica]

Geez some like stating the obvious. Of course BBI's balance sheet is fragile. If it were robust, do you think the shares would be going for 3.8c?
They have a heap of debt and they need to sell assets. That's why the share price is in the toilet. Please tell us something we don't know.

 

[select]

Geez some like stating the obvious. Of course BBI's balance sheet is fragile. If it were robust, do you think the shares would be going for 3.8c?
They have a heap of debt and they need to sell assets. That's why the share price is in the toilet. Please tell us something we don't know.

BB,

You can have a dig at me all you like but the evidence suggests you don't understand FCF and perhaps you need to be a bit more open minded and less focussed on defending your investment position.

You weren't even prepared to detail the top 4 shareholders because you had paid for it and didn't want to share the info with the person that asked yet you are more than happy to spend 12 hours of the day flogging BBI "research" to anybody that will listen. I can't get my head around that.

Tell you something you don't know? Well "On a look through basis" on March 2you certainly didn't think BBI's balance sheet was fragile. This is what you had to say.

Talk of BBI going bust is fanciful. Where's the evidence?
NO asset impairment.
NO breach of any debt covenants.
EBITDA up 5% in a savage bear market.
On a look through basis, they are still generating about $200M free cash flow per year. Even without an asset sale, they can pay back half their corporate debt by 2011/12. What's all the panic about?
I'll tell you the big difference between BBI and CNP, BNB, AFG, OZL etc.
1. NO asset impairments because of the quality of assets withstanding this deep global recession and
2. The underlying business is cash flow positive.

 

[banska bystrica]

select,
You cannot even admit that you lied. End of story.
Everything I said about BBI was spot on. What is all the panic about? Just because the BS is fragile doesn't mean they are not a great buy at less than 4c.
You have no concept of value. Risk /reward good buddy. If you don't want risk go and buy WOW.

 

[hardyakka]

Let me get this right. You are saying that BBI's FCF in the half year ($6.1 million) + the distributions that weren't paid (I'm quoting YOU $64.6 million) = HAPPY?

I must be on another planet.

The distributions that weren't paid in the half year to December actually show how fragile BBI's balance sheet is. It's not something to rejoice.

Dividends come from Free Cash Flow and NO didvidends were paid and FCF was a mesely $6.1 million.

If $64.6 million had have been distributed, $58.5 million would have been DEBT funded ($6.1 - $64.6)

Select,

Let me put this more simply so that you understand and then you will appreciate your error.

The distributions referred to above WERE paid out of cashflow during the 6 months to 31-12-08. Try looking at the cashflow statement on page 14 of the financials.

Distributions are suspended, effectively non-recurring, so will not in the immediate future be a deduction against future cashflows.

So net cash $6.1M (your figure) add back distributions which are now suspended of $64.6M =$70.7M.

If the second half of FY09 performed exactly the same in all respects as the first half cashflow would be as per above.

Cheers

 

[banska bystrica]

If the second half of FY09 performed exactly the same in all respects as the first half cashflow would be as per above.

Cheers

Hi HY,
Traditionally, the 2nd half is much stronger for BBI so those numbers would be a minimum.

They are generating 8-10c per share free cash flow on an annualized basis. Things are a bit tight and the balance sheet is stretched but whether that warrants a 96% discount to net asset value is another question. I guess conservative risk intolerant people like select would say 96% is not a big enough discount because he thinks it will probably go to zero.
Remember: Risky stocks don't necessarily mean bad investment. It all depends on the big P........PRICE.
At 4c, I say screaming buy, at 40c I would say fair value "LONG TERM OUTPERFORM", at 80c I would say take some profits.

 

[banska bystrica]

BB,

You can have a dig at me all you like but the evidence suggests you don't understand FCF

On the contrary, you display a very poor understanding of the concept.

Also, why should I share with ungrateful people like yourself something I have paid for. You are kidding. It's all take and no give with people like you. The bell's ringing buddy and no it's not Mr Whippy.

 

[sinner]

Hi banksa,

Can you tell those who care about it? I care enough that I went out and scalped $600 on the forex tonight to place a small order on BEPPA in the morning

Not willing to put any of my own cash into a indebted company but will happily put a free bet on one

 

[hardyakka]

BB,

You can have a dig at me all you like but the evidence suggests you don't understand FCF and perhaps you need to be a bit more open minded and less focussed on defending your investment position.

You weren't even prepared to detail the top 4 shareholders because you had paid for it and didn't want to share the info with the person that asked yet you are more than happy to spend 12 hours of the day flogging BBI "research" to anybody that will listen. I can't get my head around that.

Tell you something you don't know? Well "On a look through basis" on March 2you certainly didn't think BBI's balance sheet was fragile. This is what you had to say.

Talk of BBI going bust is fanciful. Where's the evidence?
NO asset impairment.
NO breach of any debt covenants.
EBITDA up 5% in a savage bear market.
On a look through basis, they are still generating about $200M free cash flow per year. Even without an asset sale, they can pay back half their corporate debt by 2011/12. What's all the panic about?
I'll tell you the big difference between BBI and CNP, BNB, AFG, OZL etc.
1. NO asset impairments because of the quality of assets withstanding this deep global recession and
2. The underlying business is cash flow positive.

Select,

If you took the time to read the detailed posts summarising an analysis of the financials at the end of February you would see under "key issues" a comment that BBI was sailing very close to the wind on cashflow of $70M. For an registered scheme such as BBI an amount of $300M is too close to the wind, that is one of many key reasons the price is at 4 cents.

The cashflow is one of many reasons, I am not going to restate these as you can read the above noted posts. On the other side of the ledger there are a lot of pluses in favour of BBI.

It is an imperfect market and my risk appetite considers this a good risk reward equation. Its very simple, an investment of $100k has the potential to return millions, or you may lose the lot. I have formed my view on the basis of my research.

The Sage of Omaha's comment sums it up nicely for me, it is along the lines of "when most are greedy be fearful, when most are fearful be greedy". Consider this and the market we are in.

If you have any other reasons other than cashflow why you consider BBI a poor investment please post them.

Cheers

 

[hardyakka]

Hi HY,
Traditionally, the 2nd half is much stronger for BBI so those numbers would be a minimum.

They are generating 8-10c per share free cash flow on an annualized basis. Things are a bit tight and the balance sheet is stretched but whether that warrants a 96% discount to net asset value is another question. I guess conservative risk intolerant people like select would say 96% is not a big enough discount because he thinks it will probably go to zero.
Remember: Risky stocks don't necessarily mean bad investment. It all depends on the big P........PRICE.
At 4c, I say screaming buy, at 40c I would say fair value "LONG TERM OUTPERFORM", at 80c I would say take some profits.

BB,

We can look back in history and simply marvel with the benefit of hindsight at the bargains some people got. But nearly always a lot of risk was involved before the event. Will BBI be one of those? No one knows, but you can form a view.

Based upon my research if a few decent cashflows are generated from asset sales your numbers above seem pretty reasonable, though if BEPPA hit about 70cents I would seek to diversify. That is a problem I would like to have.

A lot of traders are complaining about the short term effect of DB selling down its holding. I think this is great as it is an accumulation opportunity. I am at the stage of having to sell down some of my favourite small caps (including NOD that I acquired at 23 cents) to fund my BEPPA and BBI purchases.

I am looking to now acquire BBI. I recall a number you once quoted a long while back (which I will not state) I am targeting half that amount split 30/70 BBI/BEPPA.

Either I'll rock up in the Ferrari and we can go for a very expensive lunch, or I will see you down at the soup kitchen, both courtesy of BBI <g>.

Cheers

 

[banska bystrica]

"when most are greedy be fearful, when most are fearful be greedy". Consider this and the market we are in.

Spot on HY. The market has never been more fearful probably since 1930. It is this exact fear and people "jumping at shadows" looking for any sort of "risk" that provides those of us with fat bank accounts and high risk tolerances the opportunity.
If BBI goes under, it will not change my life. I have the equivalent of an average house in my city of Brisbane tied up in BBI. If BBI survives the next 12 months, I will eventually be able to buy 10-20 houses from my investment. I cannot think of a better risk/reward scenario. I have looked long and hard across the ASX and cannot find a stock with unimpaired assets trading at a 96% discount to NAV with the quality of assets BBI has.
I can understand how people are afraid of risk and even I will not invest in risky stocks without a high "reward" component attached. That's why PRICE is everything. Without Phil Green selling and these instos exiting without care for price, BBI would perhaps never have got down to these give away levels. Perhaps 20c would have been the bottom and we would still be saying 20c is a trashed price. It's all relative. Whilst BBI has significant risks, I think the "reward" if they survive is well worth the investment at these levels.

 

[banska bystrica]

Either I'll rock up in the Ferrari and we can go for a very expensive lunch, or I will see you down at the soup kitchen, both courtesy of BBI <g>.

There's a soup kitchen in South Brisbane I have done a bit of voluntary work for (serving tucker for the homeless). We will either meet there for lunch or perhaps at my favourite restaurant in Budapest which serves the best food you will ever taste. Our destination depends on BBI.

 

[hardyakka]

I have looked long and hard across the ASX and cannot find a stock with unimpaired assets trading at a 96% discount to NAV with the quality of assets BBI has..

BB,
I am in a similar position in Sydney re house etc. I have been doing likewise and have taken a holding of 200,000 units in an interesting entity. Have a look at your email.

Cheers

 

[nulla nulla]

Sounds like a mexican stand-off between one party that sees the negatives and one party that sees the positives.

A couple more positives:
a. they are not in Administration, Receivership or Liquidation;
b. they are not in breach of covenants;
c. they have their funding/refinancing covered, for now; and
d. they are working to reduce debt through the sale of assets in an orderly manner so as to realise value rather than simply unloading at fire sale prices.

Additionaly, if you buy a parcel, whether as a speculation for a short term gain or long term investment, they still send out:

e. the paperwork for tax files numbers, abn numbers etc;
f. the paperwork for your bank account details so they know where to pay dividends; and....wait for it...
g. the booklet on "Distribution Reinvestment Plan Rules.

Now, either someone has a wicked sense of humor or it could be that management of bbi expect to weather this Global Financial Crisis and return to paying dividends?

Time will tell.

 

[skc]

Additionaly, if you buy a parcel, whether as a speculation for a short term gain or long term investment, they still send out:

e. the paperwork for tax files numbers, abn numbers etc;
f. the paperwork for your bank account details so they know where to pay dividends; and....wait for it...
g. the booklet on "Distribution Reinvestment Plan Rules.

Now, either someone has a wicked sense of humor or it could be that management of bbi expect to weather this Global Financial Crisis and return to paying dividends?

Time will tell.

Perhaps I didn't understand your sense of humour, but I guess few will agree that sending out the paperwork is an indication of future dividend! It is simply regulatory requirement and basic service you get when a listed company pays Computershare or Link Market Services to manage their shareholders.