BBI - Babcock & Brown Infrastructure

[hardyakka]

Understood. I too saw recommendations back in Oct Nov Dec to buy BBI, but haven't seen one in a long time.
As you say analysts etc have access to the same information as we do in the public domain, however how is it that a small pool of forum folk can be interested in this potential golden goose whilst the vast pool of investors is missing it?
Hardyakka, your explanation is great, I just can't get my head around this gem being missed by the rest of the market. I find this particularly strange.

The only thing I would like to add to the explanations already given is that it is an imperfect market and the majority of investors are running scared, hence the flight to cash and lack of risk capital.

Without meaning to thrash a dead horse the W Buffett saying sums it up for me, this is along the lines of "When everyone is greedy be scared, when everyone is scared be greedy".

But then at the same time there is no certainty of return at this stage, there is only that when the cash is in the bank. Nothing is guaranteed.

IMO I consider BBI will recover, allbeit slowly and their actions over the past 4/5 months are demonstrating this to me. But then maybe I am naive and will lose a lot of money, alternatively if my judgement and instincts are correct I also stand to make a heck of a lot.

Never forget that many of the blue chips, ie Santos, CSL, Cochlear etc started life as penny dreadfuls or midcaps. Those who took a risk rode their price accordingly.

Cheers

 

[hardyakka]

There are plenty of people buying BBI other than forum readers. Look at the volumes going through the last month. I can assure you it's not just forum users. Instos will only start buying when the risk is gone. That's why I believe the sale of DBCT will be the catalyst for BBI to be re-rated substantially in the following quarter after the sale of DBCT.

BB,

Totally agree, when the sale is announced then I see instos moving into the BBI register.

Cheers

 

[skc]

Never forget that many of the blue chips, ie Santos, CSL, Cochlear etc started life as penny dreadfuls or midcaps. Those who took a risk rode their price accordingly.

Also don't forget many penny dreadfuls these days started life as blue chips!

Sorry couldn't resist...

 

[hardyakka]

Also don't forget many penny dreadfuls these days started life as blue chips!

Sorry couldn't resist...

yes I agree, but the opposite also applies and that is why research and instincts are vital

I could not resist either

 

[Tysonboss1]

Also don't forget many penny dreadfuls these days started life as blue chips!

Sorry couldn't resist...

HaHaHA,...

But finding out which ones just have penny dreadful window dressing could be profitable.

 

[Bolivia]

I have done alot more homework on the value of Dalrymple Bay and believe 2009/10 EBITDA could be in the 200-240 Mill area. Which means a price of around 2.5-3.0 Bill is entirely feasible. They just have to find a willing buyer!

This leads me to my next question. If the sale goes ahead and a considerable amount of corporate debt is paid off, it is easy to see how the market will react favourably to this news. Will this then become an opportunity for BNB to unload the stock it has, due to being in administration, keeping a lid on potential gains for BBI? Also, do BNB hold any BEPPA's? On a comparative basis wouldn't BEPPA do alot better, share price wise, than BBI if they announced the sale? Why then should you buy BBI?

 

[nomore4s]

They just have to find a willing buyer!

This is the sticking point atm, which is why the market is currently cautious on the pricing of BBI.

There will not be too many companies willing to pay a premium on any asset in the current climate especially if it envolves having to take on a lot of debt themselves to do it. Most companies are busy trying to reduce debt and/or shore up balance sheets.

 

[Tysonboss1]

On a comparative basis wouldn't BEPPA do alot better, share price wise, than BBI if they announced the sale? Why then should you buy BBI?

Yes you would expect that Beppa would recover faster than BBI and strengthed towards face value, Beppa will also receive a distribution before BBI.

However Beppa Maxium gain is pretty much capped at it's $1 face value + interest, So any extra value generated by the operation or sale of BBI assets will flow to BBI share holders which have no such cap on their value or distributions.

BBI and BEPPA are different animals, and thought needs to be put into the longterm pros and cons of each.

I hold both currently at a 80/20 ratio with Beppa being the larger portion.

 

[banska bystrica]

I have done alot more homework on the value of Dalrymple Bay and believe 2009/10 EBITDA could be in the 200-240 Mill area. Which means a price of around 2.5-3.0 Bill is entirely feasible.

You are now in the same ball park as me.
Once DBCT sells, corporate debt can be wiped out (or just about wiped out depending on DBCT sale price) and BEPPA will race away from BBI in price (in my opinion). If BBI are left with only non-recourse debt, the risk is all but eliminated. That ensures BEPPA holders will get $1+ worth of something. Either BBI shares, cash or a combination of both. The reason BEPPA is trading so low at 8c, is because there is still a risk that BBI goes under because of the corporate debt.

This is the price history of BBI/BEPPA last October.

31-Oct-08 $0.190 $0.310 $0.120
30-Oct-08 $0.195 $0.290 $0.095
29-Oct-08 $0.180 $0.275 $0.095
28-Oct-08 $0.170 $0.259 $0.089
27-Oct-08 $0.180 $0.230 $0.050
24-Oct-08 $0.200 $0.270 $0.070
23-Oct-08 $0.205 $0.271 $0.066
22-Oct-08 $0.230 $0.301 $0.071
21-Oct-08 $0.240 $0.355 $0.115
20-Oct-08 $0.220 $0.325 $0.105
17-Oct-08 $0.225 $0.350 $0.125
16-Oct-08 $0.235 $0.316 $0.081
15-Oct-08 $0.255 $0.348 $0.093
14-Oct-08 $0.260 $0.400 $0.140
13-Oct-08 $0.225 $0.370 $0.145
10-Oct-08 $0.205 $0.330 $0.125
09-Oct-08 $0.255 $0.400 $0.145
08-Oct-08 $0.260 $0.385 $0.125
07-Oct-08 $0.285 $0.410 $0.125
06-Oct-08 $0.290 $0.410 $0.120
03-Oct-08 $0.305 $0.460 $0.155
02-Oct-08 $0.315 $0.470 $0.155
01-Oct-08 $0.330 $0.500 $0.170

The gap on Oct 1 was 17c. I see a similar gap on the way back up.

 

[Viva_Las_Vegas]

You may all find this podcast interesting, and importantly the reference to asset values.

http://boardroom-pc.streamguys.us/files/ASX/ASX20090406/

 

[w.m.buch@bigpond]

I thought it was more interesting that a recommendation was to build a portfolio of bonds of senior debt(slide 35 I think), although better interest rate than Beppa suggested. Gives me even more confidence for Beppa.
Hold BBI and Beppa
Both LT Buy

 

[jeffTH]

Hello All
Just spent 3 hours reading all the posts since page 12 to try and get up to speed. Researched the BBI website on Friday last and bought 25k BEPPA and considering another 100k.

However, I have 2 queries -
1. Accrued interest quoted at 3.1c sofar in a BB post and I assume this is Dec 08 and Mar 09 payments deferred and another 1.06c to accrue in Jun 09. Will not these payments be made to those on the register at the time the interest payments became due rather than the holder at the time the payments are re-instated? Thus a $1.20 payment in 2012 would only arise if you held the shares from the first deferral to the last!
2. What is the danger of the "Responsible Entity" falling out of the B & B Group thus triggering a 'Change of Control' event? Could the Directors engineer such an event to minimize the Reset on BEPPA?

Cheers....

 

[banska bystrica]

Will not these payments be made to those on the register at the time the interest payments became due rather than the holder at the time the payments are re-instated?

No, the opposite will happen.

With regards to a Change of Control event, read the announcement BBI made about this on Dec 1, 2008.

http://imagesignal.comsec.com.au/asxdata/20081201/pdf/00909456.pdf

 

[hardyakka]

BBI - Another Issue

IMO if the management agreement is sorted out, name changed and DBCT and Euroports sold for good prices we will start to see the light at the end of the tunnel regarding unlocking the true value in BBI and BEPPA.

However there is one additional risk applicable to the BBI securities that does not apply to BEPPA and will affect the value of the BBI securities. Once there is reasonable value unlocked from BBI I would not be in the least surprised if there was a capital raising, at a discount of course.

Mind you the very fact that this may be a risk means that BBI would be out of the quagmire and its value re-established, which of course would be a very nice position to be in.

At this point in time I will be happy if BBI sell 100% of DBCT, and hence receive a premium for control over and above the value of the asset itself. One step at a time.

Sorry BB I forgot the name of the simple but practical name you gave your plan.

Cheers

NB/ My estimate of DBCT if 100% is sold to one of the majors is $3B, this including a control premium.

Disclaimer-If you believe any of my ramblings you are as crazy as I am and should be tossed into the death spiral.

 

[banska bystrica]

There is also some risk of SPARCS dilution depending on the vote in May. The catalysts I see for BBI to get back to 30c+ are:

1. A "YES" vote in May for SPARCS 12 month delayed reset.

2. Management internalization finalized.

3. PD Ports sale or partial sale

4. Further Euroports sell down

5. DBCT sale or part sale

6. Name change

 

[investorpaul]

What are the implications of this:

BB sued by partner

It has something to do with transferring assets to avoid payment. Does anyone know any further info about this?

 

[banska bystrica]

BBI is NOT a defendant in this case. I understand it involves the BNB subsidiary, BBIPL. Another case of journalist confusion.

 

[investorpaul]

BBI is NOT a defendant in this case. I understand it involves the BNB subsidiary, BBIPL. Another case of journalist confusion.

Hi BB,

I thought that was the case when I first read the article and then I re-read it any saw that it mentioned BBI remaining unchanged at 6.5cents (last weeks close) and thought I better doubt check.

I guess this just shows how easy it is for people to tie BBI up with the mess that has consumed other BB satellites and lose track of who does what.

 

[banska bystrica]

Hi BB,

I thought that was the case when I first read the article and then I re-read it any saw that it mentioned BBI remaining unchanged at 6.5cents (last weeks close) and thought I better doubt check.

I guess this just shows how easy it is for people to tie BBI up with the mess that has consumed other BB satellites and lose track of who does what.

Paul,
It's this sort of confusion that creates opportunities for those that have done their homework. The confusion in Nov 2008 provided the opportunity for me to buy BBI at 2.5c.
There is also mass confusion on whether BBI's assets are overvalued in the books. The market does not believe the book values. The assets for BBI are in the books at COST price plus cap ex minus depreciation. They are valued very conservatively and have never been revised upwards even in the bull market. For example, PD Ports was bought very cheaply in my opinion. See the following article from International Freighting Weekly (IFW) which backs up my view:

"On the subject of acquisitions, the disquiet surrounding a possible sale of PD Ports by BBI serves to highlight the frenzy with which investment houses were drawn toward the port sector.

BBI's buy for £337m at the end of 2005 seems a bit of steal today, when one considers the £3bn+ the Goldman Sachs-led consortium paid for ABP, and the $2.7bn REEFF, forked out for New York's Maher Terminals (which at that time handled 1.5m teu and has seen little growth since)."


I suggest people do their own research into BBI as the mainstream media has literally no idea how to distinguish between BNB and the satellites it created.

 

[Mitsimonsta]

Wow, that's a nice little jump this morning (BEPPA), hopefully it will fall back a bit later today.

Was going to buy on Thursday afternoon but got busy and missed the close. Angry at myself now