BBI - Babcock & Brown Infrastructure

[nathanblack]

I know that Beppa has a significant upside, But I have already invested an amount = to about a 1 years wage into beppa, when I get to holding an amount of this size I have little demons start to question whether I am going to far and perhaps taking to much risk,

However my current holding is part of my longterm portfolio, which I never withdraw capital or dividends from,

what I am thinking about doing now is investing $14,000 that I have sitting aside into Beppa, The catch is I have actually set this money aside for another purpose and need it back in about 9 months from now, so it would be a short term play of 6 - 9 months which is not what I usally do.

so its beppa or nothing? you disagree with my calculations, that on current price BBI 'may be' the better play over your time frame? i would be trying to average out the upside abit. what if beppa doubled and bbi trippled. i know beppa is safer downside, but they both have potential for nil value, so im more interested in best case and probable outcomes.

i just feel bbi is where i would put any extra dosh. then sell in 6months and either keep cash or invest in beppa at that point and gain further upside.

theres no rush with beppa. i would be shocked if it went much higher than 40c after dbct settles (leaving a further 60c + interest), so potentially you can get in then and still be rewarded handsomely. and at that point the risk will be close to zero for beppa. all you will need to consider is if they will be paid out early , or on maturity, and is it cash or shares. also i suspect they will be tighly held, so volumes might be low to accumulate large holding.

 

[Tysonboss1]

I guess the common wisdom would be that you never put money you need to spend into the stock market, let alone into a speculative investment.

I guess it's the gambler rather than investor coming out in me,... thats the side I try to suppress.

 

[Tysonboss1]

you disagree with my calculations, that on current price BBI 'may be' the better play over your time frame? i would be trying to average out the upside abit. what if beppa doubled and bbi trippled. i know beppa is safer downside, but they both have potential for nil value, so im more interested in best case and probable outcomes.

I don't disagree with your calc's, I understand the idea you are putting forward, Both shares have to have their pros and cons weighed up separatly because the are different animals.

At the moment I am overweight Beppa because I believe that although the maximum possible upside is capped to $1 + interest where as BBI is in theory unlimited. I am happy to take the possibly smaller gain (albeit still massive gain) and have a bit less risk.

But yes I still do hold BBI for the reasons you mentioned

 

[Tysonboss1]

the bank sweep also allocates money everymonth to buyback the SPARCS nz bonds, thats a great thing for BBI/BEPPA because it instantly improves the ballance sheet, it moves $1 from the asset side of the ledger but removes almost $2 from liability side(bought back on market around 50-60c). a gain of nearly $1.

it also moves beppa up a step on the ladder should administraion take place.

I didn't realise this.

Is it true that BBI is buying out sparcs holders.

Do you have any details of how they are doing this, what terms are they doing it on and what sort of volume are they buying.

 

[nathanblack]

I didn't realise this.

Is it true that BBI is buying out sparcs holders.

Do you have any details of how they are doing this, what terms are they doing it on and what sort of volume are they buying.

Yes, its true. SPARCS are not like BEPPA, they are bonds. As such they rank higher than BEPPA, they are considered in the same way as bank debt. Therefor everytime a bank sweep occurs a portion of that sweep is allocated to paying back the banks and buying back sparcs.

At this stage only the one sweep has occured and another is due soon(quarterly sweep), only a small percentage 0.34% was acquired last sweep, all that the sweep allowed, at a price circa 43c. All purchases are on-market so no premium is paid.

see below announcements:
http://www.nzx.com/markets/NZDX/BBN010/announcements/4890454
http://www.nzx.com/markets/NZDX/BBN010/announcements/4883513

they have made it clear, although i couldnt find the latest announcement, that they are preparing to buy more. and one can only ASSUME that post dbct sale, most debt will be repaid, and the amount allocated for sparcs buyback will increase substantially.

obviously the more they buyback, the higher sparcs value will be (supply and demand). also obviously it moves beppa up the food chain, and we can expect when cash is available beppa will be bought back at discount on market.

so its good for beppa and potentially great for bbi. to get debt of the books at such a cheap price, especially if the target beppa in a few months circa 40c and can eliminate alot of the $780mil due 2012.

cheers

 

[nathanblack]

in total the april sweep bought back $1.65mil worth at about 40c, which would work out at about 4mil sparcs. so basically NZ$4mil was purchased for NZ$1.65mil. A geat return for beppa/bbi.

http://www.nzx.com/markets/NZDX/BBN020/announcements/4895028


the july announcement is here
http://www.nzx.com/markets/NZDX/BBN020/announcements/4895028

they intend to buy another $250,000 worth, all that the sweep allowed. not much but still positive.

the reason i couldnt find the announcement at first is because sparcs are now listed twice, because some didnt agree to reset terms. the first batch of buybacks was before the vote on sparcs. this latest buyback is of the re-newed sparcs (expiry nov 2012), probably because the others convert in november anyway.

hope this info helps. bit stupid that as bbi investors the asx doent publish the announcement from nzsx. we need to regularly check both for announcements. i guess its not really price sensitive but it certainly helps Beppa/BBI.

 

[banska bystrica]

nathanblack,

Sorry mate but you are confusing SPARCS with NZ BBI Network Bonds. They are seperate listings. The two codes for SPARCS and BBI Network Bonds are

BBN010 and BBN020.

The bonds (BBN020) rank higher than SPARCS (BBN010) and also rank equally with secured bank debt hence the sweep.

 

[banska bystrica]

the reason i couldnt find the announcement at first is because sparcs are now listed twice

Hmm, nathan, have a rethink on that statement before you confuse everyone and yourself. SPARCS are listed ONCE.

 

[nathanblack]

Hmm, nathan, have a rethink on that statement before you confuse everyone and yourself. SPARCS are listed ONCE.

thanks for your clarification, and sorry to anyone for any confusion. still great news that BBI are buying back BBI Network bonds.

the reason i got confused was an announcement back in april was released under sparcs but actually related to the buyback of bonds, all announcements after april regarding buyback are only listed under the bonds.

hope they keep snapping them up as much as they are allowed, it certainly increases value for ord share holders.

 

[nathanblack]

the lack of volatility is great for some, but im finding it frustrating. i like to trade in and out of this stock, each time making a profit which i use to increase my holdings on subsequent purchases. the last month ive basically been stuck holding, theres been some buying oportunities at lower prices than my previous buy price but no prices high enough to sell out at(to be worthwhile).

i still prefer only trading this one at this point in time, but i definately want to be holding come DBCT announcement. Havent really looked to 2012, but dont really expect to be holding by then.

if i can trade up to a biger holding over the next month, then recieve about 40c by years end, i'll probably exit. might keep a few beppa til maturity.

 

[Largesse]

i think it's time a lot of you guys had a seriously hard think about your holdings here.

it was fun on the way up, but don't get left holding the baby.

 

[nathanblack]

i think it's time a lot of you guys had a seriously hard think about your holdings here.

it was fun on the way up, but don't get left holding the baby.

are your concerns primarily BBI related or BEPPA too? or all of the BNB satalites?

is it in relation to administration/liquidation or dilution?

im interested in your comments?

i remember making a killing from onetel and HIH in the months prior to colapse, so profits can still be made. i guess the risk is there that your holding on the day it goes into trading halt never to return.

 

[Largesse]

Whilst there are always temporary miss-pricings in the market, they don't last long.

There is a reason why BBI and BEPPA continue to trade at these levels, and why, after the recent burst of excitement, continue to trade down.

For a second sit back and be truly objective about your investment.
Are you really smarter than all of those professionals out there?
Are you really seeing an opportunity where no else can?
Or are you kidding yourself, and are taking a gamble on an asset sale in a declining market?

Banksa will give you a list of reasons why to hold, but he had amazing market timing and perception to seize the opportunity at 3c and dump a large holding way up in the high teens. He made a killing, the bloke that bought his holding didn't.
That movement wasn't a result of news events either, more massaging an interested market.

Does the current market for this stock still present you with the same opportunity?


And my concern relates simply to BBI/BEPPA. I think the security in BEPPA is being severely overstated.

FWIW, I couldn't care less whether this went up down sideways inside out or purple in the face. I made 2 trades on this, one that made me good money, one which handed back about a quarter of that money. I'm happy.
But I have seen this before, post-excitement blow off, and there are always people who get left holding a crying baby.

 

[cpsharky]

Those very same "professionals" were buying BBI at over $3 not so long ago even though it was abundantly clear on fundamentals that they were over-geared. The time to panic was at $3, not sub 50c. If your only argument is that the market is basically always right and therefore choose to close your eyes to the fundamentals, then you should keep your money in the bank IMHO. Investing in any stock is a gamble, so it is a matter of weighing up risk and reward. In the case of BBI (Beppa to be precise) I see some very real risk, but we have to remember that BBI are easily able to cover their interest (2x) with largely regulated incomes and are trading at a tiny fraction of their NAV. Right there some powerful reasons why BBI has a good chance at survival.

The market has been wrong by several magnitudes on other occasions. I would like to find out if they are wrong this time.

 

[stocksontheblock]

The market has been wrong by several magnitudes on other occasions. I would like to find out if they are wrong this time.

I have to agree!!!

In respect to Largesse: absolutely! I am as smart or smarter than the so called professionals you refer to. They know little more than I. Just because you call yourself a professional doesnt make you one. Just because you charge a fee for your advice doesnt mean it was worth it.

BBI may look like junk, yet what they do and what they offer is not, hence the banks and lenders will stay behind them, maybe a few bells and whistles will be tacked on, yet they will survive and the price will go up - by how much? who know's!

I'm happy to gamble on BBI, risk v's reward is not a bad one on this, providing you dont burn to many 000's trying for the reward. Look at RIO, worth $165, and all saying it was going going going going into the heavens price wise and a week later it was going going going going, yet not up. If I had a $ for everytime a professional made a recommendation and I did the complete opposite I would have made 10x what I have made on the actual market itself.

The lesson: do the research yourself, forget the professionals, and look after your own money, no one else will.

 

[persistentone]

Whilst there are always temporary miss-pricings in the market, they don't last long.

There is a reason why BBI and BEPPA continue to trade at these levels, and why, after the recent burst of excitement, continue to trade down.

For a second sit back and be truly objective about your investment.
Are you really smarter than all of those professionals out there?
Are you really seeing an opportunity where no else can?
Or are you kidding yourself, and are taking a gamble on an asset sale in a declining market?

Banksa will give you a list of reasons why to hold, but he had amazing market timing and perception to seize the opportunity at 3c and dump a large holding way up in the high teens. He made a killing, the bloke that bought his holding didn't.
That movement wasn't a result of news events either, more massaging an interested market.

Does the current market for this stock still present you with the same opportunity?


And my concern relates simply to BBI/BEPPA. I think the security in BEPPA is being severely overstated.

FWIW, I couldn't care less whether this went up down sideways inside out or purple in the face. I made 2 trades on this, one that made me good money, one which handed back about a quarter of that money. I'm happy.
But I have seen this before, post-excitement blow off, and there are always people who get left holding a crying baby.

So how do you explain New Zealand bonds and Sparcs trading at 40 cents and 20 cents on the dollar, whereas BEPPA is at 10 cents. It's difficult to see any one of these three as substantially more secure than the other when we have nearly $4B in net asset value. A scenario that leaves BEPPA worthless in administration with high probability also impacts the New Zealand income securities.

With such pricing disparities on instruments that are priced against nearly identical credit risks, it is difficult to see any rationality in the market's pricing of any of the three.

 

[random]

Largesse,

Find a nice comfy chair.
Chill out.
Open a nice bottle of red.
Have one glass only. (just for the moment)
Wipe your mind clear of all other entities with the name Babcock in it.
Rid your thoughts of those negative conotations you have built up on bbi and beppa in the past.
Put your brain in neutral gear and let it be open to new information.
Take another deep breath.

Now look at the fundamentals of what bbi , beppa have to offer and the price that they are currently trading at.
Is it really that outrageous that people are having a shot at this one?
I think not.

Another deep breath, exhale slowly now...... and another glass of red.
Now thats not so bad now is it?

 

[random]

I am astounded at the number of professional financial people who still have no idea of what Babcock and Brown Infrastructure is. Yes... still.

To this day they are confusing it with Babcock and Brown.
Hence they want nothing to do with it.

There are many ex shareholders in both entities who have been so badly hurt by the withdrawal of dividends and major loss in the actual shareprice that they don't want anything o with it in any shape or form regardless of any perceived upside.
Indeed i know of a few who can barely bare to mention the name Babcock.
Individuals and institutions have been hurt badly.
Call it pride or revenge or disgsust they just don' want to know.

Whilst not saying that this is why its in the doldrums it is a reason some wouldn't put money in it if "a professional" gave it a 5 star rating with a bullet.
A mistaken but totally understandable human response.

 

[nathanblack]

There are many ex shareholders in both entities who have been so badly hurt by the withdrawal of dividends and major loss in the actual shareprice that they don't want anything o with it in any shape or form regardless of any perceived upside.

Indeed i know of a few who can barely bare to mention the name Babcock.
Individuals and institutions have been hurt badly.
Call it pride or revenge or disgsust they just don' want to know.

do you see this as a short or long term issue? and do you think it will impact the price going forward? the more buyers/potential buyers the better

 

[skyQuake]

I am astounded at the number of professional financial people who still have no idea of what Babcock and Brown Infrastructure is. Yes... still.

To this day they are confusing it with Babcock and Brown.
Hence they want nothing to do with it.

There are many ex shareholders in both entities who have been so badly hurt by the withdrawal of dividends and major loss in the actual shareprice that they don't want anything o with it in any shape or form regardless of any perceived upside.
Indeed i know of a few who can barely bare to mention the name Babcock.
Individuals and institutions have been hurt badly.
Call it pride or revenge or disgsust they just don' want to know.

Whilst not saying that this is why its in the doldrums it is a reason some wouldn't put money in it if "a professional" gave it a 5 star rating with a bullet.
A mistaken but totally understandable human response.

And because of this will that keep the retail buyers, instos and funds away for some time...?

Cheers.