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HDF - APA Sub Group
- Thread starter It's Snake Pliskin
- Start date
skc
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Re: HDF - Hastings Diversified Utilities Fund
A good bunch of the infrastructure funds are being hammered in the last month.
Since start of Feb
The good
ENV +7%
AGK -8%
The bad
APA -10%
SPN -12%
The ugly
CIF -28%
SKI -33%
DUE -35%
TSI -49%
HDF -80%
Some of these may be oversold, but which ones? Perhaps a smartly chosen pairs trade is the way to go...
A good bunch of the infrastructure funds are being hammered in the last month.
Since start of Feb
The good
ENV +7%
AGK -8%
The bad
APA -10%
SPN -12%
The ugly
CIF -28%
SKI -33%
DUE -35%
TSI -49%
HDF -80%
Some of these may be oversold, but which ones? Perhaps a smartly chosen pairs trade is the way to go...
skc
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Re: HDF - Hastings Diversified Utilities Fund
Jumped back up to $0.4 yesterday - are you cashing in some chips, psychic?
A news article here... highlights quoted.
http://business.smh.com.au/business...-up-the-battle-of-hastings-20090311-8v9k.html
Jumped back up to $0.4 yesterday - are you cashing in some chips, psychic?
A news article here... highlights quoted.
http://business.smh.com.au/business...-up-the-battle-of-hastings-20090311-8v9k.html
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Re: HDF - Hastings Diversified Utilities Fund
So has anyone done an analysis on the offer TCW has made to buy Epic Energy from HDF?
A key question for me in evaluating this offer is what will be the value of the South East Water company that HDF would be left with, absent its debt? Are there any comparables for water companies in Australia that are currently trading as pure plays on water? How are those companies valued on either a price to book ratio, or alternately as an enterprise value to EBITDA?
Where is the best place to find the current sales and earnings for South East Water, so we might start to put some valuation metrics around it?
So has anyone done an analysis on the offer TCW has made to buy Epic Energy from HDF?
A key question for me in evaluating this offer is what will be the value of the South East Water company that HDF would be left with, absent its debt? Are there any comparables for water companies in Australia that are currently trading as pure plays on water? How are those companies valued on either a price to book ratio, or alternately as an enterprise value to EBITDA?
Where is the best place to find the current sales and earnings for South East Water, so we might start to put some valuation metrics around it?
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Re: HDF - Hastings Diversified Utilities Fund
So my first pass at the TCW offer for Epic Energy suggests a few things:
1) Hastings probably doesn't want to sell the Epic Energy pipelines. These pipelines are probably the crown jewel of the Diversified Utility Fund. They are being forced to consider doing this only because they have $60M in debt due in August 2009 and it is a tough environment for funding.
So what happens if Hastings comes back in a month and announces that they are going to refund that $60M in debt and they no longer therefore need to sell Epic Energy? Won't the HDF stock instantly crater from its current trading range back down to 30 cents? That possibility alone makes this an unbelievably speculative investment, and one with relatively poor risk and reward with the HDF stock trading above even 75 cents.
2) TCW wants to suggest that shareholders will be left with $1.47 in value for South East Water after the transaction to buy Epic. But are we really sure that the $1.47 will fall through into value for HDF? Might not shareholders impair some of that $1.47 simply because of the annoying HDF habit to take out large fees? Second, I'm seeing $521M of debt on the latest HDF balance sheet on Reuters. Is that right? So wont' HDF be left with large amounts of debt even after TCW assumes some of their loans, and won't that debt potentially impair some of the remaining $1.47 in value in South East Water?
3) TCW is offering a big distribution directly to the shareholders, probably as a bribe to accept their proposal. But what if HDF kicks back and decides it would rather get paid the money directly so it can invest it in some other activity for the shareholders. It seems to me that TCW wants this pipeline and would probably agree to such terms. That leaves the shareholders high and dry on the distribution part of the deal, and leaves any potential distribution subject to HDF's large fees.
It seems to me that the runup after release of the TCW proposal was mostly retail investors comparing the current HDF share price against the supposed $2.15 of value claimed in the TCW proposal. But what can be argued on paper to be a $2.15 offer might actually materialize as something much less than $2.15 when measured in the final HDF share price.
A runup of the HDF stock to over $1.50 seems potentially unjustified to me. I am interested in hearing the counterpoints.
So my first pass at the TCW offer for Epic Energy suggests a few things:
1) Hastings probably doesn't want to sell the Epic Energy pipelines. These pipelines are probably the crown jewel of the Diversified Utility Fund. They are being forced to consider doing this only because they have $60M in debt due in August 2009 and it is a tough environment for funding.
So what happens if Hastings comes back in a month and announces that they are going to refund that $60M in debt and they no longer therefore need to sell Epic Energy? Won't the HDF stock instantly crater from its current trading range back down to 30 cents? That possibility alone makes this an unbelievably speculative investment, and one with relatively poor risk and reward with the HDF stock trading above even 75 cents.
2) TCW wants to suggest that shareholders will be left with $1.47 in value for South East Water after the transaction to buy Epic. But are we really sure that the $1.47 will fall through into value for HDF? Might not shareholders impair some of that $1.47 simply because of the annoying HDF habit to take out large fees? Second, I'm seeing $521M of debt on the latest HDF balance sheet on Reuters. Is that right? So wont' HDF be left with large amounts of debt even after TCW assumes some of their loans, and won't that debt potentially impair some of the remaining $1.47 in value in South East Water?
3) TCW is offering a big distribution directly to the shareholders, probably as a bribe to accept their proposal. But what if HDF kicks back and decides it would rather get paid the money directly so it can invest it in some other activity for the shareholders. It seems to me that TCW wants this pipeline and would probably agree to such terms. That leaves the shareholders high and dry on the distribution part of the deal, and leaves any potential distribution subject to HDF's large fees.
It seems to me that the runup after release of the TCW proposal was mostly retail investors comparing the current HDF share price against the supposed $2.15 of value claimed in the TCW proposal. But what can be argued on paper to be a $2.15 offer might actually materialize as something much less than $2.15 when measured in the final HDF share price.
A runup of the HDF stock to over $1.50 seems potentially unjustified to me. I am interested in hearing the counterpoints.
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Re: HDF - Hastings Diversified Utilities Fund
It is fairly clear why Hastings would want to hold on to part of Epic. They obviously see significant growth opportunities once they have access to capital.
As far as TCW's offer the big question has to be why they are so adamant to go outside of the current tender process. As you say they are nearly trying to bribe shareholders into supporting their proposal without even seeing what other options are out there. Why do they care about a "whole of fund solution" they just want the asset. We may see Hastings as being compromised due to the revenue stream, I don't kid myself that TCW really is concerned about HDF shareholder value.
The question is if HDF can get 5x EBITDA for a 50% stake would they be a more valuable stock than losing the whole of Epic now at 10x. It seems like 50% might be enough to sort out their immediate debt issues and keep the upside. We will only know though once the other bids (assuming there are some) are revealed. There better be a better one or there will be big problems for Hastings.
It is fairly clear why Hastings would want to hold on to part of Epic. They obviously see significant growth opportunities once they have access to capital.
As far as TCW's offer the big question has to be why they are so adamant to go outside of the current tender process. As you say they are nearly trying to bribe shareholders into supporting their proposal without even seeing what other options are out there. Why do they care about a "whole of fund solution" they just want the asset. We may see Hastings as being compromised due to the revenue stream, I don't kid myself that TCW really is concerned about HDF shareholder value.
The question is if HDF can get 5x EBITDA for a 50% stake would they be a more valuable stock than losing the whole of Epic now at 10x. It seems like 50% might be enough to sort out their immediate debt issues and keep the upside. We will only know though once the other bids (assuming there are some) are revealed. There better be a better one or there will be big problems for Hastings.
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Re: HDF - Hastings Diversified Utilities Fund
As predicted, HDF pulled the rug out. It should be interesting to see how it trades, but it looks like (again) there was an insider leak and the stock absorbed much of the capital raising before it was announced.
The 52 page capital raising says on page 2:
"The net proceeds from the Offer...will be used to:
...
* cash cover HDF's hybrid securities...(TAPS, $110 million)"
So what do they mean by "cash cover"? Does this mean they will simply keep paying interest when due, or does this mean they are going to call the security and pay it off in full?
As predicted, HDF pulled the rug out. It should be interesting to see how it trades, but it looks like (again) there was an insider leak and the stock absorbed much of the capital raising before it was announced.
The 52 page capital raising says on page 2:
"The net proceeds from the Offer...will be used to:
...
* cash cover HDF's hybrid securities...(TAPS, $110 million)"
So what do they mean by "cash cover"? Does this mean they will simply keep paying interest when due, or does this mean they are going to call the security and pay it off in full?
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Re: HDF - Hastings Diversified Utilities Fund
110M is cash redemption. Be interesting to see how the share price responds tom. It wouldn't take much pressure for the stock to head under $1.
I think the plan is pretty sound though. Epic is a great asset with a solid growth path. If stage 3 proceeds the outlook is very strong. If they sold to TCW I would be think the fund would have struggled.
110M is cash redemption. Be interesting to see how the share price responds tom. It wouldn't take much pressure for the stock to head under $1.
I think the plan is pretty sound though. Epic is a great asset with a solid growth path. If stage 3 proceeds the outlook is very strong. If they sold to TCW I would be think the fund would have struggled.
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Re: HDF - Hastings Diversified Utilities Fund
Why are they not allowing TAPS Trust to trade today? Hastings Diversified appears to be trading, and is getting awfully close to the offering price.
Why are they not allowing TAPS Trust to trade today? Hastings Diversified appears to be trading, and is getting awfully close to the offering price.
So_Cynical
The Contrarian Averager
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Re: HDF - Hastings Diversified Utilities Fund
Brought into HDF today at 84 cents...i figure its good value considering the recent capital raising was done at 90 cents, and going forward HDF is in alot better shape than before the capital raising, assuming the distribution holds at 3 cents per quarter, its a pretty amazing return of over 14% PA....my first fund to
Brought into HDF today at 84 cents...i figure its good value considering the recent capital raising was done at 90 cents, and going forward HDF is in alot better shape than before the capital raising, assuming the distribution holds at 3 cents per quarter, its a pretty amazing return of over 14% PA....my first fund to
So_Cynical
The Contrarian Averager
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Re: HDF - Hastings Diversified Utilities Fund
7 or so weeks later and HDF trading at around $1.05 and looking good to deliver on the 12 cents per share PA distribution projection...great for those that were buying in at under 85 cents just 6 and 7 weeks ago.
The chart seems to be building nicely...and one would think that 1.20+ would be likely considering the distribution return when compared to interest rates.
7 or so weeks later and HDF trading at around $1.05 and looking good to deliver on the 12 cents per share PA distribution projection...great for those that were buying in at under 85 cents just 6 and 7 weeks ago.
The chart seems to be building nicely...and one would think that 1.20+ would be likely considering the distribution return when compared to interest rates.
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Re: HDF - Hastings Diversified Utilities Fund
Nice return SC in 7 weeks not even considering the yield. Has held up okay today considering XD.
The real kicker is still Epic stage three and the funding conditions. Nearly doubles Epic cash flows with not much extra cost. Worth over $2 if they can gt decent financing for stage 3 (a big if).
Nice return SC in 7 weeks not even considering the yield. Has held up okay today considering XD.
The real kicker is still Epic stage three and the funding conditions. Nearly doubles Epic cash flows with not much extra cost. Worth over $2 if they can gt decent financing for stage 3 (a big if).
So_Cynical
The Contrarian Averager
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Re: HDF - Hastings Diversified Utilities Fund
HDF in a trading halt today...expected to be lifted on Monday.
Perhaps a capital raising to pay for the pipeline expansion or perhaps some news on the sale or non sale of Epic or perhaps some news about TAPS. :dunno:
HDF in a trading halt today...expected to be lifted on Monday.
Perhaps a capital raising to pay for the pipeline expansion or perhaps some news on the sale or non sale of Epic or perhaps some news about TAPS. :dunno:
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Re: HDF - Hastings Diversified Utilities Fund
Chugging along this morning. Having been watching this one for a while. Could be setting the stage for a broader move upward. A lot of supply was removed the last couple of months.
Chugging along this morning. Having been watching this one for a while. Could be setting the stage for a broader move upward. A lot of supply was removed the last couple of months.
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Re: HDF - Hastings Diversified Utilities Fund
Faded like a two pot screamer tight stops now, as she exhibited a lot of weakness today. et cetera et cetera
Faded like a two pot screamer
tight stops now, as she exhibited a lot of weakness today. et cetera et cetera- Joined
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Re: HDF - Hastings Diversified Utilities Fund
first time it cracked 1.10 though and sell side is still thinnish. still think 1.20 is a realistic short term goal. assuming they can manage the stage 3 development well, and the rumours of 18% are not for the entirity of the project finance then I think 1.50+ in 12 months.
Epic Stage 3 is a fantastic project. Sell SE Water to reduce debt, get rid of the RE and we have a fantastic single asset COY.
first time it cracked 1.10 though and sell side is still thinnish. still think 1.20 is a realistic short term goal. assuming they can manage the stage 3 development well, and the rumours of 18% are not for the entirity of the project finance then I think 1.50+ in 12 months.
Epic Stage 3 is a fantastic project. Sell SE Water to reduce debt, get rid of the RE and we have a fantastic single asset COY.
So_Cynical
The Contrarian Averager
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Re: HDF - Hastings Diversified Utilities Fund
Orbis Australia is a big fund manager that has HDF as its number 1 holding with over 20 mill invested...In there last quarterly report they have a bit of a write up on HDF and thought i would share.
Ill do a little quote then link....u need to scroll down a few pages.
http://www.orbisfunds.com.au/reports/SMEF-QuarterlyReport2009Q3.pdf
Orbis Australia is a big fund manager that has HDF as its number 1 holding with over 20 mill invested...In there last quarterly report they have a bit of a write up on HDF and thought i would share.
Ill do a little quote then link....u need to scroll down a few pages.
link said:
http://www.orbisfunds.com.au/reports/SMEF-QuarterlyReport2009Q3.pdf
