BBI - Babcock & Brown Infrastructure

jacobkball · 13 August 2009

Tysonboss1 said:
Inflation of paper currency shouldn't devalue assets, Assets such as as shares and property would rise with inflation simply because there is more paper currency floating around to purchase such items with.

Okay, think about it this way. If the perceived 'value' of the shares or property have increased by say 10% due to inflation, then it stands to reason that the cost of everything else, eg groceries, utilities etc would also have increased by 10% as well. End result? No net gain.

If the capital gain of that asset class, eg shares or property, exceeds the rate of inflation, that's where you make your profit. But this assumes that the capital gain is a result of growth / performance in that sector, not a result of inflation across the board.

I'll also point out that you'll want to separate paper 'assets' from real, tangible assets such as gold, silver and real estate. Shares are definitely the shakiest sector to have all your holdings in - as we've seen, those prices can come down very quickly, to zero.

That's why I've said earlier - I'm happy to ride the BEPPA train for a little bit, but I will be moving it out to real money very soon

Do a Google search for 'mortgage reset charts' and you'll see where we currently are on the chart. There's troubling times ahead.

Cheers,
Jacob

Tysonboss1 · 13 August 2009

jacobkball said:
Okay, think about it this way. If the perceived 'value' of the shares or property have increased by say 10% due to inflation, then it stands to reason that the cost of everything else, eg groceries, utilities etc would also have increased by 10% as well. End result? No net gain.

Well the goal of investing should be to protect your capital while also generating an income and growth from the capital.

Buying Gold achieves the first objective of protecting the capital (atleast from inflation) how ever it fails to generate income.

Where as other income producing assets, such as property and the underlying assets owned by listed companies will fluctuate with short term markets, longterm they will hold their value atleast with inflation, while also producing income that will increase over time with inflation.

Tysonboss1 · 14 August 2009

jacobkball said:
But this assumes that the capital gain is a result of growth / performance in that sector, not a result of inflation across the board.

Well thats the case with gold and silver too. except you are not getting any income.

Simply put, if I had to choose between owning $1m of gold bars or $1m of shares and property, and I had to live solely of these assets for the next 50 years, I would choose the property and the shares.

Simply because you would have to start burning your capital from day one with gold bars, however with other you could live just of the cashflow of dividends and rent.

And the dividends/rent and also the capital value of the assets will keep their value inline with inflation. (offcourse there will be peaks and dips in the shorterm as there would also be with gold, but over time these assets by their very nature will keep pace with inflation)

alot of people think that gold and silver are the only hedges against inflation, this belief is wrong.

Also people think that there capital is safe in gold, this is also wrong as gold call fall in value and stagnate just as other assets can.

skyQuake · 14 August 2009

Tysonboss1 said:
But it also produces cashflow, which a bar of gold does not, and you can't claim depreciation on a bar of gold

Also isn't any capital gain from selling a bar of gold also subject to tax.

Sorry if I wasn't clear, meant that in relation to gold. If hyperinfation does occur and gold takes off, lots of value will be eroded by taxation.

Buying Gold achieves the first objective of protecting the capital (atleast from inflation) how ever it fails to generate income.

Exactly. Also you cant eat gold nor liev in it. (unless its a solid gold house)

jacobkball · 14 August 2009

Okay, we need to look at these various sectors in terms of what's happening right now.

Yes, they each have their cycles, up and down, depending on the economic situation at the time. We've had a property boom. We've had a share boom. We've also had share busts, and in the US, property busts as well.

Yes, ongoing cash flow in terms of dividends, rental etc is the goal, with capital gains the gravy on top.

What I am saying is that, in my belief, it is very near the time that silver and gold will boom. Not only that, it's very possible that currencies, eg the US dollar, will bust. That will leave only gold and silver as real money, which will then back a new fiat currency.

Those that have strengthened their positions in these two metals will be in a MUCH better position than those who have not.

We will then be able to move our money into real estate and businesses to take advantage of the next boom cycle.

These are just my thoughts on the matter - I'm not a financial advisor, nor do I have a crystal ball! I'm still learning about what's potentially ahead of us, by studying what's happened in years gone by.

Cheers,
Jacob

jacobkball · 14 August 2009

Sorry, didn't mean to hijack this thread, either!

Back to BEPPA - I'm still bullish about this, short term, providing of course DBCT comes through. If / when that happens, we'll all need to review our positions of whether we want to hang on, or cash in.

random · 14 August 2009

I don't know where!
I don't know why!
I don't know who!
I don't know exactly when!

But somebody definetely knows something is about to happen to beppa's and is manoevering through the terrain, popping out from behind the cover of the bushes to shoot down any beppa's who stick their head out in the open in the vicinity of "hill 15c".

If only i had my night vision binoculars with me.

Be alert but not alarmed citizens!

banska bystrica · 14 August 2009

The BEPPA buying is being done by JB Were as I said the other day. I don't know who they are buying for but they are serious. If someone offered 3,000,000 BEPPA at 16c, does one get the feeling they would be gobbled up in one chomp? If people want to ignore the signs, that's fine. I did almost plead with people months ago to sell their BBI's and buy BEPPA when the price was at parity or within 1c.

The only way forward for this company is:

1. Sell DBCT and pay down the majority of corporate debt
2. Recapitalize and at the same convert all the hybrids into BBI securities.
3. Internalize management.
4. Change name of company
5. Recommence distributions.

hardyakka · 16 August 2009

This market has taught me a valuable lesson.

Roundabout November I started selling down blue chips to invest into small to medium sized companies, some that seemed distressed yet analysis showed they were solid companies thrown out with the bathwater in the general panic.

With hindsight what I got wrong was the timing of my sales of these companies. I took healthy profits on companies that have since doubled and trebled. Conclusion, stock picking excellent, timing lousy.

For a long while I have been a BEPPA advocate solely for risk aversion reasons and to date am happy with that call. But then, what about the timing issue.

We have all read about various restructure scenarios, are au-fait with the asset sales (reasonably), conversion, dilution etc etc. We are also starting to realise that BBI has survived the worst of the GFC with positive growth signs emerging domestically and offshore (eg France & Germany). Who now would sell PD Ports for the same price discussed just post Corus?

So what does this tell us, my take on this:

BBI has survived the worst of the GFC and its value will generally trend up now.
The decks are being cleared with the write down provision.
There will be an arrangement whereby BEPPA is cleared from corporate debt for a % of face value (IMO 50 to 70 cents).
There will be further asset sales, but not at distressed prices.

Stepping back this tells me two things: 1) there is still a heck of a lot of value in BEPPA (generally recognised); and b) at what point in time is it best for an investor to realise this value ie timing.

The timing issue, which is driven by sales, restructures etc is IMO the critical issue unresolved.

Cheers

fureien · 18 August 2009

hardyakka said:
With hindsight what I got wrong was the timing of my sales of these companies. I took healthy profits on companies that have since doubled and trebled. Conclusion, stock picking excellent, timing lousy.

lol i feel u right there man. same here happened to me

and interesting observation about bbi not having to sell at distressed prices

Tysonboss1 · 20 August 2009

I would have expected some sort of announcement in regards to the dbct sale by now.

Does anyone have a clue of roughly when some news will be released.

erasmus · 22 August 2009

At yearly results next week august 26 there is supposed to be an update on DBCT sale according to investor relations at BBI.

jacobkball · 25 August 2009

Well, tomorrow should be quite interesting then, in terms of our share prices!

I didn't expect BBI shares to go down so much in comparison to BEPPA - that's been a surprise to me.

drsmith · 25 August 2009

jacobkball said:
Well, tomorrow should be quite interesting then, in terms of our share prices!

If there is good news then the directors will have done a very good job in keeping that information watertight.

Elvis3577 · 25 August 2009

Just replying to the two previous posts...
I think some people just got a bit nervous, and secondly I think it's their job to keep it quiet. I know it doesn't always happen...
Feeling confident about tomorrow though.
And if I'm not wrong ,I think there's a live broadcast on their website as from 11.00 am.
It will be very interesting to see what's going to happen to the Sp. To what extend I mean.
Good luck everybody , c u on the other side!
( still holding both BBI and Beppa )

Elvis3577 · 26 August 2009

Looking pretty good what I've seen sofar and the Sp is going up quite nicely too. I haven't read everything yet, but it's looking promising !!

investormichael · 26 August 2009

Sold out at 9.8 cents where does everyone think the company is heading now after todays announcements?

mark_au · 26 August 2009

Hi All
the NTA listed in the report is $1.84, compared to $2.83 previous period
I'll have to read back to see how that compares with the estimates in this thread, but i think its higher than some of the projected calculations from key posters which is even better news than we were expecting

looks like lots of sellers taking profits and buyers trying to get a bargain..

fureien · 26 August 2009

i had a sell order at 8 cents that i forgot to cancel

thats about 35-40% extra profit i didnt lock in

/TILT/

hardyakka · 26 August 2009

The movement in the share price looks pretty reasonable for both BBI and BEPPA. I think both are a little overdone and expect a bit of a pull back for BEPPA to circa 16.5cents. However IMO the upward trend will be sharper and more consistent when the market digests the results.

I find the following very interesting regarding the change of control notification.

"Accordingly, in the event of a Change of Control Event occurring as a result of the Responsible Entity of Babcock & Brown Infrastructure Trust ceasing to be a member of the Babcock & Brown Group, the directors of BBI EPS Limited reserve their right to decide whether to redeem, convert, or issue Equivalent Securities, based on the circumstances prevailing at the relevant time."

My take is that we are likely to see a restructure of BEPPAs sooner than we think. So the question is what is it worth to BBI holders to remove $800M of liabilities from the balance sheet, thus clearing the way for capital raisings, an increase in net assets etc?

45 cents in the $ plus two BBI gets my vote (45cents including accrued interest).

the BBI board is very concious of the fact that the longer any restructuring package is left, the more expensive it will be to BBI, especially as we start to move to more normalised markets.

Cheers

BBI - Babcock & Brown Infrastructure

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