BBI - Babcock & Brown Infrastructure

[investorpaul]

I think all on this forum who are interested in BBI/BEPPA should read the Investor Pack released with the interim result.

The investor pack is a good read. Its provides a great overview of their assets and strategy.

Its only 82 pages, I got through it and analysed it the other weekend after showing interest in this thread over the last couple of weeks. After reading the report, its almost impossible to argue over the quality of their assets and to date they have managed to refinance all of their debt. Previous to that I did some research for my boss who holds BBI who was being told to sell by others.

This weekend I'm putting in some effort to understand BEPPA (thanks BB for your analysis to date on BEPPA, its provided me with good ground knowledge so far and you have a real ability to explain some of the complex parts in easy to understand terms). Hopefully on Monday, once i get my head around it (always a little more cautious with 5 letter codes), ill be able to pick up some BEPPA.

At this point im hedging my bets 50% BBI, 50% BEPPA and obviously a win is not a guarantee but its like poker when the % return is so great compared to your initial outlay it requires further research/thought and if in your mind you feels its the right move to make then you take it.

 

[banska bystrica]

Paul,
I'd suggest you give BBI a call and ask for a hard copy of the Investor Pack. It's a lot easier going through it in hard copy.
I receive every report released in hard copy format.
I would be interested in your take on the Net Asset Value once you have digested it all.
Look at the "intangibles" and "goodwill". This is one area where I believe the market does not actually understand the true value.
Are you aware that Dalrymple Bay Coal Terminal (DBCT) is listed as "intangible"?
That is because it is a 99 year lease. A lease is "intangible". Things like this can confuse the average investor and even the professionals.

One broker told me last year that BBI's intangibles and goodwill were worth nothing. Yeah sure! If you rang a bell, that broker would think it's Mr Whippy.

 

[hardyakka]

How do you come to $1 per share for BBI in 2012? What happens if a hedge fund calls for and gets BBI wound up in the interim? What does BEPPA return if there is no BBI?

Not saying that this can happen however do note that a call for exactly this has been made by TCI for BBW to be wound up and the assets sold.

Just curious.

It would not matter in the least if a single hedge fund acquired all of BBI, the rights of BEPPA holders are unchanged. They can only be changed by a vote of BEPPA holders (50 or 75% depending upon the type of resolution).

The only thing a BEPPA holder needs be concerned about is, in a worst possible case situation, if NTA (assuming this translates to the same cash amount) falls below zero. Every $ below zero is a reduction in the amount available to pay out the $700M odd BEPPA liability.

NTA is currently $2.4B and when asset sales occur above book will increase.

Cheers

 

[investorpaul]

Paul,
I'd suggest you give BBI a call and ask for a hard copy of the Investor Pack. It's a lot easier going through it in hard copy.
I receive every report released in hard copy format.
I would be interested in your take on the Net Asset Value once you have digested it all.
Look at the "intangibles" and "goodwill". This is one area where I believe the market does not actually understand the true value.
Are you aware that Dalrymple Bay Coal Terminal (DBCT) is listed as "intangible"?
That is because it is a 99 year lease. A lease is "intangible". Things like this can confuse the average investor and even the professionals.

One broker told me last year that BBI's intangibles and goodwill were worth nothing. Yeah sure! If you rang a bell, that broker would think it's Mr Whippy.

BB - I printed the 82 p report on the work printer, lol. I agree if you try and read PDF on the computer screen you dont digest it all.

I will look further into the Net Asset Value and "intangibles" i think you have picked up on an important point there, i didnt think to consider the implications of DBCT being a 99 yr lease hold and the implication that would have on the balance sheet. Hopefully I get some time to research that on the w/e

As you pointed out 99.99% of people would be confused or gloss over it, but that point is hugely significant. Obviously the general market (and as the broker said) would value the intangibles at 0 in todays market. But a 99 year lease on the DBCT is a basically a license to make money for the 99 yrs and to value it at zero is a huge oversight by the market and the broker.

My bosses broker recommended he sell, because in his words BBI was only going to zero. His accountant agreed and said to sell. I convinced him otherwise, so I hope it works out (he would owe me a pay rise if it does)

 

[hardyakka]

Paul,
One broker told me last year that BBI's intangibles and goodwill were worth nothing. Yeah sure! If you rang a bell, that broker would think it's Mr Whippy.

That is why the broker got creamed in the GFC...get it..creamed...so much for my intellectual wit..sighs

"Breaking News - Mr Whippy creams the death spiral, market on ice"

 

[hardyakka]

BB - I will look further into the Net Asset Value and "intangibles" i think you have picked up on an important point there, i didnt think to consider the implications of DBCT being a 99 yr lease hold and the implication that would have on the balance sheet.

That is a crucial point and it is surprising how many persons look at it and write if off assuming it is a premium paid for the acquisition of a business, ie surplus of cash paid over the value of assets acquired.

Cheers

 

[Viva_Las_Vegas]

My only draw back is not seeing much of a buy recommendation by brokers for BBI. I've checked a few sources which say to hold which is promising, but considering all the points made by members here regarding asset values etc. I would expect it to have a stronger BUY recommendation. Any thoughts?

 

[banska bystrica]

Most brokers have no idea. They will be saying BUY when the risks are low and the share price is 30c. ABN Amro were saying BUY at $1.30, BUY at 80c, BUY at 65c, BUY at 26c, SELL at 17c, HOLD at 5c.
You get the drift of brokers? They are known as "front runners". When the markets humming along, everything's a BUY. When the market turns to garbage, everything is a SELL or HOLD at best.

 

[nulla nulla]

Most brokers have no idea. They will be saying BUY when the risks are low and the share price is 30c. ABN Amro were saying BUY at $1.30, BUY at 80c, BUY at 65c, BUY at 26c, SELL at 17c, HOLD at 5c.
You get the drift of brokers? They are known as "front runners". When the markets humming along, everything's a BUY. When the market turns to garbage, everything is a SELL or HOLD at best.

Hah hah hah, love the definition of brokers. So, if it gets down to $0.01 does it become a hold? If it holds at $0.033 is it a sell and if it moves back up to the $0.07 - $0.084 range does it become a buy?

 

[ROE]

My only draw back is not seeing much of a buy recommendation by brokers for BBI. I've checked a few sources which say to hold which is promising, but considering all the points made by members here regarding asset values etc. I would expect it to have a stronger BUY recommendation. Any thoughts?

want advice from someone who gone down this road, when he start out and doesn't understand much about stock market and business model

Stay away from bad business doesn't matter how cheap they look.

Become an independent thinker and ignore all the noise like broker recommendation, newspaper and general headline grabbing article that scare you without proper facts.

Seek out techniques use by some of the world best investors and follow that you will see remarkable return on your investment and you straight away know what business you should put your money into

Here are some of the name to look up
Lou Simpson
Charlie Munger
Warren Buffett
Walter Schloss
Phil Fisher

if you don't want to lose money you can learn 2 ways

1. From reading
2. From someone else mistake and

I think Lou Simpson said that.

The journey to these timeless techniques and advice will not be quick, it require countless hour of reading and research but if you are not willing to do that...a safer place is the index fund.

 

[Viva_Las_Vegas]

Thanks ROE. Thats some good advice. And others good point re brokers. 1c or 10c doesn't reflect the quality of the assets in this case.
ROE what is your opinion of BBI or BEPPA?

 

[eMark]

want advice from someone who gone down this road, when he start out and doesn't understand much about stock market and business model

Stay away from bad business doesn't matter how cheap they look.

Become an independent thinker and ignore all the noise like broker recommendation, newspaper and general headline grabbing article that scare you without proper facts.

Seek out techniques use by some of the world best investors and follow that you will see remarkable return on your investment and you straight away know what business you should put your money into

Here are some of the name to look up
Lou Simpson
Charlie Munger
Warren Buffett
Walter Schloss
Phil Fisher

if you don't want to lose money you can learn 2 ways

1. From reading
2. From someone else mistake and

I think Lou Simpson said that.

The journey to these timeless techniques and advice will not be quick, it require countless hour of reading and research but if you are not willing to do that...a safer place is the index fund.

I take it that you don't support BBI as a security and /or comany/business model? This is actualy a serious question.

 

[investorpaul]

The other thing to remember with Brokers is, they want to look like they know what their doing.

If every other broker is saying Sell and as a broker you want to recommend buy, you are going to have a hard time covincing the majority of your clients to follow your strategy. Furthermore if your clients see you as "risky" i.e. my broker has recommended buying XYZ for 7 cents when its fallen from $1.50+, or everone says sell yet my broker says Buy. The client will leave, it doesnt matter if they end up being right or wrong it is the clients perception of their broker being right or wrong or Risky with their money.

On a side note one of the reasons my bosses broker recommended selling was that the portfolio must have no more than 30 stocks & each stock must be balanced to a set figure once a year and because the portfolio had more than 30 stocks some had to be cut for the sake of managing the portfolio. Although I agree 30 is more managable, it doesnt mean you need to cut the excess straight away.

 

[Julia]

On a side note one of the reasons my bosses broker recommended selling was that the portfolio must have no more than 30 stocks & each stock must be balanced to a set figure once a year and because the portfolio had more than 30 stocks some had to be cut for the sake of managing the portfolio. Although I agree 30 is more managable, it doesnt mean you need to cut the excess straight away.

This philosophy of maintaining proportional balance has never made any sense to me. Why wouldn't you let your winners run and allocate a greater proportion of the p/f value to them while they are doing that?

A friend of mine sensibly moved his shares to cash well over a year ago, but was castigated by a so called adviser for not maintaining the traditional balance between 'growth' assets and cash. This despite the fact that the 'growth' assets were falling like a weighted anchor on a daily basis.

No wonder people have little faith in financial advisers.

 

[investorpaul]

This philosophy of maintaining proportional balance has never made any sense to me. Why wouldn't you let your winners run and allocate a greater proportion of the p/f value to them while they are doing that?

A friend of mine sensibly moved his shares to cash well over a year ago, but was castigated by a so called adviser for not maintaining the traditional balance between 'growth' assets and cash. This despite the fact that the 'growth' assets were falling like a weighted anchor on a daily basis.

No wonder people have little faith in financial advisers.

Ive never sold any shares to rebalance my portfolio either. For my long term stocks I buy with the same inital outlay and if one happens to be worth 3x more than the others after a few years, well so be it.

I think some of the brokers are caught up into wanting to rebalance, because they dont want to been seen as risk taking by clients

 

[hardyakka]

Lets not forget that the so called experts were the ones recommending institutional clients such as super funds take exposures to those wonderful instruments we now collectively refer to as toxic debt. Also if I recall one broker discounted the value of DBCT on the basis that property fund valuations were dropping....duh.

The best advice I have seen is when brokers say buy, sell and vice versa. After all the commission generated pays their bonuses and advising a client to buy and hold longterm does not generate a lot of commission.

Cheers

 

[select]

Lets not forget that the so called experts were the ones recommending institutional clients such as super funds take exposures to those wonderful instruments we now collectively refer to as toxic debt. Also if I recall one broker discounted the value of DBCT on the basis that property fund valuations were dropping....duh.

The best advice I have seen is when brokers say buy, sell and vice versa. After all the commission generated pays their bonuses and advising a client to buy and hold longterm does not generate a lot of commission.

Cheers

I think we all know that brokers, fund managers and analysts are typically DUDS. Finding a good one is difficult. Heck, watching Your Money Your Call on Sky Business is pretty scary.

We also know that many company managers are DUDS.

We also know that there are other people with a gift of the gab with too much spare time that frequent forums and have been flogging particular stocks from 47c to 2.5c for example.

Sometimes a dud is a dud and a bog is a bog and a bog can't be polished except by an illusionest.

What is real is the share price.

 

[banska bystrica]

What is real is the share price.

Yep and we will see what the share price is this time next year. I bought 50,000 at 42c for a dip in the water. I bought too early. Guilty. What I did do then was have the courage of my convictions and extensive research to load up the truck below 4c in Nov 2008. I will not die wondering like some hey "select"/"macrae12". Good try old son.

Why did I take a dip at 42c last year? Because NAV was over $1 and a 60% discount seemed cheap to me. I thought the markets had bottomed. I was wrong and I wasn't the only one macrae12.
I have no respect for bit players who procrastinate and if they find negatives, call a stock a dog. Every dog has his day.
Where is the factual evidence BBI is a dog? Please don't tell me the share price as that would show your complete ignorance of how markets work and assumes markets are efficient at every day of the week. Give me some facts.

PS. You can tell your buddy moderator pals I will not be returning across the road. ASF is a class above.

 

[nulla nulla]

Yep and we will see what the share price is this time next year. I bought 50,000 at 42c for a dip in the water. I bought too early. Guilty. What I did do then was have the courage of my convictions and extensive research to load up the truck below 4c in Nov 2008. I will not die wondering like some hey "select"/"macrae12". Good try old son.

Why did I take a dip at 42c last year? Because NAV was over $1 and a 60% discount seemed cheap to me. I thought the markets had bottomed. I was wrong and I wasn't the only one macrae12.
I have no respect for bit players who procrastinate and if they find negatives, call a stock a dog. Every dog has his day.
Where is the factual evidence BBI is a dog? Please don't tell me the share price as that would show your complete ignorance of how markets work and assumes markets are efficient at every day of the week. Give me some facts.

PS. You can tell your buddy moderator pals I will not be returning across the road. ASF is a class above.

Good post, the asset backing per share is what holds my attention and the quality of those assets, Current prices appear to be significantly discounted to asset value per share. Some of this could be due to the flow over of the parent problems and bbp problems, some of it could be due to the market loss of support for reit's.
The market having determined that reit's are toxic, has contributed to the refinancing problems of the reit's making it difficult for them to refinance or making it more expensive for them to refinance. Fortunately bbi have distanced themselves from bnb and have appointed outside consultants, such as macquarie, to assist with the sale of assets and restructure of their portfolio to reduce debt, improve gearing and improve their credit rating for when it comes to refinancing for the assets held.
IMO the management is making all the right noises of a company board that can survive. I may be looking through rose coloured glasses, i hold and have topped up at $0.033 and $0.048 to significantly reduce the average price of my initial entry. The share price has dropped more then 90%, the value of the assets hasn't. No doubt some time in the future we will be able to look back through these posts and see whether or not our confidence was justified or other wise.

 

[sinner]

What is real is the share price.

While this statement is indeed true, the fallacy which you have exposed is that you assume to know all the motivating factors behind the current price.

But you don't know them all, you probably don't even know the ones which matter. Nor do you acknowledge that supply/demand which influences the price most heavily is dynamic.

If the price of an asset goes down does this mean we should "hate" it or "love" it. I personally "love" assets which have gone down in price, because in a fiat currency system such as the one we utilise today, this is generally the only way said asset will present value to an investor who has done their due diligence (not a speculator who generally buys at the top and sells at the bottom).

Your attitude is similar to that of Tony Blairs, who convinced the BoE to sell off huge chunks of their gold reserves when the price was 200USD/oz. I bet they wish they had hung onto it now...