BBI - Babcock & Brown Infrastructure

[Malindidzumu]

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.

Whilst I think that the problems with BNB have undoubtedly had a negative impact on BBI and its share price, I don't see what relevance BBP has to BBI, nor A-REITS as BBI is not an A-REIT, so I see those two having nothing to do with BBI whatsoever. However what you might be referring to is general market sentiment and that has also had a negative impact on BBI as it has on every other stock out there, but there was a clear change in the sentiment in the market that started two weeks ago and as Stock Markets are forward-looking they are already starting to price in an economic recovery from the second half of the year through next year.

Debt levels, the previously negative market sentiment and the relationship with BNB are the overriding factors in BBI trading at such a significant (massive) discount to NAV in my view.

Given the quality of the assets, the apparent quality of the management team, the diversification of assets around the world (both in terms of asset class and geographic location), the future growth profiles of these assets and the regulatory nature of the majority of these assets, BBI, still at its current prices, even if it is not as cheap as what it once was, presents the opportunity of a lifetime to those willing and/or able to part with even a relatively small amount of money. It is well worth the risk for the reasons cited above as well as the fact that any investment made now is costing you a pittance for what shares in the company are really worth. Whenever anyone has been challenged on this forum to back up their statements of BBI's inevitable demise, in their own words, with evidence (facts) or even convincing arguments they have so far either fallen silent or failed miserably to provide anything of any worthwhile substance. It doesn't mean that BBI won't go bankrupt in the future of course, but I am still waiting for something of a little more susbtance from those who claim BBI has no future....I won't be holding my breath though!

 

[select]

Great result. If I were holding SPARCS, I would have covered all bases and sent in a request for conversion form just in case the vote at the meeting doesn't get the 75% required.

The fact that such a small number have requested conversion means that it is almost a shoe-in that they will get the 75% required to approve the new 2010 date as a reset date and therefore there will be NO dilution. All SPARCS holders have to abide by the vote result, even those who requested conversion. The conversion requests will be voided if 75% vote for the new terms.

Hi Sinner.

I would like to respond to you by referring to another posters quote.

34% of SPARKS holders have requested conversion. That's not an insignificant number.

If I was a SPARCS holder I have 2 choices. Convert or don't.

If I converted 50% in May and BBI went belly up I would lose my shirt because as a stapled securities holder I would be too far down the food chain to get anything back from the administrators. And the thought of selling my new shares significantly below the 6.5c "issue price" isn't very appealing.

As it stands, If I was a SPARKS holder I would be very pleased that 34% of SPARCS holders have requested conversion to stapled securities because then I would stand a better chance of getting 100% of my money back from the administrators. Less SPARCS is good if you hold SPARCS.

So, what would I do if I then had to vote on new reset terms? I would vote NO to the new reset terms and allow 34% of the holders to convert 50% of their holdings and in turn keep November 2009 alive and reconsider my options at that time.

I'm not saying BBI will go into admin but it makes sense for a SPARCS holder to let as many convert as possible and keep November 2009 alive.

So it is probably misguided for anyone to suggest that SPARCS holders have given BBI a vote of confidence.

I would vote NO.

But that's just my humble opinion.

 

[investorpaul]

I had a look through the BBI interim Results again this morning, there is still more I want to do and analysis. But the attached shows what we were talking about yesterday RE: Intangible assets.

You can see it the accounts that $1.6bn has moved from Property, Plant and Equipment to Intangible assets, this is in related to DBCT operation on a 99 yr lease.

As was pointed out yesterday by other posters a number of people/brokers have given Intangible Assets a value of zero. Obviously removing approx $1.6bn from the asset calculation means these people and/or the market are giving BBI a lower Net Asset value that would be the case if they valued DBCT properly (ie kept in within their calculations for Net Asset Backing, etc).

* I believe this is the correct analysis of the situation but as always do your own research and dont rely on what i have posted.

 

[banska bystrica]

Hi Sinner.

I would like to respond to you by referring to another posters quote.

34% of SPARKS holders have requested conversion. That's not an insignificant number.

34% is a pitiful number to be honest because of those 34%, the majority will have only forwarded a request for conversion form as "back up" just in case the vote is NO.
I expected over 50% would have sent in forms to cover all bases. The fact that such a low number have requested conversion tells me that the vote will be a resounding YES and no dilution will eventuate.
What would I know though? I have only done hundreds of hours of research into BBI. Maybe I should take the "select/macrae12" approach and just say it's a dog because it's 6c? I'm still waiting with baited breath for some hard evidence it's a dog. How about a bearish analysis of the balance sheet or EBITDA? Just give me something other than "the price is 6c, therefore it's a dog". I thought I left that sort of garbage analysis back at HC.

 

[banska bystrica]

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.

Yes I've got heaps of spare time. As you would know, I play golf, I travel frequently and I invest in the market. That's my life and I make no apologies for "having too much spare time". You should try it one day select. It sure beats getting the 9 to 5 train.
What gave me this lifestyle? A battered tech stock called Scitec Ltd (SCS) that AMP sold to me at 7c in huge volume which I held for number of years, watched it become VeCommerce and then I sold for over $1. That's right. SCS was considered a dog by every broker in town. The dog had it's day though. Woof woof! I never looked back after that. I expect BBI/BEPPA will provide a similar return.

 

[Tysonboss1]

Maybe I should take the "select/macrae12" approach and just say it's a dog because it's 6c? I'm still waiting with baited breath for some hard evidence it's a dog. How about a bearish analysis of the balance sheet or EBITDA? Just give me something other than "the price is 6c, therefore it's a dog". I thought I left that sort of garbage analysis back at HC.

Well you see Banska, The stock market can never be wrong, It is a perfect efficiant market place that always prices things accucuratly based on all available infomation, There fore if the market is pricing BBI/Beppa at prices sub 10c, then yes the share must be a dog with no real value attached to it, It's not like the market ever acts based on fear or greed, people never make investments based on emotions or other factors affecting other parts of their personal or business life and every investor understands the company fully emotional news items don't affect anyones investments.

By the way, what I said above was totally in jest.

 

[banska bystrica]

So, what would I do if I then had to vote on new reset terms? I would vote NO to the new reset terms and allow 34% of the holders to convert 50% of their holdings

Poor old "select" is assuming the 34% who submitted conversion forms will be voting NO.
I know one substantial SPARCS holder who sent in a conversion form but will be voting YES for the new terms. I'm certain there are many like him.

 

[select]

Poor old "select" is assuming the 34% who submitted conversion forms will be voting NO.
I know one substantial SPARCS holder who sent in a conversion form but will be voting YES for the new terms. I'm certain there are many like him.

BB,

You seem to have missed the message in my post.

The 66% who didn't submit a conversion request would be delighted to vote YES in order to reduce the number of SPARCS which in turn would provide greater insurance of getting a 100% return in the event BBI enters admin.

For SPARCS holders it really makes no difference if there are 2.5 billion securities or 5 billion. Dilution isn't a concern to them. The returns will be the same and reducing the number of SPARCS would be an opportunity too good to refuse.

If you owned 50% of all SPARCS and one other person had the other 50% i'm sure you would love him to convert and leave you with a greater insurance against your investment in the event admin occured

All the research in the world gives no guarantee against all the variables and it will certainly bring you no mercy from the bankers. This is just another situation that is in the lap of the gods. It could go either way.

For the above reasons and the fact 6 months is a long time in the current climate I think November 2009 will be kept open via a NO vote.

It's just an opinion.

 

[investorpaul]

Select

What reasons do you see for BBI failing?

I am approaching BBI as a longer term spec holding (i agree nothing is certain but the rewards far out weigh the risk)

My reasons for optimism are:

1. To date BBI has been able to refinance their debt.
2. The majority of their debt is non recourse (ie asset specific), and therefore a failure of one asset or ability to finance it will most likely not be sufficient enough to bring the entire company to its knees.
3. Things like the DBCT being classified intangible and therefore people skipping over the fact that its income producing and therefore does have a saleable value.
4. No links or loans to the Parent B&B group
5. No management fees to the parent B&B group
6. High quality assets that you cant create more of easily (ie try building ports all around Europe). Sure they could suffer with a down turn in world trade but they are still needed.
7. Government regulation of some assets, this ensures a move stable cash flow and the government obviously views these of national significance (ie value)

* Disclaimer I hold BBI, please do your own research

 

[banska bystrica]

All the research in the world gives no guarantee

No it doesn't but it sure beats the hell out of not doing the research. At least if I lose my substantial investment in BBI/BEPPA, I can sleep easily at night knowing I did the research, liked the probabilities and did all I could to justify a large investment in what the market considers a "trashed dog of a stock".
For those who paid $1.50+ for BBI, it is a very bad investment but my average is 7.5c for BBI and less for BEPPA as I've been arbing BBI/BEPPA each time they get to within a cent in price.
I am comfortable with my investment and that's all that matters to me. It might go belly up but I'm yet to see solid evidence that supports that theory.
The doomsayers have yet to present a compelling argument.

 

[investorpaul]

BB

Quick question/thoughts Re: BEPPA, I have been doing a little read over the weekend.

Obviously BEPPA ranks ahead of BBI in regard to a wind up of the company, so If one was to buy BEPPA and BBI even in the event that the company goes belly up you could say afford to lose your $x investment in BBI as long as your BEPPA get paid out for say 15 to 20 cents.

I.E.

I buy one share in BBI for 7 cents
I buy one share in BEPPA for 8 cents

Assume the company goes belly up, I then need BEPPA to be paid out at a minimum 15 cents, to cover my investment for both sets of shares.

So effectively your hedging your potential losses (assuming that you expect BEPPA to get a reasonable payout relative to your entry price)

What are your thoughts on this?

 

[banska bystrica]

My thoughts are that IF BBI goes into administration, BEPPA will probably be worthless. If things were that dire for BBI to be liquidated, then it would be optimistic to envisage BEPPA holders getting anything after banks, SPARCS and NZ bond holders are paid.
Even so, BEPPA has a cushion of $2.4BN right now. That's the net equity of BBI as at Dec 31, 2008. So that cushion has got to be worth something.

I am buying BEPPA for two reasons:

1. They do rank ahead of BBI
2. They are currently owed 3.1c in interest payments and this MUST be paid to BEPPA holders before the company can resume distributions to the BBI holders.

So, BEPPA has to be worth a minimum of 3.1c more than BBI plus whatever the $2.4Bn cushion is worth in a liquidation should that eventuate. You now see why I continue to purchase BEPPA whilst the price differential is so low.
In order for BEPPA to be worth $1 in 2012, BBI must remain strong. A strong BBI in 2012 means BEPPA is worth $1+ accumulated interest. I have a price point and a certain event whereby I would be prepared to sell all my BEPPA and buy BBI with the proceeds. That price is a long way north of 6c though and the "event" is still some way off although perhaps not as far off as most imagine.

 

[Tysonboss1]

Does anyone have an estimate of how much debt BBI has been able to clear each month since they have ceased divs and interest payments.

 

[Viva_Las_Vegas]

Well this has turned into one hell of a discussion!!!

This week we saw the price of BBI go skyward for a change with the pending announcement, which ended up being in relation to DBCT.
So here are my questions which Banksa will probably be able to answer.

1) Since DBCT is intangible, are BBI then selling the 99 year lease rights to it?
2) Is DBCT making money for BBI to date? How much per quarter?
3) Same question as TysonBoss, how much debt has BBI manged to clear since suspending dividends etc?

I think BBI has a great potential IF it survives, and honestly I would be gutted if I lost what I had invested in it.

I just hope we are all not looking at it through rose coloured glasses simply because we have decided to tie our money up in it.
The best analogy I can think of is reading camera reviews online, those people who spend a lot on a new camera are usually unlikely to bag out their purchase.
I enjoy hearing the positives of BBI, but shouldn't we examine worst case scenarios?

 

[nulla nulla]

Many many years ago, I bought Burns Philp for under $0.10 and as bpc recovered I took part in the issue of options and convertable preference shares, Graham Hart,in control of the company, steered it out of receivership, bought out Goodman fielder then privatised bpc at over $1.00. The underlying value of the assets behind the share, combined with the determination of the chairman and Mr hart as MD, gave me great comfort that my investment was not going to be squandered.
In bbi, I see a similar oportunity.

 

[hardyakka]

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.

Select,

The fact is that BB has made the price of his purchases known and you are restating old news, to what end?

Yes he does support BBI for reasons that that have been shared and referenced to supporting documentation. Each person can review this and form their own view.

If you hold an opposite view then I would love to hear it and read any supporting data I assume you have.

Cheers

 

[hardyakka]

Folks,

Do you realise that you are messing up my purchase strategy!!

If everyone was to agree with the "facts" put forward by select/macrae then he may persuade persons at the other forum to offload BEPPA and even BBI and my buy orders will be filled.

Please help me out, I want an additional mill of BEPPA, so can we please agree:

a) BBI will go bust
b) BEPPA worthless
c) BBI a dog/trash etc etc
d) Only a mug would buy BBI/BEPPA
e) All facts show it will go bust
f) Intangibles worth nothing
g) BBI owes BNB squillions
h) man agree buyout number billions.
i) No one wants BBI assets
j) BBI and BEPPA are in (dare I say it) a DEATH SPIRAL
k) You get 6 months hard labour for saying BBI has any value
l) BBI is like a US REIT with retail exposures in Cleveland
m) Anything else negative you can think of.

Taa in advance

Cheers

 

[drsmith]

It's primary objective was to generate a growing stream of fee income for the now deceased BNB mothership.

 

[mark_au]

Folks,

Do you realise that you are messing up my purchase strategy!!

If everyone was to agree with the "facts" put forward by select/macrae then he may persuade persons at the other forum to offload BEPPA and even BBI and my buy orders will be filled.

Please help me out, I want an additional mill of BEPPA, so can we please agree:

a) BBI will go bust
b) BEPPA worthless
c) BBI a dog/trash etc etc
d) Only a mug would buy BBI/BEPPA
e) All facts show it will go bust
f) Intangibles worth nothing
g) BBI owes BNB squillions
h) man agree buyout number billions.
i) No one wants BBI assets
j) BBI and BEPPA are in (dare I say it) a DEATH SPIRAL
k) You get 6 months hard labour for saying BBI has any value
l) BBI is like a US REIT with retail exposures in Cleveland
m) Anything else negative you can think of.

Taa in advance

Cheers

LoL Nice strategy HY ;-)
I think your window of opportunity may have passed though..
If it works, i'll be in for some more ;-)

 

[nathanblack]

thurs and friday saw a bit of downward pressure on beppa/bbi on otherwise positive days. possibly profit takes after the gains made earlier in the week(stock specific and in broad term)

fri the dow fell 150pts so perhaps our market will be off 30pts at opening and there may be some buying oportunity in beppa/bbi. i'll try get some beppa at 7cents