BBI - Babcock & Brown Infrastructure

[nomore4s]

That still doesn't account for where all the money went from boom times. Petrol prices in the US were still cheap compared to the rest of the world.

Like i said, i think it's a bit of ...cry poor and get free $$$$$

There's a bit more to it than that Viva.

These companies are in real trouble and have been losing money for awhile. CEO's are losing their jobs so I don't think it is just crying poor for hand out money.

Alot of it is to do with how these companies (inc the banks) were making profits in the boom but that discussion isn't for this thread.

 

[investorpaul]

That still doesn't account for where all the money went from boom times. Petrol prices in the US were still cheap compared to the rest of the world.

Like i said, i think it's a bit of ...cry poor and get free $$$$$

My summary is a huge simplification of the whole thing, there are structural problems within the company and the American economy in general

 

[Mitsimonsta]

If only we knew as much about BBI as we do about the problems in the US economy.

I notice that BEPPA has started to fall back a little in later trade.

 

[investorpaul]

If only we knew as much about BBI as we do about the problems in the US economy.

I notice that BEPPA has started to fall back a little in later trade.

It has fallen back a little towards the end of the day for a day or two now. It could be that there are people who dont want to hold overnight (ie they just trade it during the day?) But i have also noticed parcels that go through after close at a significant reduction to the last price so perhaps people sell down the stock in anticipation of that.

 

[Tysonboss1]

Some problems started emerging when petrol prices rocketed and people started seeking out smaller more efficient cars (again usually from Asia). American car makers have traditionally made larger, family cars, trucks, 4wds, etc. They then had to play catch up by making cars that consumers wanted. Then the GFC hit and they could no longer rely on the buyers who were only buying because of cheap credit.

Yeah, GM completely misread the market, they were releasing over size pick up trucks and they bought the rights to manufacture the hummer right before oil prices peaked and global warming became big news.

 

[Jez]

The company is paying out more in distributions than it makes.

Since the company is paying out all profits and thus does not reinvest anything back in the business.

Funny that!

Now tell us something new. Why on earth would company directors not own Gazilions of shares and pay themselves good money? We all know that when a company goes belly-up and there is no money left to pay creditors, the share holders get zilch, so those directors have to get that money into their family trusts before belly-up day comes!

Just telling it like it is!

 

[investorpaul]

Funny that!

Now tell us something new. Why on earth would company directors not own Gazilions of shares and pay themselves good money? We all know that when a company goes belly-up and there is no money left to pay creditors, the share holders get zilch, so those directors have to get that money into their family trusts before belly-up day comes!

Just telling it like it is!

In the investor info pack BBI will only pay out future distributions from free cash flow. So while it was an issue in the past, it wont be in the future (assuming they get to a position where they can pay distributions again).

 

[banska bystrica]

From The Intelligent Investor:

"The asset for which there is significant demand is the jewel in BBI's crown: Dalrymple Bay Coal Terminal (DBCT). Serving as a gateway to the Bowen Basin Coal region, the largest known coal deposit in Australia, this infrastructure is as essential as essential infrastructure gets.
The asset is fully regulated by the Queensland Competition Authority and the contracts with mining companies are "take or pay". With demand apparently double DBCT's current capacity, it's irrelevant at the moment, but the mining companies need to pay the same amount whether they use the terminal or not.
It's an extremely attractive asset to infrastructure funds and potentially, the mining companies themselves. Frustrated by the lack of investment in additional capacity, Rio Tinto and BHP Billiton would love to get their hands on it."

 

[wesleysnipesjr]

http://www.abc.net.au/news/stories/2009/04/02/2532836.htm

Dalrymple Bay coal shipments spike. Interesting....

 

[Viva_Las_Vegas]

Banksa

When DBCT is shown in that light, it's almost a shame to sell it.
Perhaps a 50%sale of DBCT and some bits and pieces of other assets would be better for BBI's long term future?

 

[investorpaul]

Banksa

When DBCT is shown in that light, it's almost a shame to sell it.
Perhaps a 50%sale of DBCT and some bits and pieces of other assets would be better for BBI's long term future?

I recall from memory that their preferred option is to sell a minority stake, but if necessary they would sell more (maybe BB can confirm)

 

[banska bystrica]

Yes, the preferred option is to sell 49% but since then the banks have implemented a sweep facility to pay off corporate debt so if the price is right, they would probably sell 100%.
I think a minimum price for 100% would be 11.5X EBITDA = $2.6Bn
A ripper of a price would be 13X EBITDA or $3Bn.

 

[bellenuit]

The asset is fully regulated by the Queensland Competition Authority and the contracts with mining companies are "take or pay". With demand apparently double DBCT's current capacity, it's irrelevant at the moment, but the mining companies need to pay the same amount whether they use the terminal or not.[/I]

How exactly does "take or pay" work?

In the "Dalrymple Bay coal shipments spike" article it stated that: "The month of March saw a jump in the amount of coal being shipped out of one of Australia's largest coal terminals." Does BBI still only get the same amount if more coal is shipped through the terminal. What incentive does BBI have to increase capacity to meet demand if they still only get the same fee?

 

[banska bystrica]

BBI are paid on total capacity, not usage. Therefore, if they invest in expanding capacity they will receive more revenue. DBCT could be doubled and usage would still be close to 100%. This is a problem for the mining companies that use the port....ship delays etc. Time is money. They would love to own it.

 

[skc]

How exactly does "take or pay" work?

One of the most confusing jargon imo. It means "take the service/product and pay" or "just pay".

It's like your gym membership. Pay them a certain amount, use as infrequently as you like. Doesn't worry the gym one bit.

 

[Mitsimonsta]

Big jump in BEPPA on open....

Buy now, or wait for a fall - THAT is the biggest question that is facing my mind right now.

 

[Viva_Las_Vegas]

Bear or Bull for BEPPA guys?

Looks like I'm going to have some cash to buy BEPPA with, just wanted people's opinions. Do we see a correction on the horizon? Or is this the new bottom. I see BEPPA is around 8c today!

 

[Mitsimonsta]

It tends to fall a bit in the afternoon Viva.... just something I have noticed.

I have also tended to notice that there has been quite a bit of profit-taking on Fridays of late. While it is a nice opening jump, the ASX200 tend to wander back to about half of opening jump on a Friday as people close out their positions for the weekend.

 

[Viva_Las_Vegas]

LOL

Mitsimonsta looks like you and I are thinking alike today hahahah

GL.....................

 

[investorpaul]

yer last few days it has really fallen away in the afternoon. Although it is a positive to see it open strong today. If it can get a bit of momentum going that would be good