BBI - Babcock & Brown Infrastructure

BBI/BEPPA is a risk/reward INVESTMENT. I suggest largesse go and buy CBA or better still put his funds into a CBA term deposit earning 2.5%. That would suit his risk profile. Nothing wrong with that but don't come on here and start accusing BBI holders of being no more astute than the guy down the pubtab with a beer in one hand and a smoke in the other.

Bottom line: BBI net equity is in excess of 70c per security. Stock trades at 90% discount. Market is fearful of BBI therefore has overreacted on the downside. Thankyou Deutsche Bank at 2.5c..lol
BEPPA dragged down with it even though it is a debt instrument. Madness but we'll take it thankyou.
Bit like the stock that gave me my big kick financially. SCS (later to become VeCommerce). AMP Funds management sold their large parcel to me (and a few other private investors) at 7c after they bought at much higher prices. We sat on those shares and I sold out my shares at $1+ years later.
Sometimes the "so-called" professional investors actually have no idea and because they are large players in smaller stocks, they influence market direction and create enormous opportunities. BBI/BEPPA is one of those rare opportunities but only for those investors brave enough to go against the market opinion.

banska bystrica said:

BBI/BEPPA is a risk/reward INVESTMENT. I suggest largesse go and buy CBA or better still put his funds into a CBA term deposit earning 2.5%. That would suit his risk profile. Nothing wrong with that but don't come on here and start accusing BBI holders of being no more astute than the guy down the pubtab with a beer in one hand and a smoke in the other.

Bottom line: BBI net equity is in excess of 70c per security. Stock trades at 90% discount. Market is fearful of BBI therefore has overreacted on the downside. Thankyou Deutsche Bank at 2.5c..lol
BEPPA dragged down with it even though it is a debt instrument. Madness but we'll take it thankyou.
Bit like the stock that gave me my big kick financially. SCS (later to become VeCommerce). AMP Funds management sold their large parcel to me (and a few other private investors) at 7c after they bought at much higher prices. We sat on those shares and I sold out my shares at $1+ years later.
Sometimes the "so-called" professional investors actually have no idea and because they are large players in smaller stocks, they influence market direction and create enormous opportunities. BBI/BEPPA is one of those rare opportunities but only for those investors brave enough to go against the market opinion.

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Thanks for the investment advice BB, but i'm actually quite risk tolerant, but only when the risk/reward equation lines up.

FWIW,



Anyone who purchased BBI above that Red line is now underwater, or anyone who purchased BBI in the last 3 months is now underwater.

On the contrary, vast majority of CBA purchasers in the last 3 months would be sitting even, or maybe slightly up.

Risk/Reward plays are great, so long as you pick the right ones.

Absolute returns are what build a portfolio.


A couple of other points
a) 90% Discount is for a a reason. Stop implying that it's just a free swing.
b) What type of market were you buying in when you purchased SCS?


Based on that graph, maybe you should advise everyone to go buy CBA shares?

What would most prefer? 20% down but happy that they are 'making a good risk/reward play' ? or with their money still in their account?

Largesse said:

Thanks for the investment advice BB, but i'm actually quite risk tolerant, but only when the risk/reward equation lines up.

FWIW,



Anyone who purchased BBI above that Red line is now underwater, or anyone who purchased BBI in the last 3 months is now underwater.

On the contrary, vast majority of CBA purchasers in the last 3 months would be sitting even, or maybe slightly up.

Risk/Reward plays are great, so long as you pick the right ones.

Absolute returns are what build a portfolio.


A couple of other points
a) 90% Discount is for a a reason. Stop implying that it's just a free swing.
b) What type of market were you buying in when you purchased SCS?


Based on that graph, maybe you should advise everyone to go buy CBA shares?

What would most prefer? 20% down but happy that they are 'making a good risk/reward play' ? or with their money still in their account?

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Mate you have no idea what you are talking about.

You cannot compare BBI/BEPPA and CBA they are two totally different stocks with two totally different set of fundamentals.

Everyone who has done research on BBI/BEPPA acknowledges the risk (yes we have also discussed the potential for upside). Furthermore you cannot take a short term view on BBI/BEPPA, it will go up and down, but the real potential is in the longer term.

Most posters (based on what I have read through this forum) who see long term potential got into BEPPA at or below 10cents and would be sitting on a small profit at the moment.

One would expect the CBA and other blue chip stocks to perform solidly over the long term, you would usually expect to buy now and sell in 10 yrs and see a great profit. (but it is still not guaranteed). BBI/BEPPA is completely different it is purely an investment based on the value we see, that is not reflected in the market. Again we have all acknowledged the increase risk with this stock, but there is also increased potential (in myview and others). Whether you agree or not is irrelevant.

Furthermore I could pick a number of companies within the ASX 100 and 200 that have lost money over the last couple of months as well (have a look at ORG). You cant just pick one stock (CBA) and say because its share holders have made money in the last 3 months, that everyone who holds BBI/BEPPA is wrong.

Risk /reward was the the outstanding play of the last decade when BBi were 3c and lower. Thanks Deutsche Bank. Sold at circa 16c. Game set match largesse.

By the way, I have said many times BBI was too risky at higher prices especially after Corus news hit. That's when I sold all my BBI. It is now getting to buy territory again....BUT,

BEPPA is the play largesse. The play of 2009/10. A time horizon of 3 months largesse? That's a bit rich to judge a stock's performance good buddy. I bought SCS from AMP at 7c in the late 80's. About the same time you were in nappies I'd reckon. Your lack of street smarts makes me think you are still fairly young with a lot to learn. Remember, the BEST house in the street is not necessarily the best investment. Sometimes the perceived dogs are the cream. You'll learn that one day.

By the way, I hold BEPPA only.

largesse wrote: "Absolute returns are what build a portfolio."

Yep and plenty who "built" a portfolio over the last ten years playing conservative "best" stocks are now under water. Ten years of building all down the drain so don't pretend the ASX Top 20 type stocks are necessarily the best investment. You normally pay a big premium when you buy the ASX Top 20. That is a poor investment. The real money is made in small/mid caps. Even you should know that.

Tell you what largesse. I'll bet you a neat $20K that BEPPA outperforms CBA over the next 12 months starting now and we will both lodge our $20K with the Moderator here who can place the funds in a CBA term deposit..lol maturing in 12 months.
Are you up for the challenge?
CBA $38.82
BEPPA 11.9c

PS. CBA better get to $100+ to even be in the running on my figures.

investorpaul said:

Mate you have no idea what you are talking about.

You cannot compare BBI/BEPPA and CBA they are two totally different stocks with two totally different set of fundamentals.

Everyone who has done research on BBI/BEPPA acknowledges the risk (yes we have also discussed the potential for upside). Furthermore you cannot take a short term view on BBI/BEPPA, it will go up and down, but the real potential is in the longer term.

Most posters (based on what I have read through this forum) who see long term potential got into BEPPA at or below 10cents and would be sitting on a small profit at the moment.

One would expect the CBA and other blue chip stocks to perform solidly over the long term, you would usually expect to buy now and sell in 10 yrs and see a great profit. (but it is still not guaranteed). BBI/BEPPA is completely different it is purely an investment based on the value we see, that is not reflected in the market. Again we have all acknowledged the increase risk with this stock, but there is also increased potential (in myview and others). Whether you agree or not is irrelevant.

Furthermore I could pick a number of companies within the ASX 100 and 200 that have lost money over the last couple of months as well (have a look at ORG). You cant just pick one stock (CBA) and say because its share holders have made money in the last 3 months, that everyone who holds BBI/BEPPA is wrong.

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Ok mate, as you are telling me that I have no idea what i'm talking about, maybe you should prove that you know what you are talking about.

You could do this by showing me your risk weighted valuation of BBI or BEPPA. Either will do.

No need to rush, you can get back to me in a week if you need the time to put it together.

And no, just quoting the advertised NTA doesn't count as a valuation.

Also, as you 'have done the research', maybe you could give us all a quick run down, 200 words max, of the risks inherent in purchasing BBI or BEPPA.
Shouldn't take you long. Maybe quantify those risks as well.

I look forward to you proving me wrong, because I am assuming that you in fact have no idea what you are talking about and are just punting based on what other people have said is a 'good investment'.

FWIW, i didn't pick CBA, merely using Banksa's investment suggestion to compare.

I was a bit surprised to be called "not an investor" just because I hold Beppa in my portfolio.

I have a different range of risk profiles in my portfolio.

I bought BBI, Beppa AND CBA (and others) at about the same time.

I sold BBI at a profit, when it hit my trailing stop.

I still hold beppa, as i am still well in profit and see more upside than down.

If it falls, I may sell, its not as though it will go into receivership overnight

so really my major risk is gap risk, if bad announcements happen.

I acknowledge that is substantial risk, but beppa is a small part of my portfolio, I am not as forthright as BB.

Largesse, you mentioned you have bought and sold this stock

Why did you do that if you thought it was so risky, and what has changed your mind now?

Largesse said:

i didn't pick CBA, merely using Banksa's investment suggestion to compare.

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Why do people continually get my username wrong? It is not Banksa Bystrica. It is Banska Bystrica.

Largesse, I will actually let you nominate any Top 20 stock you like for our little side wager if you don't think CBA will cut the mustard against BEPPA.

banska bystrica said:

largesse wrote: "Absolute returns are what build a portfolio."

Yep and plenty who "built" a portfolio over the last ten years playing conservative "best" stocks are now under water. Ten years of building all down the drain so don't pretend the ASX Top 20 type stocks are necessarily the best investment. You normally pay a big premium when you buy the ASX Top 20. That is a poor investment. The real money is made in small/mid caps. Even you should know that.

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Banksa,

I'm not here to duel it out with you. I have clearly acknowledged you made a great play on BBI/BEPPA in previous posts. What is getting my snot up is that I feel that some are understating the risk and over stating the potential reward on this stock.

I'm not here to mollycoddle people or try to protect them from themselves, but I have the right to come in here and voice my opinion when I think they are wrong.

BBI is a rampers dream, so easy to pump up the blue sky potential while quitely overlooking the serious risk built into it's purchase.

To clear up what you keep trying to muck up, i'm not saying that BBI/BEPPA will 100% fail, or not give holders some return, i'm saying that people are misunderstanding the risks, and that the risk/reward is some what misaligned.

And no, i'm not going to bet you 20k that CBA out performs BBI, because I wouldn't invest in CBA myself. I only used it as an example because you brought it up.

I said you could have your pick of any stock in the Top 20.

BTW, I acknowledge there is some chance BEPPA will be worth 0 in 12 months whilst there is no chance CBA will be worth 0. Therefore, I agree the downside potential is greater with BEPPA but it is my belief that the upside is far greater with BEPPA.

If you like, I will send you a spreadsheet with some really tough stressed numbers in it on BBI and you are free to comment via email on where you believe I am still being overly optimistic.

if chinese or friends bought ( or provided finance to a buyer) of the dalrymple bay coal loader , the price regulator would not be an issue, as from then on coal suppliers could be invited to price coal on a delivered to dalrymple bay basis and not on fis or fob basis.

the same would apply to the japanese but dont expect that they have surplus funds which they dont want to hold in the form of us dollars.

would also obviate pressure on china to sign up for costly restrictive greenhouse restrictions.

and this is without considering bhp or rio issues.

i would have thought that prospective buyers of this coal loader would have already started loading up big time on beppa (or even bbi) so as to partly offset the cost, but this is not happening - i smell a big rat -possibly want to wait for other qld coal loaders to come on the market and do not want to bid up those prices by bidding up the dalrymple bay coal loader price.

hold beppa (lots of), nil bbi, nil sparcs.

Banska Bystrica is a very pretty town in Central Slovakia that should have been made the capital when Slovakia became independant. Bratislava was given the nod because of its size and geographic location (being very close to Vienna).

mikes said:

i would have thought that prospective buyers of this coal loader would have already started loading up big time on beppa (or even bbi) so as to partly offset the cost, but this is not happening - i smell a big rat

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mikes,
DBCT is worth circa $2.7Bn.
BBI's entire market cap is worth $170M.

The big potential buyers of DBCT would not be interested in buying BBI or BEPPA.

banska bystrica said:

I said you could have your pick of any stock in the Top 20.

BTW, I acknowledge there is some chance BEPPA will be worth 0 in 12 months whilst there is no chance CBA will be worth 0. Therefore, I agree the downside potential is greater with BEPPA but it is my belief that the upside is far greater with BEPPA.

If you like, I will send you a spreadsheet with some really tough stressed numbers in it on BBI and you are free to comment via email on where you believe I am still being overly optimistic.

Click to expand...

My market view is such that I wouldn't place any of the top 200 let alone top 20 against BBI or BEPPA. Penny-dreadful volatility alone would probably see me lose that bet.

I feel like you are trying to pigeon hole me as a blue chip only investor, which I am far from. But it's ok, I have presented like one.


I'll take you up on that spreadsheet and valuation.

I'll pm you my email address

mikes said:

if chinese or friends bought ( or provided finance to a buyer) of the dalrymple bay coal loader , the price regulator would not be an issue, as from then on coal suppliers could be invited to price coal on a delivered to dalrymple bay basis and not on fis or fob basis.

the same would apply to the japanese but dont expect that they have surplus funds which they dont want to hold in the form of us dollars.

would also obviate pressure on china to sign up for costly restrictive greenhouse restrictions.

and this is without considering bhp or rio issues.

i would have thought that prospective buyers of this coal loader would have already started loading up big time on beppa (or even bbi) so as to partly offset the cost, but this is not happening - i smell a big rat -possibly want to wait for other qld coal loaders to come on the market and do not want to bid up those prices by bidding up the dalrymple bay coal loader price.

hold beppa (lots of), nil bbi, nil sparcs.

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Given our recent dealings with the Chinese and strategic assets (Rio Tinto debacle /OZL Prominent Hill), do you really think that Chinese purchase of DBCT is a realistic possibility?

My best bet would be a syndicate of local producers.

Largesse,
Have I honestly ever said there were no risks or little risks with BBI/BEPPA?
Have I never mentioned that one could in fact lose the lot if buying BBI/BEPPA?

Largesse said:

Given our recent dealings with the Chinese and strategic assets (Rio Tinto debacle /OZL Prominent Hill), do you really think that Chinese purchase of DBCT is a realistic possibility?

My best bet would be a syndicate of local producers.

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I agree with you on that. A syndicate of local producers would be the red hot favourite. I think the bidding will be fierce and the first official offer may not be the last one received.

no doubt the celestials could co-opt friendly parties to front for them ( in purchasing or providing finance with interesting clauses or covenants not disclosed , and commercial in confidence arrangements.

I have just caught up on the recent exchanges, seems as though some persons prefer sniping rather than discussing the fundamentals of the stock.

Offer of 35cents +2 BB.
As the holder of couple of million BEPPA I would review this on my analysis of the market. It basically depends upon what the future holds. If DBCT realises a good price, PD Ports and Euroports gone then obviously no.

Fundamentals
As a qualified accountant with a decade of experience in infrastructure some of the viewpoints regarding BBI as a dog etc etc make me smile. For example I am expecting a small impairment charge for PD Ports, this being based on what has been announced versus what must be announced under LR 3.1 , what helen has said and income streams coming on line ie Tesco. Any positive resolution to Corus is a bonus. Now the snipers can slam this, but get it from the horses mouth and ring BBI IR.

I am not going to bother repeating my analysis of other BBI issues, except to say that, considering the types of asset, I am quite happy with the fundamentals versus risk and concur with BB that it will be the play of 2009/10. I am an investor not a trader and also hold CBA.

What do I expect
I agree some form of restructure is necessary, however what I expect is to share in the inherent value of the assets not yet recognised in the balance sheet. This means that there will be some trade off by BBI security holders.

I am not a charity, yet will be flexible and quite likely accept what I consider to be an equitable restructure, with the pain and benefits shared. Yes I am still increasing my holding very simply because I reasonably understand the beast, its weaknesses and strengths.

BB has consistently shared his research and I think it fair to say he is a fairly astute investor. An added bonus for me is that BB has drawn many conclusions which are generally consistent with my own view. I have yet to see Largesse, Dr Smith et al put up a logical or reasoned argument backed by facts supporting their views. Guys, give me facts that support your views so I can analyse these and reconsider my position.

When the financials come out next month I am going to set aside a few days to analyse them with a fine tooth comb and will post my analysis. Why doesn't someone with an opposite viewpoint to mine do likewise and that analysis can be referenced to the audited financials, regulatory price resets etc.

Enough said

Cheers