BBI - Babcock & Brown Infrastructure

Comments on the recent announcements today re change in substantial holdings? Cheers. Thanks. Any thoughts on the signifigance?

banska bystrica said:

I am certainly not interested in selling at 10c. This stock was smashed beyond comprehension to levels completely unjustified. I would have thought a minimum price would be 30c before I would contemplate selling any. In June it traded at $1.00. A 70% discount to that would be my minimum sell point and not for all of them.
Savage bear markets do throw up some sparkling gems. BBI is one of them. Hold tight and it will be worth a lot more in 2009. It will have a breather for sure but too many investors and institutions now recognize the true value and so any weakness will be seen as an opportunity to accumulate.
It's NTA is well over $1 and the intangibles in the books are actually worth a lot of money. People scoffed at the intangibles and said they were worth nothing.
Tell me the lease on Dalrymple Bay Coal Terminal which is being eyed off by Xstrata, Macarthur Coal, BHP, QIC and others is worth nothing, yet it is an intangible.
A 99 year lease is "intangible" but you and I know it would be worth a couple of billion at least. 10c is still a trashed price. Not interested.

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It looks as though the parent has been selling. Looks very much like a situation where BBI and BNB are drifting apart. I hear a name change is imminent once the change of control is triggered. The clarification of BEPPA was nicely timed. Certainly no coincidence. This stock will be well north of 15c sooner rather than later. Someone has been buying this seriously. The volumes are not just retail buyers.

If a major shareholder such as BNB (as Banska suggests) or one of the other banks which hold a large holding sell a large parcel of shares in BBI, what time frame are they expected to inform the market of their sale? And is there a volume requirement attached to this as well if so.
What are ASX rules regarding this?
I wonder if anyone is able to enlighten me on this point i would appreciate them telling me.

Thanks.

Been keeping an eye on this stock for a while, and bought a decent amount when it hit about 4c... Definitely will be keeping it long term. A lot of people getting on the band wagon tho..

btw, good work banska, very informative postings

hey guys, just wondering, is it too late to jump on the bandwago? not asking for financial advice but have been interested in this one for a while, I'm thinking medium term maybe 1-2 years?

From the looks of it its still a decent buy. I bought some earlier on and then another lot today but its still fairly risky but with a very nice potential return. I'm only putting on what I'm prepared to loose.

Volumes have dropped right off again from 174M to 35M today.
http://www.asx.com.au/asx/research/CompanyInfoSearchResults.jsp?searchBy=asxCode&allinfo=on&asxCode=BBI&companyName=&principalActivity=&industryGroup=NO#closing_prices

Also a concerning announcement about possible redemption of EPS not for cash but an equivalent??
01/12/2008 BBI EPS - Redemption on Change of Control

I am worried by the high levels of intangible assets allocated to goodwill along with the extreme levels of debt.
http://au.finance.yahoo.com/q/abs?s=BBI.AX

my03 said:

hey guys, just wondering, is it too late to jump on the bandwago? not asking for financial advice but have been interested in this one for a while, I'm thinking medium term maybe 1-2 years?

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I think that is a good position to take. The aim being that by then they will have lowered their gearing and be left with a quality set of high yielding stable and often regulated infrastructure assets.

Share_Bear said:

Also a concerning announcement about possible redemption of EPS not for cash but an equivalent??

I am worried by the high levels of intangible assets allocated to goodwill along with the extreme levels of debt.

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You either haven't done your homework properly or you haven't read my posts.
In fact, the BEPPA announcement was extremely positive and the intangibles are extremely valuable so I have no idea how you came to your conclusions.

"It's NTA is well over $1 and the intangibles in the books are actually worth a lot of money. People scoffed at the intangibles and said they were worth nothing.
Tell me the lease on Dalrymple Bay Coal Terminal which is being eyed off by Xstrata, Macarthur Coal, BHP, QIC and others is worth nothing, yet it is an intangible.
A 99 year lease is "intangible" but you and I know it would be worth a couple of billion at least. 10c is still a trashed price. Not interested."

That's what I posted previously. I'm very happy people didn't do their homework and still aren't. It enabled this stock to be bought heavily under 3c.

Its funny.
It doesn't matter what share it is it is always a giant hurdle to go from 10c to a whopping 10.5c. People are used to the .005 increments but oh boy watch out for that massive move to a whole .05 movement.... thats scary!
Volumes on the buy and sell are both quite large today.
Which side will blink first?
Amusing to watch really.
Perception of value is very strange especially when dealing in shares.

Sorry I meant to say from 1/10th cent to half a cent. Apologies. Got my decimals mixed up. I was always better at fractions at school anyway.

made it 0.11

lot of resistance though - all those dudes that bought in 1/10th's (me included)

I'm holding though

Another "intangible asset" that a few of you doubters might like to ponder is the property lease of 64 acres attached to the Port of Teesport in the UK.

"PD Ports brings jobs and new projects to the Tees; MIDDLESBROUGH based PD Ports has enjoyed an exciting start to 2008 with approval of major expansion plans and an agreement with Tesco in what is potentially the biggest deal in over 30 years.(News)

Article from:
Evening Gazette (Middlesbrough, England)
Article date:
May 22, 2008.
With the expected creation of more than 6,300 jobs when both projects are delivered, PD Ports has made its mark as one of the largest employers and key economic drivers in the North-east.

In February, the campaign to build a new deep sea container terminal at Teesport, known as The Northern Gateway (NGCT) was granted final approval by the Secretary of State for Transport, Ruth Kelly. This was less than 22 months after plans were initially submitted in April 2006. "

Now if you still think the "intangibles" on BBI's balance sheet are worthless, then do some research and you may be enlightened.

Another link: https://www.businessspectator.com.a...n-new-import-centre-E9329!OpenDocument&Click=

Tesco paid 14.9M pounds (AUD$34M) as a land lease prepayment on the land adjoining Teesport.

banska bystrica said:

You either haven't done your homework properly or you haven't read my posts.
In fact, the BEPPA announcement was extremely positive and the intangibles are extremely valuable so I have no idea how you came to your conclusions.

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To accuse me of not doing research is obviously completely unrealistic as I am the one providing facts and references. I came to these conclusions from the references I stated so I obviosly have done the research.

Let me elaborate on goodwill. I am extremely concernecerned by the fact that goodwill was almost tripled 2007 to 2008. It was 478.05M in 2006, 570,06M in 2007 then 1,369.78M in 2008. I want you to think about how much of that "Book Value" is actually recoverable "Realisable Value" when goodwill usually based on reputation.
http://au.finance.yahoo.com/q/abs?s=BBI.AX

You stated an estimate NTA per share of $1, could you please provide your reference as you may be using old figures. NTA is actually negative -535M on the 2008 Balance Sheet.
http://au.finance.yahoo.com/q/abs?s=BBI.AX

Moodys Rating has dropped twice within 2 weeks with concerns over the extreme debt levels, one maturing in Feb.

Also volumes have dropped to 25 Mil.

There are some good posts at the start of this thread. I feel for those who have made a loss.

Also bb you make some interesting posts but could you please start providing references.

This is an interesting stock and from my take aside from bouncing around by day trades, longer term can only be positive.

The comments re tangibles and intangibles is interesting. But I think (as pointed out by other..BB possibly), BBI is an infrastructure play deriving predominantly (75%) regulated income. Therefore, if as generally accepted, an asset is worth it's discounted cash flows, historical book values are not necessarily good indicators of value.

Personally, I'd not be using NTA as my acid test of valuation. Instead I'd look intensely at key drivers of regulatory returns aka DORC valuation methodolgy and ingredients to CAPM (viz debt/equity assumption, debt costs and equity costs).

(Much of my analysis based on what I'd consider a well constructed invesment pack, Oct 08)

It is difficult not to be impressed by the Dalrymple Bay Coal Terminal:
-revenues based on take or pay with counter parties representing the largest mining houses in the world. Variable operating costs on strict pass through arrangements;
- an insatiable appetite internationally for good wholesome coal. I understand there is still even today a queue of sea vessels awaiting to be loaded ex DBCT!
- the asset was acquired 2002 so its replacement cost (ingredient to regualtory return assessment) moved significantly upwards since acquisition;
- no immediate competitors ... Rome may well have been built in a day but competing coal terminals of DBCT capacity take a little longer;
- cost of debt pointing downwards;
- cost of equity underpinned by market insanity. In fact I think this is a no lose situation... either equity is priced by the market at rates lower than currently prevailing or if investors persist in demanding greater returns to underwrite mrkt volatility, the regulator must afford greater prices... either way it has to be good for share price.
- the debt position is interesting but I don't think hopeless. If I recall I was bothered by about $100M ... in the sceheme of things doesn't look overwhelming;

Like Share_Bear I am a little concerned by the growth in goodwill noting that most of the 07/08 increase attributable to Euro port acquisitions. However, I suspect the same analysis is relevant... to what extent is the acquisition price paid above tangible asset cost attributable to premiums available per regulated returns? (Rhetorical question... I will do my onw research!)

For the record, I have a BBI position. Didn't enjoy today too much but life's a long time!! My take is that if BBI can distance itself from the more hideous stock BNB, ignore the media beat up about having to sell the farm (aka DBCT) to stay afloat, manage its debt rollovers efficiently then I see a pretty good stock in BBI.

Welcome feedback but insist you do your own research. This is strictly my rantings

Share_Bear said:

Let me elaborate on goodwill. I am extremely concernecerned by the fact that goodwill was almost tripled 2007 to 2008. It was 478.05M in 2006, 570,06M in 2007 then 1,369.78M in 2008. I want you to think about how much of that "Book Value" is actually recoverable "Realisable Value" when goodwill usually based on reputation.

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From accounting pov goodwill is the acquisition price over and above book value of the acquired assets. So the fact that goodwill numbers increased has little bearing, apart from the fact that they acquired many assets. What is important is whether the acquisition price was a good one in light of the current environment. Reputation has nothing to do with anything.

Not really providing any views on BBI...but the meaning of goodwill seems a bit confused in your post.

http://en.wikipedia.org/wiki/Goodwill_(accounting)

Reputation (of the target) can be why the acquirer is willing to pay for the goodwill.

Anyway, BBI is an ASX200 stock that no doubt has been analysed inside out by many players, esp. the banks. It has been trading at trash prices not just for a day, but for weeks. I doubt an average outside investor can add much value by carrying out his own analysis and valuation. IMO the more sensible and efficient approach in a situation like this is to trade the price, not the fundamentals.

up nearly 17% today. Making back ground lost in the last few days

Only news i can see is a change in the compliance committee

Whilst it would be prudent if not necessary from the point of view of the banks and BBI to sell one or two more assets i sincerley hope that the DBCT is not the asset or included with others.
I was pleased that justthinkin also mentions this.
This is such a premium asset. It was yesterday, it is today and tomorrow it will be even more so. Selling this is just silly talk imho.

Even if we are unable to pay back principle owed in the short term, the cash flow from this outstanding business is to be envied by others and goes a long way to servicing interest obligations.
Surely the banks must acknowledge this.
If we were to sell this i for one would be suspicious of the true motives of the sale and would be more than interested in the circumstances as to how and who the ultimate purchaser would be.
Just my thoughts.
Still holding and maybe not finished adding considerably more BBI.