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Babcock & Brown SFF

Thx for the update! Yes, their the problem they may face is only potential not imminent and it's already factor into its current share price. Let's continue to hold till the cow comes home and buy more if necessary. But stay alert on any undesirable outcome of the current financial woes.

 

The stock is fundamentally OK

The rumours feed into the stock price already

As the rumours are out already, it is getting more difficult short this one 

 

Hi Farmer

since you asked :

I bought some at 60 cts .

I will buy same amt again 1 or 2 mths from now to even out at whatever if the price is lower

As they say , I will keep for next 1 to 3 yrs

 

Yes, a cordial way of posting opinion is indeed commendable here. That's why I keep coming back for more to share / inform.

Oops! looks like BBs starts to Q to sell again. They wanna force down the price some more for another "margin call" again?

Soloman senior, what's your stake now? Hold/dump the horse?...hihi, just wanna know your opinion cause I'm vested some.

 

You are right... :)

It is of utmost importance for those who play the stock market to treat everything (eg. differing views)
in an impersonal manner. Because if one does, it as good as a guarantee to lose.

If one is easily agitated, it clearly shows one's approach in the stock market is wrong.
One must be absolutely objective and not get upset or angered by anything which do
not conform to our own prejudices...  

 

Another question: Allco listed in Australia - the price of the counter went down by a lot. What will happen to the Allco listed on SGX if the parent company goes into trouble?

 

I think the postings in this thread is very commendable........forumers post differring opinions/information without getting personnal against those with a divergent view. This way, readers can get a more balanced view and make investment decisions accordingly.

Another announcement today

http://info.sgx.com/webcorannc.nsf/ef3ba6cb188613ea482571b2003641d3/0ebe83e368eb145a4825740f0082d638?OpenDocument

ps - aoeuidht, if you cut and paste the website page, you can automatically create a link in your post

 

Thx for the infos, aoeuidht!

When something is too good to be true, it probably is..... at ~19% divd yield is it really too good to be true.

Well, if the current crisis continue to drag on for months to come, I believe not only this counter, but many other reits too will face "margin calls" too. This break some light as to why recently, BBs are selling reits in a big way even below their NAV.

I guess ultimately, investors will have to make their own choices and bite the bullet! 

 

see: 

http://www.investmentmoats.com/investment-ideas/babcock-and-brown-structured-finances-response/

 

 

 http://www.theaustralian.news.com.au/story/0,25197,23370961-643,00.html

 Adele Ferguson | March 14, 2008

THE Australian arm of a US broking house has been circulating a note that clearly indicates that local stock Babcock & Brown was financially vulnerable, at a time when investors appear to have been short selling Babcock shares.

Contrary to suggestions overseas hedge funds have been ganging up to short sell stocks they had analysed closely, the desk note from Lehman Brothers Australia executive Paul Davenport noted the company's stock code, apparently as a guide for investors overseas who were not familiar with the company.

Regulator ASIC has been aiming to reassure a nervous share market by cracking down on any rumour-mongering that could be used to depress companies' share prices -- a problem that has stuck a number of corporates in recent weeks, particularly Babcock, Allco and ABC Learning.

The Lehman Brothers Australia desk note dated March 5 had the problem that by the time it went out, B&B chief executive Phil Green had already moved to change his company's financial stucture to repair the chinks in its financial armour, although it was only announced afterwards. The note and an accompanying spreadsheet were titled "margin debt scenario", which focused on Babcock & Brown's alleged vulnerability to margin loans.

On March 7, Mr Green tried to reassure the market that the group was "comfortable" with its positions relating to the funds and had no need to sell its stakes in them and no intention of doing so.

As the stock kept falling, Mr Green tried something else: on March 10 he revealed that it had been systematically reducing its margin loan from $631 million since December 31, and to date had retired more than $250 million of short-term loans on its listed vehicles.

There is little doubt that the Lehman note added to fears in the market that Babcock stock was facing margin calls, particularly given that the March 3 spreadsheet, which is understood to have been accurate given the information that was then publicly available, showed that the loan to valuation ratio for the collateral on Babcock's margin loans had blown out from 57 per cent to 74 per cent since December 31.

The norm for margin loans is LVR of 70 per cent, the note said.

"If the value of the listed associates keep dropping, the LVR might continue to go up and when it is above 70 per cent, there will be increasing likelihood of a margin call."

The attached Excel spreadsheet listed 15 Babcock-related entities, including Babcock & Brown Power, Babcock & Brown Infrastructure, Jackgreen and Sydney Gas. It said: "Attached is an Excel file that highlights the calculations -- it is fluid, it will update from Bloomberg."

It concluded: "The bulls will argue Babcock doesn't have a problem. The bears will say if it was 57 per cent in December and 74 per cent now, then this is a worrying trend!"

The note and the Excel spreadsheet bases those LVR estimates on statements in B&B's latest financial accounts, which show the value of the listed associates at December 31, 2007, at $1.1 billion, and the margin loan at $631 million.

But as the market learned on March 10, B&B had been reducing its margin loan and so the $631 million figure was incorrect.

If the spreadsheet had included that information, the LVR would have been 45 per cent instead of the 74 per cent recorded on the excel spreadsheet. This 30 per cent differential kept the stocks well away from margin calls.

Responding to questions from The Australian last night, Mr Davenport said that among his hedge fund and fund manager clients,"everyone has been interested in the margin loan situation with various companies".

He said the note was "a way of clarifying the exact margin situation with this company".

Mr Davenport said he believed the problem for B&B was a "potential, not an imminent" risk because the company had "unrestricted cash and undrawn capacity that could be used to pay off the margin loan, which is what happened".

"Obviously this cash can be counted against any loan and I was aware this cash existed.

"Subsequently Babcock decided to use the cash plus get a new loan from Deutsche to pay off the margin loan.

"That is why I used Dec 31 and published accounts. It is the right thing to do when making such calculations."

He said that he had not seen any short selling in Babcock recently because "there has been no borrow available for over a month".

There are various ways to short sell stock but the most common one is to borrow shares from share custodians holding them on behalf of institutional investors.

 

CDO is abbrev for Collateralized Debt Obligation see  http://en.wikipedia.org/wiki/Collateralized_debt_obligation

The problem is that it is not isolated to CDO-based on US housing. The problem is that it is increasingly hard for the wholesalers to sell these type of paper - based on this type of math & packaging. The market makers are going for $2 per share.

CLO(Collaterized Loan Obligation.) is a type of CDO. Do your own research (google it!) - understand what you are buying. Do NOT take the word of the salesman(even if title is CEO) at face value. BBSF did not buy CDO/CLO paper backed by US home LOANs but last I looked there were ABS etc. Hence it is falling. Why did Northern Rock in UK sink? They were not in the US subprime mkt? Do you understand how northern rock collapsed? http://www.theaustralian.news.com.au/story/0,25197,23370961-643,00.html

The mkt maybe being too risk adverse and mis-pricing these... but that's a different problem.
Note their recent guidance on moving out of certain type of securities.
Note news from option trades show Lehman in facing potential issues. 

 

 If you have the share... take the time to truly understand if these fit you.

 

BBSFF yield is double that of some of the REITS !!

Too good to be true

Good for retirement

Don't sell if you make a loss

 

BBSF is short sold/sold by those banks/brokerages that are related to sub prime mess

That,s why the price drops from 93 cts to 60 cts

If you have the share - do not sell

This dividend alone will save your losses if you hold

 

Yep, that's what I understand as well:  they had clarified that they are not vested in CDOs. Still, with the weaker greenback and other factors, the are not immuned.  That's why the lower divvy guidance. It is of higher yield compared to many others though.

My investment in this counter has fallen by 1/3.  However, most counters are down by a fraction too. Look at SGX and YZJ, well, at least the divvy I got from BBRF is one consolation.  I am in BBRF for long term.

 

As far as i can understand....they are NOT vested in any CDOs as their mgmt had clarified last year but on CLOs. Though they're involve in mortgage loan in Australia/UK in certain % of the portfolio but not any in the US. But to be fair, still, they're not immune to the current credit crisis as they've stated during their Q result announcement, but its the risk investors will have to bear consider its attractive yield right now if materialize. 

 

they are vested in CDOs. The poison that sank Bear Stearns from $70 -> $2 almost overnight.

willing buyer... willing seller -> buyer beware. 

 

Since i posted it for MIIF......from Bloomberg.com.

Babcock & Brown Structured Finance Fund Ltd

Price0.610	Change-0.015	% Change-2.400	Bid0.610	Ask0.620	Open0.620
Volume298,000	High0.620	Low0.610	52-Wk High1.260(06/07/07)	52-Wk Low0.610(03/17/08)	1-Yr Return-34.028

Shares (Millions)389.416	Market Cap (Millions)237.544	Earnings0.179	Price/ Earnings3.402	Relative P/E0.335	ROEN.A.
Last Dividend Reported0.060 Final	Dividend Yield (Trailing 12mo.)18.410	Rel. Dividend Yield4.453	90-Day Volatility30.238	Beta vs. FSSTIN.A.

 

Thats right! Its a attractive yield counter(18% currently - trailing 12 mths) which I would consider even if its divs is reduce by half(not a good sign though). Will buy more in due course.


 

 

Thanks shplayer. Already holding BBRF at 96 cts. Yield is pretty atractive at current price. Still thinking of buying in more at below 60 cts. The divvy received on 14 March was good, well, at least feel good to the eyes, considering such market conditions.

Have a great day!

 

Fairygal,

Generally, share price movement due to external factors does not impact the business of the company.

I think for your investment analysis for this counter, Coy announcement of 10 Mar (posted by Farmer) would be a good guide. Also refer to the 'OUTLOOK' for FY 2008 in their FY07 presentation

http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_AC54C6395CCDB6CE482573FB00820C14/$file/FY2007Presentation_27208_final.pdf?openelement

where it reaffirms 1H08 divvy of 5.2c.

At this payout, total divvy to be paid is approx S$20m. If 2H divvy is say 6c, then total divvy payout for the year is approx S$43.5m.

Hope this helps with your decision.