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Babcock & Brown SFF

Comparison for Trust and Funds

			BB Code		FYE	Price	DPS	DPS	Yield	Yield

							Current	Forward	Current	Forward

Business Trusts

Babcock & Brown SFF  BABB SP      	Dec 	0.87	10.2 	10.5 	11.7% 	12.1%

Cityspring 		CITY SP 	Mar 	0.99 	6.0 	6.8 * 	6.1% 	6.9%

MIIF 			MIIF SP 	Dec 	1.05 	8.4 	8.4 	8.0% 	8.0%

SP Ausnet 		SPN SP 		Mar 	1.66 	14.0^ 	14.2^ 	8.4% 	8.5%

Shipping Trusts

First Ship (US$) 	FSLT SP 	Dec 	0.86 	6.6 	8.5 	10.2% 	9.9%

Pacific Shipping Trust (US$) PST SP 	Dec 	0.42 	4.2 	4.2 	10.0% 	10.0%

Rickmers Maritime 	RMT SP 		Dec 	1.56 	8.6 	13.1 	8.3% 	8.4%

Average - Business Trust 						8.5% 	8.8%

Average - Shipping Trust 						9.5% 	9.4%

Average 8.9% 9.1%

Current yield for First Ship and Rickmers are annualised

 

Risks to portfolio are well managed and within tolerance levels. BBSFF has no investments in the US subprime market. All its investment shave performed to expectations. Sensitivity to interest rate is managed via the following (a) organic hedging which preserves margin eg Ancora Investment series; (b) fixed rate investments eg North America Biofuels Loan Facility; and (c) equity investments with contracted incomes, combined with fixed rate debt such as BBAL No 2. It is estimated that a 50bps change in interest rates will result in a change in distribution of less than S$0.25m for any 6-month period.

TP S$1.20. We have pegged BBSFF?s target price at S$1.20. This translates to a target yield of 8.5%, which stands at a 330 bps spread based on the blended risk free rates of the location of its assets.

 

Sorry for the bad alignment.

DBS Vickers - High yield underpinned by firm guidance for FY07/FY08

No exposure to US sub-prime market, exposure is only to the much lower risk UK and Australia non-conforming mortgage market.

Dividend Guidance.

For FY08, DPU guidance is at least 10.2Scts, of which 90% has been hedged into S$. Management is confident that it will be able to pay out this amount at least as 76% of the dividend is contracted for already.

Capital recycling. Management is looking to monetize its investment in JET-I equity and JET-I CDS which should result in capital gains given that aircraft prices have been rising and the portfolio was acquired at 87% of value. Other investments being considered are further investments in BBRNA, aircraft, and music assets.DPU for FY07 is confirmed to be at least 10.2Scts - 1H07 dividend declared was 5.23Scts; made up of 4.7Scts for 1H07 and 0.53Scts for date of listing to end Dec 06. 2H dividend of at least 5.5 cts is 100% hedged. 2H dividend is higher HoH by 5% as distributions from new investments made in 1H will start to contribute.As a percentage of the total portfolio, exposure to the Australian non-conforming mortgage market is 18% whilst exposure to UK is 4%. Our opinion is that the risk is low: (a) The portfolio's loan to value ratio stood at 76% for UK and 73.3% for Australia as at the end of 2006. For comparison, for the US sub-prime mortgage market, the loan to value ratio stood at 85% at the end of 2006 and the risk is heightened as 29% of loans had a loan to value ratio of close to 100%. (b) Over the last 12 months, property prices have risen in both UK (10%) and Australia (9.2%) while there was a decline of around 3% in the US. (c) There is an added cushion for BBSFF?s portfolio that is exposed to Australia as these mortgages originated before 2003 and home prices have risen substantially since then.

 

DBS Vickers

No exposure to US sub-prime market, exposure is only to the much lower risk UK and Australia non-conforming mortgage market.

Dividend Guidance.

For FY08, DPU guidance is at least 10.2Scts, of which 90% has been hedged into S$. Management is confident that it will be able to pay out this amount at least as 76% of the dividend is contracted for already.

Capital recycling. Management is looking to monetize its investment in JET-I equity and JET-I CDS which should result in capital gains given that aircraft prices have been rising and the portfolio was acquired at 87% of value. Other investments being considered are further investments in BBRNA, aircraft, and music assets.DPU for FY07 is confirmed to be at least 10.2Scts - 1H07 dividend declared was 5.23Scts; made up of 4.7Scts for 1H07 and 0.53Scts for date of listing to end Dec 06. 2H dividend of at least 5.5 cts is 100% hedged. 2H dividend is higher HoH by 5% as distributions from new investments made in 1H will start to contribute.As a percentage of the total portfolio, exposure to the Australian non-conforming mortgage market is 18% whilst exposure to UK is 4%. Our opinion is that the risk is low: (a) The portfolio's loan to value ratio stood at 76% for UK and 73.3% for Australia as at the end of 2006. For comparison, for the US sub-prime mortgage market, the loan to value ratio stood at 85% at the end of 2006 and the risk is heightened as 29% of loans had a loan to value ratio of close to 100%. (b) Over the last 12 months, property prices have risen in both UK (10%) and Australia (9.2%) while there was a decline of around 3% in the US. (c) There is an added cushion for BBSFF?s portfolio that is exposed to Australia as these mortgages originated before 2003 and home prices have risen substantially since then.

 

Thanks gentlemen, I think I can understand a horse better than this one.

 

My philosophy is only invest in something you understand else stay away from it cuz you might get burned without knowing why. It is juz like play BlackJack 21. If you dunno the rules you still wanna open position and play and hope the croupier gives you monies when open up your cards?

 

Hi farmer. If you wish to know about this company, reading research reports from brokerage firms might help. Phillips had one a month ago which is quite in depth. Recently, the company had announce its financial  statement so Phillips did a follow up and DBS wrote one too. But they are hard to find. OCBC has one in July which is available on their website. Also, read their annual reports might help too. I glimpse through these report. I still don't understand how it work. All know is they get most of their money from leases and loans. Loans only account some 30% of their portfolio and the management continuously said they have no exposure of US sub-prime, still their price fall like mad. I don't know why. If you do trade online, you can take a look of their trades and sometimes you could see in a split second someone dump it in hundred of lots. I don't know why. I think it's very oversold. But before you jump in, research it, study it, ponder it and decide.

 

Look mainly at the NTA and NAV.

EPS, PE, gearing ratio are not the right indicator.

They pay dividends mainly from the payment they receive from their assets, or in lesser extend the copyright of the musics (this incurred amortisation loss over the course).

You can go to SGX website, look at their last financial report presentation that gave detail breakdown of their holding and business.

 

Morning and thanks for your reply Pinnacle and Tiandi! 

Can you understand those instruments that this fund is holding currently? It seems that the dividends declared was higher than its EPS and will remain even going forward. Can kindly share more info?

 

Farmer, BBSFF is a Aust Fund.

Macq bank, largest commer bank in Aust was hit by CDO, hence causing panic in investor in BBSFF.

BBSFF had reported that they are not vested in CDO, only CLO, hence not affected. But sentiment causing the share to be oversold.

I done a bargain buy too during this period.

 

Farmer, there is a saying : if you do not know what is this product, then do not invest in it. There are many other opportunities on other counters that suit your style. Just a thot for you. Good luck.

 

 

Why BBSFF with such a high dividend yield(>10%) is trading at 88.5cts? At current price, is it not under value and looks very attractive?


Well, after going thru informations about the fund, it seems too complicated for a layman like me to understand what it's holdings and implications which may arrive under the current market conditions. Maybe I'm not a sophisticated investor or simply b'cos the sort of asset class it is holding are new to me.

Something I dun understand fully, I will avoid. Is there anyone who can explain it to me better? 

 

DBS Vickers

Babcock & Brown Structured Finance Fund: High yield underpinned by firm guidance for FY07/FY08

BUY S$0.87 BABB SP; Price Target : 12-Month S$ 1.20

Story: Babcock and Brown Structured Finance Fund (BBSFF) offers the highest yields amongst funds and business trusts listed on the SGX. Management reaffirmed its dividend guidance for FY07 at 10.2Scts and guided that FY08 DPU would be at least 10.2Scts as well.

Point: Even with the volatility in the stock markets, management is able to reaffirm its dividend guidance as 76% of its income is contracted for and it does not have any exposure to the US-sub prime market, a segment that it made a conscious decision to avoid.

Relevance: The recent sell down provides investors an opportunity to gain exposure to a high yielding stock, which offers a yield of 11.7% in FY07 and 12.1% in FY08. Maintain Buy, TP S$1.20.

 

Posted: Tue Aug 14, 2007 10:43 am    Post subject:
As anticipated that its dividend payout is greater than income and its share dilution to pay manager, its NAV drop by 1 cents. In this Q2 report, its tangible NAV was removed, which was reported as 75c in Q1 report. I don't know the reason why they removed the tangible NAV. The intangible music copyright bears accumulated impairment losses due to amortisation. Its interest-bearing borrowing raised huge to 251M from 127M one year ago. Rental income drops from 1.5M (Q1'07) to 1.4M (Q2'07). Guarantee income drops from 1.3M (Q1'07) to 1.0M (Q2'07). Again, forex gain increases from 1.8M to 5.3M, but EUR/SGD and AUD/SGD may drop and this forex gain may be removed. Extracted from a posting in CNA Forum

 

Hi Pinnacle, I thought the purchase of Alinta by Singapore Power and Babcock & Brown would contribute more positively to the B&B holding company. Would this have any positive effect on BBSF? Apart from the preceding question, i agree with your prognosis on BBSF's potential and am most impressed with the company's investor relations arm. Managed to pick up a few of these babies for the long haul.

 

I had it with this stock. Sold off at a loss. Hurts. I am very impatient now. I hold on to a stock for two and half years. Its really bad memory. 

 

Shareholders of Australian energy infrastructure group Alinta Ltd. approved on Wednesday a $6.9 billion takeover offer by a consortium led by investment firm Babcock & Brown .

Perth-based Alinta said 88 percent of shareholders voted in favour of the break-up and sale of the utility's assets to a consortium of Babcock and state-owned Singapore Power Ltd, which values Alinta at $16.46 a share on a cash and scrip basis.

Alinta spokesman Tony Robertson said the company will be delisted on Friday after a court ruling approves the deal.

The takeover of Alinta, Australia's largest energy infrastructure firm, had sprung out of a controversial management buyout proposal in January, and shareholders' approval of the deal would mark an end to a long-drawn out takeover tussle between the Babcock-led consortium and Macquarie Bank .

Babcock and Singapore Power plan to carve up Alinta's assets and redistribute them within its businesses. Alinta's portfolio includes a stable of gas transmission pipelines across Australia as well as an asset management business.

The deal would catapult Babcock to become Australia's largest infrastructure group.

Australian utility SP Ausnet , which is 51 percent-owned by Singapore Power, will be also given an option to buy some of Alinta's assets.

 

Phillip Securities Research - BUY

TP - $1.40

The Manager of BBSFF reiterated that the investment portfolio has no exposure to US subprime and confirmed once again the dividend outlook of at least 5.50 Singapore cents for the second half of 2007. For greater transparency, BBSFF has released a breakdown of the cash economic income by asset type. All of the asset classes have performed in-line or better than expectations and there is no asset impairment on its portfolio.

1HFY07.

Attractive yield. BBSFF currently trades at an attractive yield of 10.6%. In addition to the re-affirmation of FY07 dividend payout, the Manager has released a dividend guidance for FY08 of at least 10.20 Singapore cents. 90% of these has been hedged into Singapore dollars. BBSFF is confident of achieving the dividend guidance as revenue from the underlying assets are stable and at least 76% are contracted revenue.

Upcoming transactions. The Manager will be looking to increase its investment in each of the three target asset classes. Specifically BBSFF will be looking to add to its portfolio additional investment in rollingstocks and music copyright assets. Likely divestment of its stake in JET-i will be in the later part of the year.

Valuation. Share price of BBSFF has taken a hit recently reaching a low of $0.90. In a recent announcement, BBSFF had highlighted it has no exposure to the US subprime market and reiterated that point in the results brief. In addition, the Manager has released a FY08 dividend guidance and for greater transparency, disclosed the cash economic income of each investment. We feel that this is a good move to re-assure investors of the stable underlying income which is on course to achieve the projected values. We do not feel that the current economic conditions have any adverse impact on BBSFF and at this point in time, we maintain our initial earnings forecast and fair value at $1.40, which is priced at a slight premium to our DCF model of $1.36 to reflect an acquisition premium. At the current price of $0.96, BBSFF offers a very attractive yield of 10.6% and we recommend a BUY on the counter.BBSFF reported total revenue for the first half of 2007 at US$36.0 million. On a QoQ comparison with 1QFY07, second quarter revenue grew 47% and PAT grew 30% mainly due to contributions from the new investments since IPO. Among the new investments are music copyrights, additional investment in railcars as well as securitised assets. Excluding the effect of foreign exchange gain, revenue for the half year stands at US$28.8 million.

 

The sale of Alinta Ltd. (AAN.AU) to a consortium led by Babcock & Brown Ltd. (BNB.AU) and Singapore Power took another step forward Monday with the competition regulator giving the deal the green light.

The Australian Competition and Consumer Commission said it will not oppose the deal after receiving court enforceable undertakings from the bid partners.

The ACCC said the undertakings include the sale of Alinta's 35% stake in APA Group (APA.AU) and operating contracts for two pipelines to prevent the aggregation of interests in competing gas pipelines in New South Wales and Western Australia.

Alinta shareholders are due to vote on the sale in Perth on Wednesday

 

Just read its asset review,any views on asset value impairment going forward, remember reading somewhere Europe also has its very own subprime issues, wonder will this affect the portfolio of its loans as some are classified as BB or BBB,not prime.Have not bought any Reits or Trust yet as all these are new instruments,most are not tested yet in a recession.So just getting a feel.