forget about debt/equity ratio, this stock is all about cash flow.
when the tolls start to come in and go up each year by CPI (assume 3%) then interest rates will have to go up by 3% each year to see the real value of the asset decrease. this wont happen because in 4 yrs when they have to refinance the debt tolls would have gone up around 12%, so with base toll income of say $500m in 4 years it should be around $562m, on the other hand the int rate would need to be around 10% to be at a stand still. ie rates ould need to go up by 3% between then and now.
The RBA has forecast a slow down in growth by the end of the year, with most economies around the world easing monetary policy Australia is one of the few tightening. This suggest that in 3 years time the RBA will be cutting rates, hence the value of assets like CEU will move upwards.
For all those that think CEU is like CNP you need your head examined. Dont beleive everything you read because most are trying to sell something. CEU is an excellent asset and at these prices you can't really go wrong, the price might be a little weaker in the short term but take a 2-3 yr view and the whole market looks quite cheap.
The hedge funds will stop shorting once the US mess looks over, going buy the so called bailout of bond insurers that look like happening as of Friday night i suspect we might be at the tail end of the short selling and might even see a recovery rally once everyone works out the world isnt ending and good compaines can still get debt, which is basically what TCL said last week.
$2+ by the end of the year i think.
CEU Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
