every broker report rates this a but, com sec notes very much the same, as were 2 other brokers i can mention.
see today daily email from intersuisse as a fine example- ***link valid for today only **** 5th march http://www.intersuisse.com.au/files/Morning Notes.pdf
Babcock & Brown Infrastructure Group BBI Wednesday 5 March 2008 Debt profile long-dated and hedged – Opportunity from indiscriminate selling Recommendation: Buy for strong double digit yield
Investment Rationale BBI is a stapled security over a trust containing transport and energy infrastructure assets and the company which manages the trust. The stock´s cash yield is high; distributions are fully tax-deferred but reducethe investor's cost base for capital gains tax purposes. Distributions are likely to remain tax- deferred for at least two to three years. They are paid out of a reliable and diversified stream of operating cash flows from regulated infrastructure assets with stable market shares. The re are no distributions from revaluations, regearing, refinancing or restructuring. BBI is highly geared and we expect more capital raisings as further suitable infrastructure assets are found – Babcock & Brown has proven expertise in finding and negotiating income- generating assets. Rising bond yields would increase interest expense, although the effect is not strong. A high-yield albeit slow-growth investment.
The Result ($m) 1H07 1H08 % Chg Revenue 1,016.7 601.3 +69.1 EBITDA 319.7 251.6 +27.1 EBIT 178.0 163.6 +8.8 NPAT -14.6 -35.4 na EPS -0.7c -2.6c na Interim Tax-Def. Distribution 7.5c 7.0c +7.1
Event The interim distribution was tax-deferred and guidance remains for at least the 2H08 and FY09 distributions to be fully tax-deferred. There was no change to the guidance for full-year distributions of 15.0¢, implying a 2H08 distribution of 7.5¢, and for FY09 distributions of 16.0¢. The guidance assumes no material adverse change to key tax and regulatory environments, and completion of the expansion of Dalrymple Bay Coal Terminal in line with schedule. This looks well on track with the announcement yesterday that DBCT Phase 1 is complete. This increases capacity from 59Mtpa to 68Mtpa; Phase 2/3 should complete next year bringing this to 85Mtpa.
Impact After all the acquisitions, capital raisings, debt and fees, security holders will get only a one-cent increase in full-year distribution next year. The appetite for BNB to grow assets under management, including using its satellite funds such as BBI, ensures a sound growth pipeline but puts a li on growth per security. The recent sell-off in BBI securities, due to aversion to entities with a deb profile, is not justified. Just 10% of BBI’s total debt matures in the next 18 months. The debt predominantly backs regulated assets and assets whic have strong monopolistic cash flows. BBI has hedged 93% of its debt in the short term and 86% of its debt is hedged to December 2009.
Recommendation Impact If BBI delivers, by the end of FY09 it will have compounded the distribution by 6.5% pa since FY06 inclusive. The diversity of the quality portfolio gives stability and long-term income-seeking investors have an opportunity to lock in an excellent yield at current prices. Buy for a strong double digit yield.
Business Description Babcock & Brown Infrastructure (BBI) is a specialist infrastructure entity which holds and manages a diversified portfolio of assets. Primary investment strategy focuses on acquiring, managing and operating quality infrastructure assets in Australia and internationally. Some 50% of income is from Transport Infrastructure and 50% from Electricity Transmission & Distribution (mostly ex-Alinta). BBI is managed by Babcock & Brown Infrastructure Management Pty Limited (BBIM), a subsidiary of Babcock & Brown Limited (BNB), which holds an interest of 8.1% of BBI.
http://www.intersuisse.com.au/standard.asp?pg=48
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0417 GMT [Dow Jones] Babcock & Brown Infrastructure Group (BBI.AU) down 7.5% at A$1.05, despite positive news that first of its three-phase expansion of the Dalrymple Bay Coal Terminal has been completed, with analysts saying nothing to suggest there's problems with remaining ramp up planned by end of 2008. "There may be some stories going around that the stages 2 and 3 are delayed but we queried BBI around that and they said no, definitely not, it's all on target," said Matthew Spence, an infrastructure analyst at Merrill Lynch. Suggests more industrywide factors at play after Asciano Group (AIO.AU) warned Monday an economic slowdown may hurt its ports and rail business next year, with "cyclical names" such as AIO, off 17%, BBI, which is down 7.5% and Macquarie Airports (MAP.AU), down 5.7%, "the ones getting slammed today." (WEL)
BBI Price at posting:
0.0¢ Sentiment: Buy Disclosure: Not Held