Channel Infrastructure NZ Limited

**Rawz** · 15-12-2023, 12:03 PM

Originally Posted by SailorRob

If you were thinking along those lines then you way too smart to use a stupid debt to equity rule.

The equity of the old refinery was one day x and another day y.

Your rule could have killed you.

The stated book value of equity means nothing.

Like you said above there a 66,000 or whatever companies out there for us to invest in. We all have our own screens. Maybe i miss some opportunities but cant be across everything and need to cut out a lot quick

**Bikeguy** · 15-12-2023, 12:05 PM

Originally Posted by SailorRob

Until this business actually exists as a terminal with normal CAPEX and not doing all this growth rubbish and the actual maintenance Capex can be seen and we know the costs of the old site (won't know this for a long time) so everything settles out and we can see steady state contractual earnings and normal expenses and we know then what the debt is and the cost of it etc etc we cannot price the equity.

Too many moving balls and we know how they always move - to the money incinerator.

Percy out of his mind buying the Wife shares of this dog.

Share price can do anything in the short term, for may years this traded at a premium while it lost money hidden by accounting practices that allowed a lot of things to be capitalised that were in fact losing money before they were even built, then boom all yer money is gone.

Thank you, appreciate you taking the time to share this information.

**SailorRob** · 15-12-2023, 12:11 PM

Originally Posted by Rawz

Like you said above there a 66,000 or whatever companies out there for us to invest in. We all have our own screens. Maybe i miss some opportunities but cant be across everything and need to cut out a lot quick

Yep fair enough but you'll cut out all the good stuff, and get all the rubbish. Opposite of what you trying for.

If investing was a simple as running a screener... well damn.

What you should be focused on is the technicalities of IFRS 16 and how that is skewing debt and throwing off returns on capital and equity and all sorts.

A good business that creates value will trade for multiples of book value - the equity is worth way more than the cost to build it. The debt may look large against the book equity.

The bad businesses will have loads of equity that has been misallocated and not correctly depreciated and debt against this origami fortress will look ok.

**SailorRob** · 15-12-2023, 12:12 PM

Originally Posted by Bikeguy

Thank you, appreciate you taking the time to share this information.

I am not making a prediction on the share price - could go much higher who knows. But over the long term the share price will follow the performance of the business and for this one the returns on the capital they are currently 'investing' is paramount.

**Bikeguy** · 15-12-2023, 12:16 PM

Originally Posted by SailorRob

Yep fair enough but you'll cut out all the good stuff, and get all the rubbish. Opposite of what you trying for.

If investing was a simple as running a screener... well damn.

What you should be focused on is the technicalities of IFRS 16 and how that is skewing debt and throwing off returns on capital and equity and all sorts.

A good business that creates value will trade for multiples of book value - the equity is worth way more than the cost to build it. The debt may look large against the book equity.

The bad businesses will have loads of equity that has been misallocated and not correctly depreciated and debt against this origami fortress will look ok.

I completely feel for all the investors who have been involved with this company long term, a lot of financial loss…
Simply buying in at the right time and enjoying the dividend return of a business that will plod along now it is simplified seems pretty fair too?

**SailorRob** · 15-12-2023, 12:19 PM

Originally Posted by Bikeguy

I completely feel for all the investors who have been involved with this company long term, a lot of financial loss…
Simply buying in at the right time and enjoying the dividend return of a business that will plod along now it is simplified seems pretty fair too?

If that dividend is paid out of cash earnings after all expenses have properly been accounted for and there are no surprise expenses in future.

Currently they are just borrowing to pay the dividend.

Why pay a dividend if you spending many multiples of that dividend on CAPEX?

Often dividends are a total illusion.

**SailorRob** · 15-12-2023, 12:22 PM

If you start a pie shop and it's making you 20k a year but you're spending 100k a year on pie making machines it's very hard to say what you're actually earning.

You need to be able to forecast what the earnings on the 100k worth of pie machines will be in future.

You need to be able to get that 100k back at some point.

Otherwise the wife might not be happy with the 20k you brought home but the 100k that's gone.

Accounting says that you haven't spent 100k on pie machines as this is capitalised and in fact you only spent 10k on the pie machine as it will last 10 years blah blah... but the reality is that you have.

Look for businesses where everything is expensed even though it is an asset that lasts a long time.

Choysa tea spent money on a chimpanzee advert in 1996 and expensed it that year, but that investment made a sale in 2023 (to me). Bought out by Unilever which I own.

Look for investment through the income statement.