CHI - Channel Infrastructure Ltd (NZR)

[craic]

Having owned these for a number of years, I have no doubt that the dividend is of limited importance to the majority of shareholders who are, after all, the major oil companies.They allow about 25% of the shares to rest in the public arena. Their dividend comes straight from your pocket through the pumps.

[grumpy]

I agree craig,
but those major shareholders are also not in the market
to buy or sell shares - so they do not determine the
shareprice. OTOH, the oil companies might have an
interest in the 'processing fee cap' which could
limit earnings for NZR.
What are your thoughs on that?
Grumpy

[craic]

If you look at the board you will see that the four oil companies are in complete control.

[Happy Camper]

This Happy Camper wishes that he had set his stop-loss at $8.00 now. To think that both of my theoretical stop-losses would have been taken out on Thursday.

I am still happy to be holding NZR.

To my mind the fact that the gross dividend represents only about 42% of NPAT suggests that the capital expenditure that has yet to be signed off early next year is all but a foregone conclusion.

And for a long-term holder, that isn't a bad thing at all.

Cheers

[gamerice]

quote:Originally posted by Happy Camper

This Happy Camper wishes that he had set his stop-loss at $8.00 now. To think that both of my theoretical stop-losses would have been taken out on Thursday.

Hehe, welcome to the world of share-trading, u got greedy there.[]

[Happy Camper]

Possibly I did gamerice. Possibly I did.

I was more intrigued that two theoretical stop-losses could be taken out on the same day. I can honestly say though that had my $8.00 stop-loss been in existence, I would already be back in this share.

I believe the sell-down was an over-reaction. The fact that the margins are easing suggests that the cap will not come into consideration. having said that the closer they can get to the cap without breaching it, the better.

Cheers

[grumpy]

Hi,
what do you know about the cap? Does it get
renegotiated every year? Is it automatically
readjusted every year?? Or fixed in place???

It would seem im the current situation that
the cap puts also a cap on earnings...

[Chris]

Hi Grumpy,
The Cap is part of the origonal processing fee agreement... it has 2 sides to it. The first side is something called the "Floor". This is the minimum amount of money that the customers will pay the refinery. The last time from memory that the floor was excercised was back in 1999 (I think) when margins were bad. The cap is the other dise of the coin, kind of a trade off to say that the oil coys will guarantee a fixed income but if prices go too crazy then they can be capped.

As far as I know, the floor is adjusted each year for inflation and increased capacity.
It appears that the cap however is not.

That aside, 36m bbl at $9usd bbl will still give you a revenue stream of roughly $360m NZD.... Then add the pipeline etc on top of that the revenue should be close to $400m..

This share has typically been a high yeilding dividend play share, I feel that now they are not paying out the 100% in dividends that they used to the money managers may re rate the stock a bit.

Cheers
Chris

[Placebo]

It seems to me that having a ceiling set in dollar terms only is self-limiting. As the price per barrel rises, doesn't a $9USD margin per barrel become less in percentage terms?

Surely this ceiling on the margin must go!

[Chris]

its all part of the processing agreement. The main purpose of the processing agreement is to keep the refinery fully utilised.

At the moment margins are good, and may be good for a couple of years yet, however, NZR has a minimal impact on the margins. The oil cos choose the feedstock etc and although we would like to think it, NZR dosnt affect the price of oil that much.

I think as shareholders, we were all thankfull when the floor was activated back in 1999 too... The major thing that NZR controls is its availability... thats was it does well... They cant turn off the plant when the margins turn negative, its simply not that easy.

Chris