CHI - Channel Infrastructure Ltd (NZR)

[SailorRob]

Was wondering the same thing today. Super profits would be my guess too: https://www.reuters.com/business/ene...es-2022-04-28/

Should'a, could'a, would'a.

(But they would only then blow it on the next "make work for the boys" scheme).

Correct, massive profits. However their fee was capped at a ceiling so couldn't have exposure to the full market margins we're currently seeing.

And correct they would just blow it again.

[Waikaka]

Been a real lesson with this one.

Bought in before Covid and had my teeth kicked in as demand for refined product plummeted.

Despite some reservations bought all through the Covid dip, capital raise and turmoil involved in the closure of the refinery operations. I do appreciate SailorRob throwing acid. Kept me on my toes as felt pretty lonely for a while in this particular gutter. Pretty much all out now with some modest gains. Seems fully priced for what income it can be expected to generate.

Particularly disappointed they closed the refinery. Cyclical businesses should never make critical decisions at the bottom of the cycle.

Weird thing is in my line of work if you mess up there are consequences. From your boss, peers or even subordinates. While not a fan of ad hominem criticism it is worth mentioning that by employing someone as CEO who was the head of strategy at Arrium, when that strategy drove the company bankrupt in 2016 negatively affecting their 10,000 workers, who has continued to push to have the refinery operation closed while playing down the possibility of current sky high refining margins. You would think perhaps an apology or recognition of the lost potential earnings that the shareholders now miss out on, the effect on local community and NZ balance of trade but I figure once you get high enough in the food chain it doesn't matter if you make a bad decision. Which is a shame for us all.

Pretty glad to out of it really. Strange cyclical business, boiling oil is clearly hard mahi and a thankless task that deserves more recognition and personally now is a time to have dry powder at the ready.

[SailorRob]

Been a real lesson with this one.

Bought in before Covid and had my teeth kicked in as demand for refined product plummeted.

Despite some reservations bought all through the Covid dip, capital raise and turmoil involved in the closure of the refinery operations. I do appreciate SailorRob throwing acid. Kept me on my toes as felt pretty lonely for a while in this particular gutter. Pretty much all out now with some modest gains. Seems fully priced for what income it can be expected to generate.

Particularly disappointed they closed the refinery. Cyclical businesses should never make critical decisions at the bottom of the cycle.

Weird thing is in my line of work if you mess up there are consequences. From your boss, peers or even subordinates. While not a fan of ad hominem criticism it is worth mentioning that by employing someone as CEO who was the head of strategy at Arrium, when that strategy drove the company bankrupt in 2016 negatively affecting their 10,000 workers, who has continued to push to have the refinery operation closed while playing down the possibility of current sky high refining margins. You would think perhaps an apology or recognition of the lost potential earnings that the shareholders now miss out on, the effect on local community and NZ balance of trade but I figure once you get high enough in the food chain it doesn't matter if you make a bad decision. Which is a shame for us all.

Pretty glad to out of it really. Strange cyclical business, boiling oil is clearly hard mahi and a thankless task that deserves more recognition and personally now is a time to have dry powder at the ready.

Incredible post Waikaka. Well done to you.

I agree about being fully priced regarding the income it can be expected to generate and taking the debt load into consideration and the cost of the eventual demolition which nobody is talking about but a HUGE liability. My employee grant shares cleared into my name post redundancy on the 31st May and I dropped them like a bad habit.

I still have slides from the presentation given by the big shot who was brought over from Australia, forecasting what margins going forward from Covid were going to be. I stated directly to the CEO 10 days ago that in order to correct the predictions made by this guy, I would have to print the slide with the prediction chart on a A3 piece of paper and then turn it the wrong way around, so as to give me enough room in the vertical direction to plot the difference between his prediction and current reality of the highest margins in recorded history.

What you say regarding recognition or apology is bang on the money, and is the strong feeling from the workforce. It's not going to happen... But where are the shareholders? They should be demanding it. Why are the shareholders not asking why in 2013/14 they were sold the expansion project for $365 million, all the fancy bloody advisors and consultants telling us what a great idea... Now that investment has been turned to dust in a very short space of time. ZERO consequences ZERO accountability.

The CEO is a lawyer and in my opinion was specifically brought in to get the Refinery shutdown. The decision was made before Covid. As I've said to her, she could not have done a better job if her job was to shut down the Refinery and get the terminal up and running.

It's been a good run for me. I started there in 2003 and am now on the decommissioning team until early next year but am redundant from my old job. The company has treated us as well as you could hope for under the circumstances. But everything you said is on the money. Nobody from management or the board has had skin in the game the entire time I've been there. Look at who took up, or more to the point didn't... the latest rights offer or whatever it was to staff below market price. 15k and the top man can't take it up? If I was the CEO then I'd be saying well if you can't stump up 15k to invest in the company you are running, we have a big problem.

Well done Waikaka and I appreciate your acknowledgement of my acid throwing, I wish I had it thrown on me with all my investments as the most important thing is to be told the downside or why you might be wrong as we can all see the things we like or we wouldn't be invested.

Cheers mate.

[Muse]

Been a real lesson with this one.

Bought in before Covid and had my teeth kicked in as demand for refined product plummeted.

Despite some reservations bought all through the Covid dip, capital raise and turmoil involved in the closure of the refinery operations. I do appreciate SailorRob throwing acid. Kept me on my toes as felt pretty lonely for a while in this particular gutter. Pretty much all out now with some modest gains. Seems fully priced for what income it can be expected to generate.

Particularly disappointed they closed the refinery. Cyclical businesses should never make critical decisions at the bottom of the cycle.

Weird thing is in my line of work if you mess up there are consequences. From your boss, peers or even subordinates. While not a fan of ad hominem criticism it is worth mentioning that by employing someone as CEO who was the head of strategy at Arrium, when that strategy drove the company bankrupt in 2016 negatively affecting their 10,000 workers, who has continued to push to have the refinery operation closed while playing down the possibility of current sky high refining margins. You would think perhaps an apology or recognition of the lost potential earnings that the shareholders now miss out on, the effect on local community and NZ balance of trade but I figure once you get high enough in the food chain it doesn't matter if you make a bad decision. Which is a shame for us all.

Pretty glad to out of it really. Strange cyclical business, boiling oil is clearly hard mahi and a thankless task that deserves more recognition and personally now is a time to have dry powder at the ready.

agree with Sailor Rob - this is an *outstanding* post...one for filing away...
"Cyclical businesses should never make critical decisions at the bottom of the cycle" - gold
and the lack of accountability too

[SailorRob]

What the hell is going on with this company's share price??

There are now 373 million shares on issue... so with recent trading around the $1.20 mark, this is an equity value of 450 million dollars!

Revenue is going to be 100 million... so that's nearly 5 times REVENUE. What in the hell are people thinking? This is one of the most expensive companies in the world before we even get into margins or capital structure. Let alone PROFIT which I cannot find any information about in the 162 page Terminal document...

Facebook is trading at 3.7 x times sales for god's sake, with 3 billion daily users and profitability and growth that you need to see to believe.

So do people think margins on this dog are going to be near double Facebook at 50% or something? As a 50% margin on 100 million of revenue would give you 10x earnings on a highly levered capital structure. wouldn't excite me, and that would have margins far far higher than any Fuel terminal Business in the world. I don't think so.

Before this latest bond issue, net debt was around 200 million - they say then will pay some down with the bond issue but how much? And then how will the massive staff redundancy cost be paid as well as the 200 to 250 million that's getting spent over 5 to 6 years on the conversion and then 50 million (YEAH RIGHT) for future demolition? Where is all this cash coming from, oh wait I know, the 200 million extra debt they can take on through pre approved lending facilities.

Let's call it 450 million, that's an invested capital base of 900 million now... and 100 million in Revenue is gonna feed that beast adequately with rising rate expectations all the time? Wowzer. OK.


So after the conversion is complete we have (if all goes according to plan which with this lot it NEVER does) we have interest expenses on 450 million, latest bond issue already 5.8%, let's say 6% average across it all - that's nearly 30 million in interest. They say 35 million OPEX (will be more) so 100 minus 35 minus 30 is 35 left. Now for CAPEX, they said 5 to 10, well hell which one is it? Now it's up to 12. Depreciation is 15 so let's call it that... we got 20 million left. But we haven't paid down any debt yet or any tax (which supposedly there won't be any for a while) But let's go with 20. Doesn't seem much now does it.

So, tell me why the management, who have seen ALL the financial detail of how this little scheme is going to be conducted and are party to all the intricacies of the contracts as well as everything else than we may not be... Why haven't they participated in the Equity raise below market level, why have they bought no bonds? Lord knows we're paying them enough to invest just a little 15k, no?


Some of my workmates who received shares as compensation are clutching onto them like a first born child. These are the lads who watched this company look them in the eye (like a dog can look you in the eye while it takes a dump on your carpet) and tell them that the $365 million CCR project was a great idea. It was turned to dust in 5 years flat. These guys have seen cost blowouts and the effects of the worst management in corporate New Zealand history make screw up after screw up for decades. They could sell this junk now and buy any one of hundreds of world class companies that are currently on sale throughout the world... I watched one put a sell order in at $1.22 when the bid was $1.21 and I kept my mouth shut which is exceedingly difficult for me, but I was thinking damn SMASH that bid as fast as you can.. like break that god damned mouse.


It seems to me the price is trading up due to the oil price and high pump price - punters must think that it's good for the company?


Hell I can't predict what the share price will do as I cannot predict people's stupidity but I sure can tell you what this mutt is worth.

[Maxtrade]

What the hell is going on with this company's share price??

There are now 373 million shares on issue... so with recent trading around the $1.20 mark, this is an equity value of 450 million dollars!

Revenue is going to be 100 million... so that's nearly 5 times REVENUE. What in the hell are people thinking? This is one of the most expensive companies in the world before we even get into margins or capital structure. Let alone PROFIT which I cannot find any information about in the 162 page Terminal document...

Facebook is trading at 3.7 x times sales for god's sake, with 3 billion daily users and profitability and growth that you need to see to believe.

So do people think margins on this dog are going to be near double Facebook at 50% or something? As a 50% margin on 100 million of revenue would give you 10x earnings on a highly levered capital structure. wouldn't excite me, and that would have margins far far higher than any Fuel terminal Business in the world. I don't think so.

Before this latest bond issue, net debt was around 200 million - they say then will pay some down with the bond issue but how much? And then how will the massive staff redundancy cost be paid as well as the 200 to 250 million that's getting spent over 5 to 6 years on the conversion and then 50 million (YEAH RIGHT) for future demolition? Where is all this cash coming from, oh wait I know, the 200 million extra debt they can take on through pre approved lending facilities.

Let's call it 450 million, that's an invested capital base of 900 million now... and 100 million in Revenue is gonna feed that beast adequately with rising rate expectations all the time? Wowzer. OK.


So after the conversion is complete we have (if all goes according to plan which with this lot it NEVER does) we have interest expenses on 450 million, latest bond issue already 5.8%, let's say 6% average across it all - that's nearly 30 million in interest. They say 35 million OPEX (will be more) so 100 minus 35 minus 30 is 35 left. Now for CAPEX, they said 5 to 10, well hell which one is it? Now it's up to 12. Depreciation is 15 so let's call it that... we got 20 million left. But we haven't paid down any debt yet or any tax (which supposedly there won't be any for a while) But let's go with 20. Doesn't seem much now does it.

So, tell me why the management, who have seen ALL the financial detail of how this little scheme is going to be conducted and are party to all the intricacies of the contracts as well as everything else than we may not be... Why haven't they participated in the Equity raise below market level, why have they bought no bonds? Lord knows we're paying them enough to invest just a little 15k, no?


Some of my workmates who received shares as compensation are clutching onto them like a first born child. These are the lads who watched this company look them in the eye (like a dog can look you in the eye while it takes a dump on your carpet) and tell them that the $365 million CCR project was a great idea. It was turned to dust in 5 years flat. These guys have seen cost blowouts and the effects of the worst management in corporate New Zealand history make screw up after screw up for decades. They could sell this junk now and buy any one of hundreds of world class companies that are currently on sale throughout the world... I watched one put a sell order in at $1.22 when the bid was $1.21 and I kept my mouth shut which is exceedingly difficult for me, but I was thinking damn SMASH that bid as fast as you can.. like break that god damned mouse.


It seems to me the price is trading up due to the oil price and high pump price - punters must think that it's good for the company?


Hell I can't predict what the share price will do as I cannot predict people's stupidity but I sure can tell you what this mutt is worth.

You hit the nail on the head. 100% agree with your perception. Punters are incorrectly correlating higher barrel and pump prices to think that means the company will make more profits, which is a mistaken assumption. There seems to be a bit of a bounce from lows, FOMO watching the SP going up so following like sheep buying in to not miss out. However fundamentally that is a poor decision. Likely to see on the first publicised negative news in relation to the company a rapid retracement again in the share price. As you have stated 5 x revenue, lacking profits, oil industry facing overall massive challenges ahead with climate hurdles etc. Seems like many have just been gambling hoping others are seeing a recovery in SP off the lows. But no real reason it should be or that SP has 'recovered' 150% in the last year! In it's own bubble likely to pop any time this year. Staying completely clear of! As soon as punters start selling and are happy to take their huge profits off recent years rally from 0.4's to 1.2, SP could very quickly fall sharply. Don't get caught snoozing on this one. Have stop losses set for sure! And as they trigger, house of cards.

[Maxtrade]

punters seem to be gambling rather than investing these days. FOMO seeing a recovering SP bounce off its lows. Following like sheep to not miss out. 150% rally off previous lows in last year! They cant see the sector and company still has huge issues and stock has been over bought. 5 x revenue with the hurdles oil faces with climate and restrictions, no thanks. Profitability!?? Higher barrel and pump prices don't mean the company is all of a sudden profitable. Foolish 'investing'. When profits start getting taken off the table, house of cards in the works. Definitely have your stop loss set for this one. Because when she drops, will be sharp.

[Sideshow Bob]

"A Sustainable Future".....

Investor presentation (nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com)

[golden city]

Great update. With dividends comming soon and very good cashflow with no tax for nine years

[SailorRob]

"A Sustainable Future".....

Investor presentation (nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com)

Yeah... So going to average 105 mil revenue and will max out the credit card at 375 mil. Each will likely be worse but at face value..

105 mil to service 800 million enterprise value.

Good luck.