CHI - Channel Infrastructure Ltd (NZR)

[Pumice]

I read it was most likely Mobil and Chevron (given thier combined %)

Should be good for the company in the LT though.

Also hold a few.

[scamper]

Quite a drop since the late April posts above when sp around 270--280, but now 230.
Is the div (c. 5.25%) good enough to happily hold?
Because I've held these for years and years, my profit is still terrific, but am beginning to feel I should be out.
However, I still feel this company is in a profitable long-term business, and is doing it well. Thoughts? Cheers.

[moimoi]

Scamper, do you think they can continue paying a dividend at the level you mention while doing the refinery upgrade?

I expect the dividend will reduce due to the large capital spend and i think the company may have even confirmed that at some stage recently.

And i am only guessing but I suspect that some of the holdings that were distributed to beneficiaries of Mr Gardiner's estate have been released onto market of late...

[crighton100]

Quite a drop since the late April posts above when sp around 270--280, but now 230.
Is the div (c. 5.25%) good enough to happily hold?
Because I've held these for years and years, my profit is still terrific, but am beginning to feel I should be out.
However, I still feel this company is in a profitable long-term business, and is doing it well. Thoughts? Cheers.

I sold all my shares in NZR when they dropped below $3 as I read that if the proposed up grade was approved [which it has] then the likelyhood of dividends in the next couple of years was negligable.It would appear that many people who rely on dividends as a source of income have taken heed & sold down their stake if you look at the downward trend in the stocks price.I think there is a good chance they will continue down in the short term,but as a long term investment,they will again rise.

[scamper]

Gosh! It's six months later and still looking shonky.
The independent review of processing fees looks fine -- will the people who sold down today be regretting the sale?
At this price, even the 4.55% divi looks not too bad.

[Pumice]

Gosh! It's six months later and still looking shonky.
The independent review of processing fees looks fine -- will the people who sold down today be regretting the sale?
At this price, even the 4.55% divi looks not too bad.

I read they dropped out of the NZX50?, so possible that institutional investors are dropping the stock.

Is NZR starting to look cheap?

[sharer]

I read they dropped out of the NZX50?, so possible that institutional investors are dropping the stock.
Is NZR starting to look cheap?

I'm thinking about it.
But we need to try guessing how the figures may look after completion of the current upgrade(s).
It can only be a guess & gamble, so resorting to TA to try guesstimate where the sp low might be.

[moimoi]

Nothing stopping AIRNZ building its own storage facilities.

IMO zero impact on NZR. (well done on bailing without hesitation tho Sparky :-) )

[Vaygor1]

I read they dropped out of the NZX50?, so possible that institutional investors are dropping the stock.

Is NZR starting to look cheap?

My advice (pun intended) is to leave well alone.

The formula for calculating refining margins is extremely complicated. So complicated in fact that it requires an entire panel of independent analysts to review it from time to time (really only to re-understand it in my view). It is this complexity in-part that makes NZR shares historically volatile with relatively significant components of it relying on the Singapore Standard and the USD/NZD exchange rate. By the way, the refining margin does have a floor and a cap otherwise volatile would be an understatement.

I bought NZR around May 2006 and sold all my holding around July 2007.
Made 23% total in capital gain with fully imputed dividends (equating to 19.7% per annum) and have not bought any since.

The reason for buying was two-fold:
1) At the time the world-wide bottle-neck on oil supply was refining capacity. There was no trouble getting enough crude out of the ground and a few huge mega-refineries that would really change the game (ie eliminate the bottle-neck) were still under construction. In the meantime, this mean't nice high refining margins.
2) NZR had completed its Future Fuels plant enabling it to (i) be one of the 1st in the world (honestly) to produce low sulphur diesel and low benzene petrol - ie short term monopoly - and (ii) accept lower cost high sulphur/sour crude oils - ie cheap 'raw material'.

The reasons for selling:
(1) The mega-refineries came on-line and the bottleneck shifted from refining-capacity to getting the stuff out of the ground.
(2) As required by global agreements, many other refineries completed their upgrades to produce low sulphur products (ie NZR lost its monopoly)
(3) NZR announced a change in its dividend policy to reduced dividends in the lead-up to, and during, large capital expenditure.
(4) NZR announced the go-ahead of the 'Point Forward' project (which required large capital expenditure).

I have 4 points to make:
1. In my humble view, world-wide refining capacity will never ever be the bottle-neck again.
2. In the oil biz, you need to know your stuff.
3. In the oil biz, you need time to keep a close eye on the world news and the business you invest in.
4. Since selling in 2007, I don't think NZR has stopped spending large amounts on capital, and if so, then not for long.

Volatility aside, it is points 1 & 4 above that prevent me from buying... but mainly point 1.

[sharer]

I'm also reluctant to invest in NZR at least until we see results & how things are going after completion of present major upgrade works. There will be plenty of time to recheck & reassess the situation, & nobody expects any rapid return to earlier high dividend yields.
Several good points made above by Vaygor1 seem valid to me.
The recent warning of (hypothetical) risks quoted by Sparky are also relevant in this respect.
As well, as i mentioned myself way back there somewhere on this thread, since we are inevitably looking at long time periods here, what happens when someone decides the time has come to justify building a new refinery some place else? (Taranaki region produces all our NZ oil so far commercialised, so must be something they review periodically. And if the long anticipated major discovery in the Great South Basin ever actually happens all bets will be off.)
Meanwhile, by investing in Z Energy bonds (Greenstone) we already have another significant indirect interest in the fortunes of NZR, so could argue that is another reason to avoid further direct investment at this time.
Looking even further out, i'm hoping to see opportunities arise in the small operators already quietly producing 'algal oil' below the radar