CHI - Channel Infrastructure Ltd (NZR)

[Waikaka]

Not a huge fan of subsidies but interesting the Aussie govt is proposing a 1.15c per litre bonus payment for locally processed fuel. Trying to keep their last old refineries alive for energy security reasons.

At Marsden's reduced 90,000bbls a day that would be maybe ~$6 million a year. However no hope of that with the current bunch in charge though.

[Getty]

Great posts Sailor Rob.
Thankyou for the effort & time put in to share wise insight.

Like many Kiwi's, I used to take pride in seeing things such as NZR enabling NZ's 'independence', but it took a dose of Rogernomics to expose such things as being economic illusions and disasters.

Like many, I also have profited by trading NZR, up until the last one, where I lost.
The tide was going out, but your analysis shows it was never really in to start with.

[SailorRob]

Thanks Waikaka and Getty, appreciate the feedback.

I've been harsh on the NZR bulls that's for sure but just calling what I see. I still work there, so for me this has all be too real watching a slow moving train wreck over the years.

From here any free cash flow would just go to the terminal project and reducing debt (both could reward shareholders yes) but man to generate any would be a miracle, the capital that has to be put back into the business is just phenomenal and we're falling further and further behind in maintenance which would have to be caught up on. Any free cash flow would just be in a non shutdown year and then get spent as soon as the next shutdown came along, so just an illusion .

Getty - The tide was going out, but your analysis shows it was never really in to start with. That pretty much nails it. I will say though that it didn't need to be a disaster or economic illusion, had the business been run properly over the last 10 years we would survive this no problems. That said it would still be a very tough business.

I think this piece on capital allocation sums up the issues I have seen play out with my own eyes - very useful insight.

The management of every company has two basic roles: to run the company and to allocate the capital that it earns. The first task is obvious, but the second one is frequently overlooked by both investors and managements. Managements generally tend to be better at managing companies than allocating capital. These are two completely distinct functions and require different skill sets. A large part of top corporate managers reached their lofty positions by working their way up from lower positions or by specialising in specific fields. Therefore, these people tend to be experts in the fields within which the company does business rather than in capital allocation. It is very typical, therefore, to see managements that run companies well but allocate capital poorly.

The Jetty and Pipeline are incredible assets but there are just so many moving balls here it's dizzying. IMHO impossible to predict how it will all work out. As I have said the share price could be back over $1 or higher in a heartbeat but that's just outright speculation.

Waikaka as I've said I love my cigar butts as much as you do but I just don't think this is one. The coiners of the phrase wouldn't touch it. If you want a real cigar butt again check out ARLP, up 85% since I posted about it in October and still cheaper than cheap. They did a quarter of their market cap in free cash flow in the last 3 Months. Never had a negative cashflow in their history.

Looking like will go to shareholder vote around March for the Terminal and Front End Engineering Design underway now. Apparently all the stakeholders are miles apart in negotiations.

[bull....]

pretty hard case z and the other major oil companies are not happy about paying floor fees for long , they dont mind the opposite end though of taking the extra margin above the processing fee top limit though llol that dude who protested against the processing agreement for years at the agm's might had some merit after all eh

[SailorRob]

pretty hard case z and the other major oil companies are not happy about paying floor fees for long , they dont mind the opposite end though of taking the extra margin above the processing fee top limit though llol that dude who protested against the processing agreement for years at the agm's might had some merit after all eh

Bryan Halliwell. Legendary dude.

[SailorRob]

NZR bulls been awfully quiet... What's going on?

[Waikaka]

Probably just me on the bull side.

I gave into my weakness for horrible stocks and had a modest top up around mid Jan.

MRKT cap is down to $142 million, $230 million in debt which at least hasn't got worse, significant assets is what keeps tempting me, even though at this point it is a one way relationship. I am down 55.6% since my first pre-covid purchase.

My most hopeful case is that they keep the refinery trucking long enough for the margins to improve so they can get a few more puffs of this gutter butt and then eventually decommission at the next large capex/opex spend.

Seems like they are foreshadowing that in Feb they will announce the change to an import terminal but happy to ride it through.

In November/December they brought in NZ$ 24.6 million in processing revenue but ~14% of that was fee floor top ups so not that surprising the oil company shareholders are not happy.

[bull....]

need to consider the assets will need to be severely impaired if they go to an import terminal

[SailorRob]

Probably just me on the bull side.

I gave into my weakness for horrible stocks and had a modest top up around mid Jan.

MRKT cap is down to $142 million, $230 million in debt which at least hasn't got worse, significant assets is what keeps tempting me, even though at this point it is a one way relationship. I am down 55.6% since my first pre-covid purchase.

My most hopeful case is that they keep the refinery trucking long enough for the margins to improve so they can get a few more puffs of this gutter butt and then eventually decommission at the next large capex/opex spend.

Seems like they are foreshadowing that in Feb they will announce the change to an import terminal but happy to ride it through.

In November/December they brought in NZ$ 24.6 million in processing revenue but ~14% of that was fee floor top ups so not that surprising the oil company shareholders are not happy.

Great to provide brutal honesty Waikaka.

Not convinced on hope being a good investment case however. Extremely unlikely they will invest money into the big 2022 shutdown so that's the line in the sand for me.

Too many moving balls - jetty and pipe great assets but nobody knows what the future contract will look like.

Hopefully you had a look at some of the 'gutter stocks' I pointed out last year on this thread. ARLP in October up around 140% and still one of cheapest companies in the world. Free cash flow of 280 million 2020 against a current market cap of 800. And STU which I've been beating the drum hard on since it was in the 50's.

I'd still consider borrowing your NZR shares off you at 5%.

[Waikaka]

No point being shy about the hits. Too many people talk a good game about buying at all time lows once the rebound has happened but never state positions as they buy them.

Regarding NZR I have long boring timeframes so happy to hold through the changes.

My stink list as of today:
ZEL = -8.6%
SAN = -17.8%
SML = -19.72%
NZR = -52.7%

and my gutter rats made good:
MPG = 94.4%
STU = 76.8%
SUM = 66.6%
FBU = 60%
MEL = 50%
TPW = 38.5%
TWR = 21.2%
KPG = 18%

And a whole bunch in the middle.