CHI - Channel Infrastructure Ltd (NZR)

[bull....]

current crack has fallen from highs to around 7.50 I believe

[bull....]

Is my information correct....that is NZR consistently beats international crack prices by US $2.50-3.50 a barrel

in the last margin throughput report

Singapore complex margins remained healthy and averaged USD 5.40 per barrel for the period. Refining NZ’s margin uplift over Singapore complex margins of USD 4.50 per barrel for the period was again higher than the normal range of USD 3 - 4 per barrel, driven by excellent operational performance and ongoing favourable crude price spreads against the Dubai benchmark.

so should still be on track for a good 2mths again

[dodgy]

Actually - if this is really turning out such a stellar year, than I would expect in March 2016 more than just a token as dividend. Have a look at their dividend policy (slide 14 of their latest investor presentation):

The aspiration is to pay top quartile NZX50 dividend returns over the investment cycle, specifically:

• During periods leading up to and including major capital expenditure the dividend pay-out expressed as a percentage of NPAT will be in the 40-60% range unless otherwise advised by the Directors.
• During periods of modest capital expenditure and optimum debt levels, the dividend pay-out percentage will be above 60% unless otherwise advised by the Directors.

Based on that ... sure the directors can still do whatever they deem sensible, but I would expect a payout closer to the 40% of EPS (with the reminder going to debt repayment). This means if things keep ticking as they do at the moment and we end up with an EPS between 40 to 50 cents, than this would amount to something like 16 to 20 cents final divvie.

Obviously - things can turn fast on the oil market - i.e. DYOR

Hi BlackPeter
What I hope for ( $3++), and what I believe are two separate issues. The directors have stated a capital return for the future, all things being equal. Therefore order is, repay debt to comfortable level, resume dives "token" and return capital. Hence my 2016 prediction.
Regards
-dodgy (owner/shareholder)

[iceman]

That is pretty much the same take on it as I have BP. I certainly am expecting a divie in that range for the near and medium term future and significant reduction of debt at the same time. Time will tell.

Actually - if this is really turning out such a stellar year, than I would expect in March 2016 more than just a token as dividend. Have a look at their dividend policy (slide 14 of their latest investor presentation):

The aspiration is to pay top quartile NZX50 dividend returns over the investment cycle, specifically:

• During periods leading up to and including major capital expenditure the dividend pay-out expressed as a percentage of NPAT will be in the 40-60% range unless otherwise advised by the Directors.
• During periods of modest capital expenditure and optimum debt levels, the dividend pay-out percentage will be above 60% unless otherwise advised by the Directors.

Based on that ... sure the directors can still do whatever they deem sensible, but I would expect a payout closer to the 40% of EPS (with the reminder going to debt repayment). This means if things keep ticking as they do at the moment and we end up with an EPS between 40 to 50 cents, than this would amount to something like 16 to 20 cents final divvie.

Obviously - things can turn fast on the oil market - i.e. DYOR

[dodgy]

Hi all
It appears that the NZR AGM will be in Auckland this year - 1400 29/4/15 - Pullman hotel. Please check your admission slip when received next week .
Regards
-dodgy (owner/shareholder)

[barleeni]

Hi all, everyone seems very bullish at the moment but I still have the opinion that there is more downside than upside perhaps? (which I don't like to say as it is my largest holding at present) i.e. to me it feels as though the current s/p reflects the best case scenario playing out in the next 12-24 months. Predictions are for say $120mil profit FY15, which going by consensus would raise the possibility of 20 cents in divi's...... which for a share with a current price of circa $2.60 about a 7% return.. and this is best case scenario? hoping that oil prices and exchange rates don't go the wrong way?

Thoughts? I am happy to hold, as my average buy price is $1.90, but I think we might be in a holding pattern here at $2.60 for quite a while?

[Nasi Goreng]

I'm in your camp barleeni. After earnings the price stalled and I felt like it could be a potential slow walk up to $3 with the risk of it falling back. I would be tempted back in again if it fell back to $2.20.

[Nasi Goreng]

Well OGC is currently a PE of 6. There are quite a few similarities between both companies. I don't think NZR is in the same league as most infrastructure companies as far as sustainable returns for the future go.

[barleeni]

I don't understand your reasoning...... how can $2.60 have priced in the best case scenario.
Your best case scenario, $127m profit, would give the company a PE of just 6......please tell me where you can find an infrastructure company on the nzx that trades anywhere near this multiple. Most are 12-15.
You are using a divi return as the only way of valuing the company.......thats weird
Your scenario indicates if they payed all profits out as a dividend, say 50cps, the company would be worth more than if they choose to pay 20 cps of the 50 cps profits in a divi and used the other 30cps to pay back debt. Thats very weird.
hmmmmmmmm me thinks you should look past the divi percentage per share and pay more attention to EPS.

I consider return based on the dividend only primarily because I don't consider this as a growth company in any way shape or form. I haven't got figures in front of me but I recall throughput as being very flat for the last 4-5 years, which I guess is limited by the plant capacity. So for me EPS is dividend driven only.

My thoughts are a) there is no opportunity to increase throughput and hence there is zero growth opportunity b) profitability of the company is largely dictated by factors outside of the companies control (i.e. no matter how good management is it cant really influence profit/loss) and c) no one can really foresee how the company will be performing in 24 months. Hence I am only looking at this short term, and certainly im not envisaging 'sustainable returns' like you would with a typical infrastructure company as Nasi Goreng puts it.

[dodgy]

I think you should do some more research on the company as the new plant which will be operational offers an increase in throughput.
Average 10 year historical PE for NZR is between 12&13

Morning Snaps and all
All views have been well canvassed in prior posts, especially my own. We all know about soothsaying, time and time alone will be the judge.
My preference for now is for owner/shareholders to attend the AGM in a few weeks and make their views known, ask the questions and seek the answers. The company wants and needs its owners feedback. If you can, help steer your company. your hard earned money where ever . It's your constitutional right - not only NZR but every co. you put money into.
_dodgy (owner/shareholder)