MBL - May Be Lame?
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     holycow
Member
Username: holycow
Post Number: 1788
Registered: 08-2004Rating: N/A
Votes: 0
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| | Sunday, October 09, 2005 - 12:00 pm: |  
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Macquarie goes into bat for us...
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There's no simple explanation for last week's stockmarket tumble of more than 4 per cent, but there is a context to the sell-off and it centres on the issue of whether the ASX and its flagship stocks, such as Macquarie Bank, are genuinely world class.
For the past decade, Australian stocks traded at a discount of about 20 per cent to the Rest of the World, otherwise known as the MSCI (Morgan Stanley Capital International Index - an indicator of global stock prices). Over the past two years, overseas markets have been weak and our China-fuelled ASX has roared. In recent weeks we had moved to a 1 per cent premium to the Rest of the World. We stayed on top of the world for about a month, because last week's "correction" (where do they get these terms? It was a $40 billion drop!), will mean Australian stocks are again trading at a small discount to the Rest of the World.
The question is can the ASX really stay at these levels with prices that are line-ball with markets like New York or London, or will they tumble further?
I believe our stocks are every bit as good as overseas stocks and the ASX will return to its upward trajectory in double-quick time. The Australian economy is in better shape than many of its rivals, especially the US, so this market should recover quickly...
*** not sure if I am agreeing with this gentleman totally... but when come to MBL, I have been scratching my head since time begins coz I can never quite figure out how they make their money and how they can justify and maintain that kind of growth and earning. Anyway I have given up and have told myself not to worry about this one - just let it go... just let it go... when the time comes, one fine day it will come crashing back down with a dud! 'tis, is my belief.
When Enron was at its peak, many analysts were completely bowled over by their mystical business model and their ability to beat any earning forecast.. with cinch! Coz they have no clue how it works and they were getting handouts from Enron from A to Z when come to valuating its worth. Now, 4 years into the aftermath, everyone has something to say. Hindsight is indeed a good teacher. Just check this out.
Now don't get me wrong here by accusing MBL in practising some kind of black art or into some kind of foul play like Enron. What I am trying to get at is how much do the market analysts know about the business of the setup like MBL or BNB? How much do they know about their business model? How much do they know about the check and control, governance and transparency within the entities under the umbrella of these setups?
How do they earn their keeps? I know there were figures of 20% to 50% perfomance fees/bonus being thrown around, but just how? It also seems to imply it depends on some kind of future earning capability. I don't know... I am ignorant here - so please treat me as spitting into the wind if you like.
I am also wondering how much big money can they entice investors to fork out and generate the kind of super earning if and when the market turns bearish? The market will turn bearish into the future sooner or later - by then how?
The interest rate is going up, hinted over and over by the FEDS that they will raise rate, the cost of money is getting higher, the risk is rising, the longer the project lasts in a high deficit, rising inflation, rising oil cost/tax economic environment could mean one thing - you better make sure your long term investment returns something that can justify the kind of risk you are taking...
The bottom line here - can someone help me by explaining to me how MBL justifies their current SP? That goes for BNB too.
HC
"... if you've got a chart, I have an opinion!"
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holycow
Member
Username: holycow
Post Number: 1840
Registered: 08-2004Rating: N/A
Votes: 0
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| | Thursday, October 13, 2005 - 12:13 pm: |
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Shaky foundations underpin listed property trust sector
By Stephen Bartholomeusz
October 13, 2005
RESEARCH on the listed trust sector commissioned by the Australian Council of Superannuation Investors has highlighted some disturbing weaknesses in the governance structures within the sector.
The research, undertaken by institutional proxy adviser Corporate Governance International, does have its limitations — because it is purely a discussion of the governance structures and practices of the listed trusts, rather than their economics.
It comes, however, at a time when the massive expansion of the sector is generating increasing scrutiny and questioning of the validity of some of the models that have emerged.
The research paper divides the sector into three categories: the "traditional" ASX-listed trust; the "standard" stapled listed trust and the "non-standard" stapled trust. Most of its concerns are related to the governance structures of the traditional and non-standard stapled trusts.
The core of those concerns lies with the fact that, in those entities, there isn't the direct accountability to the end-investors that is provided by the relationship between boards and shareholders in a conventional listed company. Instead the single responsible entity (SRE) regime enables the trusts' assets and operations to be held and managed by the SREs with limited accountability to the security holders.
While the regime requires that a majority of directors of the SRE or of its compliance committee to be "external", the directors or committee members are appointed by and remunerated by the SRE.
In the standard stapled trust model — the one to which most of the big listed property trusts have moved — the stapling of the trust with the management company replicates conventional listed company governance.
In the non-standard stapled trust model, CGI says, the SREs aren't in reality owned or controlled by the owners of the listed company but by the promoter, usually through complex provisions in the corporate element of the stapled entity's constitution. The promoters have created vehicles that look like stapled trusts but operate like the traditional trusts.
With both the traditional trust and non-standard stapled trust model, there are generally major related-party transactions with the promoter group. The rights to manage the entity are valuable (often protected by provisions within the constitution or contracts with the listed entity) and there are usually major performance fees to the promoters based on revaluations of the trust's assets by the SRE.
Yet many of the trusts and their promoters share the same auditor and, in many instances, the non-audit fees paid to the auditor exceed the audit fee or are significant in relation to it.
In some trusts it could be said that control is entrenched, there are potential conflicts between the interests of the promoters/SREs and the security holders, there is limited accountability and the investor protections built into the SRE regime are weakened by the promoter's ability to appoint the independent directors/committee members and auditors.
...
Not only have there been changes to the structure of trusts, but there have been big changes to their underlying asset bases. Most stapled property trusts have "active" income from property developments and other operating activities. Most of them also have borrowings. Many of them have significant offshore operations. There is a lot more risk and complexity in the structures than there was in the traditional trusts.
Non-standard stapled trusts are even more complicated as they invest in a range of asset classes, have tiered fees structures, often have cross-relationships with other similar entities within a "family" of vehicles promoted by their sponsor and use financial engineering to leverage investor returns — and the fee streams to the sponsors.
Investor scepticism is starting to have an impact. The listed property trust sector, which has generated substantial outperformance over the rest of the market in recent years, has underperformed since January — falling about 3.5 per cent, while the overall market has risen about 10 per cent.
The non-standard stapled trusts operated by groups such as Macquarie Bank and Babcock & Brown have been among the hardest hit by the recent market sell-off. All that suggests the trusts, and the non-standard stapled trusts in particular, need to demonstrate more robust governance structures that give investors greater control of an entity's affairs, and provides greater transparency and more checks and balances on related-party dealings.
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The credibility of their trust models — including the credibility of the independent directors, the audit functions and confidence in the integrity of the related-party dealings — underpins their ability to continue to generate the large fee streams and leveraged returns on their own capital that the listed trusts enable.
**** warning bells are ringing! Do it the dumb and dumber way - if you don't know, don't touch it. Suck it and see may be harmful to your financial health...
HC
"... if you've got a chart, I have an opinion!"
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holycow
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Username: holycow
Post Number: 1846
Registered: 08-2004Rating: N/A
Votes: 0
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| | Thursday, October 13, 2005 - 04:28 pm: |
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... one of the leading losers - they will all get their due punishment one way or other. Just love it coz I am sadistic. 
BNB Daily
HC
"... if you've got a chart, I have an opinion!"
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holycow
Member
Username: holycow
Post Number: 1859
Registered: 08-2004Rating: N/A
Votes: 0
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| | Friday, October 14, 2005 - 01:25 pm: |
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MBL Weekly
1) the problem with high flyers - once the fog is clear, punters begin to see how ugly they look, and then the desertion begins...
HC
"... if you've got a chart, I have an opinion!"
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joni
Member
Username: joni
Post Number: 11
Registered: 07-2005Rating: N/A
Votes: 0
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| | Sunday, October 16, 2005 - 03:23 pm: |
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nice post,
notice the correlation between the XAO and MBL.
see something?
Market Correction = MBL being hit with a freight train.
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holycow
Member
Username: holycow
Post Number: 1868
Registered: 08-2004Rating: N/A
Votes: 0
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| | Sunday, October 16, 2005 - 06:16 pm: |
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... the more question people ask, the more "dirt" will be revealed, sooner or later, I want to read about some "frank and honest" investment opinion! No more CRAPS!
The end game of these projects will be terrible especially when they reach the last 5-10 years of the project life, those who are holding out will pay the ultimate price, if you were to assume that there'll not be any more tax concessions and the toll collections are not sufficient to pay off the borrowing, something they need to keep incurring to pay for distribution.
... and thanks to concessions from the Labor government of Carr, Macquarie Bank launched its flagship satellite fund, the $5.5billion Macquarie Infrastructure Group. MIG now counts Sydney's Eastern Distributor, plus the M4, M5 and the Westlink M7 projects among its assets. In effect, Macquarie controls the lucrative cash-spitting ring road of Sydney's main traffic arteries under secret terms with the NSW and federal governments. Despite the sale of these very public assets into private hands, the critical financial and legal information about these assets remains a mystery.
What has come to light, however, is that even after eight years of operation and an M2 stock price that went from $1 to $10 a share (the M2 company grew from $155 million to $2.1 billion at the time of the Transurban takeover), the M2 remains a loss-making business on cash flow from tolls alone. Instead, about 25 per cent of the M2's income is derived from infrastructure bonds under the obscure Infrastructure Borrowings Tax Offset Scheme, or IBTOS.
Under IBTOS, wealthy private individuals well-connected or lucky enough to be offered the break can effectively make a 17 per cent return on their tax "investment".
Transurban has $1.25 billion of these tax-effective infrastructure borrowings, the M2 an estimated $300 million. IBTOS is a Howard Government initiative of 1997 that replaced the original and even more generous infrastructure bonds scheme devised by the Keating government. Although the federal Government effectively underwrites the revenue of the City Link and M2 projects, there was nobody in Canberra who wanted to talk about it this week.
Treasurer Peter Costello's office declined to respond to questions from Inquirer and suggested assistant Treasurer Mal Brough might help, but Brough declined to respond to questions. The most detailed information provided by one of his staff was an eight-year-old press release.
The Government refused to provide information on the magnitude of its tax support for infrastructure projects or even which projects got the support. Macquarie, which answered some emailed questions for this article, would not say how much the subsidy was worth.
IBTOS is being phased out over the next few years but Transurban's debt has risen from $1.6billion to $3 billion in the past three years and University of Sydney traffic expert John Goldberg says the road projects are not viable without government support.
"The income for the M2 over six years is $631million and that for City Link over four years is $1 billion," he said in a recent paper to a transport conference. "But, of the total amount for the two roads of $1.65 billion, an amount of $704 million, or nearly 43 per cent of the total income has resulted from interest payments under the IBTOS arrangement. Exploitation of the tax system is clearly necessary to compensate for the instrinsic deficiency of revenue available from toll collections."(... still clueless on interest payment vs exploitation of tax system - how does it work?)
A spokesman for Macquarie, Matthew Russell, says Goldberg's report - based on the financial accounts of Transurban and Hills for the past six years - is effectively "11 years old" in its assumptions.(... here's a little hint... but how?)
"These are very successful projects for investors, debt providers and the community at large. Hills Motorway listed at $1 and was ultimately taken over in excess of $10 so clearly it was an outstanding project," he says.(... do you believe in free lunch? I don't!)
As with the bulk of Macquarie Bank's infrastructure projects, Hills has been a spectacular success for investors, and even better for the bank. Together with Macquarie Infrastructure Group, the bank has taken more than $500million in fees.
This, despite all the roads yet to make a positive return on toll revenue alone.
Rival banks and stockbroking companies, while sometimes privately critical of the bank's aggressive approach to fees and debt, enjoy an estimated $300 million in broking, underwriting and other fees from the constellation of Macquarie companies.
However, given the spectre of rising interest rates (infrastructure stocks are especially vulnerable to interest rates, as investors buy them for yield), consternation is already on the rise.
Last month, Goldman Sachs JB Were issued a report to its institutional stockbroking clients urging caution. The emerging issue in the market, wrote Were's chief investment officer, Mike Hawkins - in a thinly veiled reference to Macquarie and its aspiring "mini-me", Babcock & Brown - is "engineered investment performance".(... in my context - humbug and craps!  )
"At some point the debt needs to be repaid," said Hawkins, referring to MIG and some other companies in the Macquarie stable.(...yes, Yes, YES! Some poor suckers are gonna paid through their nose!)
Whether it be Macquarie Airports (which includes Sydney airport), MIG or other satellite companies, the winning formula has been to get control of the privatised asset via a concession, then use the stock market to fund the development of the asset via a public float.(... love to see the next one and see if people are still rushing for subscription)
Investors are attracted to the float because of Macquarie's brilliant track record and yield, or distribution.
The distributions are high, although - this is not commonly known - they are largely derived from government subsidies and debt. The funds pay their distributions from money they have borrowed, equity they have raised from the market and from tax breaks. Toll revenue has been a relatively small, though growing, proportion. Even so, the stock prices of the funds rise as Macquarie revalues the roads and airports higher, increases the debt on the increased asset value and gears the assets more aggressively to deliver a higher distribution. This is the beauty, and the danger, of the Macquarie model... (... beauty of the project? It's more like passing the monkey...! If there are more of this kind of report bringing up the awareness of the inherent risk people are taking on, I have a feeling these funds won't be able to "revalue" their assets that easily, lower revaluation means lower borrowing, will that allow them to maintain their distribution? If they can't keep that going, I suspect the stock price of these two will plummet. Just wait and see. Don't be too surprise by then you can buy MBL for less than $40 a pop. BNB? Nah, just pay them $5, that's their valuation initially!
http://www.theaustralian.news.com.au/printpage/0,5942,16922309,00.html
HC
"... if you've got a chart, I have an opinion!"
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holycow
Member
Username: holycow
Post Number: 1871
Registered: 08-2004Rating: N/A
Votes: 0
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| | Sunday, October 16, 2005 - 07:33 pm: |
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Joni,
I tend to see the market in this light - the market is reacting to the threat of more interest rate hike as hinted by the Feds not too long ago. The first week of November will confirm for us if they really mean biz. Also, in light of this, any current bullish or bearish view you are reading should be treated with a "pinch of salt" because from now till then the market over in the USA (as well as ASX) will be working hard to "price" in the cost/risk of more rate hike.
On top of that the combined threats of high energy cost and oil induced inflation threat will not help in making this process any easier.
The slamdunk on MBL is a manifestation of interest rate fear and long term risk reassessment of their projects by the big investment funds. Its demise is not over yet. I believe by the time the dust settles and the work over it is done, say by the first week of November, we will see a somewhat skinnier MBL.
Cheers.
HC
"... if you've got a chart, I have an opinion!"
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msparks
Member
Username: msparks
Post Number: 229
Registered: 10-2004Rating: N/A
Votes: 0
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| | Sunday, October 16, 2005 - 09:00 pm: |
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Good article HC
""Together with Macquarie Infrastructure Group, the bank has taken more than $500million in fees.
This, despite all the roads yet to make a positive return on toll revenue alone.""
DUE is another that was paying a distribution from debt or capital raised from share issue.
"ok, give me your money and i will give you a small bit back as a dividend before i even make a cent ", what a deal.
Have to wonder about companies who pay out 100% plus of their earnings.Payout ratio not to be overlooked.
BNB, interesting, could be about $10 if head and shoulders is realised.
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holycow
Member
Username: holycow
Post Number: 1873
Registered: 08-2004Rating: N/A
Votes: 0
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| | Monday, October 17, 2005 - 06:05 pm: |
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MBL 5-min Oct 17
1) smart money exiting MBL in droves, note the acceleration at eod with volume spiking up!
BNB 5-min Oct 17
2) BNB was cruising nicely in its own little world and then the tsunami hits - it too suffered the indignity of being dumped in sympathy selling...
3) now the game has turned interesting, will both these stocks be skewed and bbq like two dead ducks?
HC
"... if you've got a chart, I have an opinion!"
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holycow
Member
Username: holycow
Post Number: 1874
Registered: 08-2004Rating: N/A
Votes: 0
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| | Monday, October 17, 2005 - 10:11 pm: |
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MBL Daily Oct 17
HC
"... if you've got a chart, I have an opinion!"
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holycow
Member
Username: holycow
Post Number: 1880
Registered: 08-2004Rating: N/A
Votes: 0
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| | Tuesday, October 18, 2005 - 12:07 pm: | | | | |
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