Bristlemouth: A Value Investing Blog
February 23, 2012
Thoughts on ILF's Half Year Results

We're under the pump at the moment with reporting season in full swing but I've found a quick way to share some thoughts on ILF's result with you. Apologies for the scribbles but hopefully you find it useful (let me know if not!).

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Comments (2) | Category:Investing | Tags: ILF, net asset plays, Value Fund
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Bristlemouth - A Value Investing Blog

February 22, 2012
Equity, Deposits, Hybrids: Good, Good, Ugly
In July 2006, the now bankrupt RiverCity Motorway issued a prospectus promising an initial yield of 6% per annum. They paid it for the first few years but the strange thing was the tunnel wasn’t even built at the time of the float. Not one cent of revenue was going to be generated until 2010 when the road was expected to be opened. As we pointed out at the time, the yield was nothing but a Clayton’s yield. They raised extra money from investors upfront, just so they could give some of it back while the road was under construction. Source: RiverCity Prospectus The rationale was simple. Which of these two options would you find easier to sell: a toll road generating a 6% yield (already you’re thinking safe, More...
Comments (2) | Category:Investing | Tags: ANZ, convertible note, CPS, income securities, Westpac
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February 21, 2012
Why China’s Hard Landing Is A Certainty
Two years ago, Professor Michael Pettis of Peking University's Guanghua School of Management was something of a loner in his view that China’s infrastructure-led growth was creating gargantuan problems. Now, with land sales falling off a cliff, house prices reversing courseand the central government forcing Chinese banks to roll over local government loansthat had no hope of being repaid, the structural problems with China’s economy are widely accepted (at least in the international press … you don’t read much about it in the local papers). The debate is no longer about whether China is overly dependent on infrastructure spending. It is blatantly obvious the associated buildup in local government debt is More...
Comments (3) | Category:China | Tags: China, GDP, Investment
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February 9, 2012
South Africans’ Smart Slide Into Oceania
If its first deal is anything to go by, South African company Hosken Consolidated Investments (HCI) is going to have a successful time of it in Australia. HCI, a decades-old investment company listed on the Johannesburg Stock Exchange, has just finalised a slick and cost effective backdoor takeover of Oceania Capital Partners (OCP), an ASX-listed private equity company formerly known as Allco Equity Partners. OCP has been in wind down for about two years now. Of its three investments, two were sold last year and it was left with a 52.6% stake in debt collections company Baycorp and about $191m of cash. HCI established operations in Australia mid 2011. If it liked the look of Baycorp, it could have bought it from OCP. To do so More...
Comments (2) | Category:Investing | Tags: baycorp, hci, hosken, oceania capital partners, OCP
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February 8, 2012
Mortgage Rates to Rise: Good Luck Selling That
Wouldn’t you love to be working in the PR department of one of the big four this week? You already had your work cut out. Not passing on the RBA rate cut was never going to look good and the papers were already salivating at the abuse they were going to hurl at your employer. Then big Glenn Stevens drops a bomb: the RBA won’t be cutting rates at all. Some say Stevens is actually Jim Grant in disguise. He certainly sings a different tune to 'Zero Percent' Bernanke and the markets, where a rate cut was predicted by every single bank’s economist. Wishful thinking perhaps. In any case, Stevens has left you with a problem. Your bank now needs to put rates up to recover rising funding costs. That’s a PR More...
Comments (3) | Category:Investing | Tags: funding costs, glenn stevens, rate cut, rba
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February 7, 2012
Spark's Value Rising as Interest Rates Fall
This is a bit technical, so feel free to skip it if technical isn’t your thing. Despite generating a total return of 31% last year, Spark Infrastructure owners could be in for an even better year in 2012. Whilst Spark owns electricity distribution networks, its financial characteristics are more like a five-year bond than a normal operating business. It owns assets that are monopolies and, to prevent abuse of those monopoly powers, it is regulated by the Australian Energy Regulator (AER). Every five years, the AER sets the prices that Spark’s businesses are allowed to charge and locks them in for the following five years. It does this by determining an appropriate weighted average cost of capital (WACC) for the More...
Comments (4) | Category:Investing | Tags: distribution networks, electricity, infrastructure, power, Regulatory, SKI, Spark, WACC
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