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# Inergy, L.P. Message Board

• gmax97 gmax97 Jan 27, 2012 10:55 AM Flag

## math assignment

Current dividend of \$.705 is covered by DCF at 68% level. Lets say mgt is pursuing costs reductions etc to give it a coverage ratio above 100% as a margin and drops the divi down the full 32%. \$.48 a quarter. So you can buy this stock for \$19 right this moment, get a .70 reduction on your basis in two weeks and thus .48 x 4 / 18.30 = 10.5% yield. And you get the upside of propane prices in the future.

Dont you want to buy low, clip coupon and sell at a higher price once the math becomes obvious to others?

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• 7% is a more likely distribution target ( APU pays about 6% ) : taking your .48 x 4 = \$1.92 annual distribution ( 1.92 equals 68% of 2.82 ) \$1.92 is 7% of \$27.42
Somewhere between \$26 and \$28 per sh is reasonable. Just my guess.

• This is why not announcing the exact cut until next quarter is a problem. It produces too much uncertainty. 68% of the current distribution is \$1.92. Say they have to build in a 10% cushion, that's \$1.73. The market may still require a 10% yield until this stabilizes. That means it could trade down to \$17.30.

The one opportunity may be that the selloff is taking NRGM down too, which may present a buying opp.

• While we're at it let's pretend that pigs had wings so that way they could fly. We can also pretend the grandma had a "set" so she could be grandpa. Also don't forget the tooth fairy and Santa Claus.

• Competition to maintain volumes in a very warm winter seems to be killing all the players. Give Crammer some credit as he has been waving folks off this industry.
I agree a 40% cut, worse than I had assumed, along with expense cuts is most probable. Management will want to throw in the kitchen sink and be absolutely sure there are no more cuts. So I believe they will model in 1.2 DCF coverage with the .2 coming from structural expense cuts.
I think pricing is now so tight there are no players who can or would wish to ‘push’ for market share right now. It will be interesting to hear all the calls and see if this is a good assumption or not.
Long term normal weather and finally; after all these years, improving employment rates are the keys here. But I also believe American consumers will be more frugal like the greatest generation for the next 40 years.

• sure. if your math is close to right.

but, there is always the possibility the distribution cut will be more severe, that way more sellers will arrive and gap this POS down again, or that the propane business doesn't pick up in the next year (warm temps in particular - I know I am using very little LPG at my place right now).

I already have a substantial position in NRGY....and its way underwater now. I'd add more if I were confident this is the bottom. I just don't...quite...feel...the...bottom is here.

The lows of 2008 were in the 15's. That may the place to buy. Maybe.