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Inergy, L.P. Message Board

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  • richardleeds richardleeds Mar 9, 2012 1:27 PM Flag

    NRGY has about $1B in assets needing write-down

    Company has been a free fall for a year during the best stock market in 5 years.

    Combine that fact with the inflated balance sheet values and inflated book value, pay out ration that is way off the charts and out of line for a prudent company, and you have a recipe for further declines in my opinion.

    The call volume usually reflects gamblers or bottom fishing option strategy. The fundamentals of the balance sheet have not changed. If you take away the assets of $1 billion dollars that have no substance other than accounting terminology for overpaying for asset acquisitions, the crazy payout ratio on the dividend, you have a recipe for future hurt.

    The dividend cut when it happens will drive investors for the doors, the price could fall significantly if you combine a dividend cut with continuing accounting losses.

    There is a reason that the stock market indexes are at a high and these shares are at a low. Wait to this market eventually turns around and falls as all markets do. When the market indexes correct when Israel attacks Iran or Afghanistan, Syria and Iraq all implode into civil war in 2013, the world markets will reverse course.

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    • RichardLee, I am inclined to agree with you. 1st we have noway to determine what those call options are about. Could be a hedge or some idea that a small pop will happen. They are very cheap. 2nd they did not commit much money toward them, if they picked up 3k options that amounts to about $30,000 dollars not anything huge.
      Obviously someone believes that they will have an 8% dividend and the stock is worth 17-18 dollars so they are buying. If I was making the decision I would cut dividend to 6% , get pain over with and build up some cash reserves, if that is even possible. Then as things improve increase dividend. Otherwise they may be in for another dividend cut which would really tank the stock. I am thinking that this is a 12-15 dollar stock with a good future in 2 to 3 years down the road.

 

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