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Inergy, L.P. Message Board

  • richardleeds richardleeds Mar 9, 2012 2:24 AM Flag

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

    The balance sheet shows over $500 million in goodwill. The same balance sheet shows $400 in intangible assets.

    Goodwill and intangibles!!! You know what that is don't you? "Blue Sky" or "B.S."

    Shareholders need to consider that those numbers should be written down to reflect their FMV, fair market value. I would maintain that those numbers have no real marketable or sale value. Write down those assets and the company needs to subtract a billion dollars from the balance sheet and from the book value. That would give you a truer value for the company.

    Those assets on the balance sheet are nothing more than pie in the sky. I'm thinking the shares have a lot more decline in them. Remember this stock market over the last 12 months has increased to the highest point in three years and NRGY during this robust market is in a free fall. Looks to me it has a lot lower it can fall unless you like the smoke and mirrors that makes up the balance sheet and the pay out coverage on the dividend.

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    • Goodwill is pointless.

      It has no bearing on NRGY's ability to pay cash distributions.

      All that matters is the cash generating ability of those assets.

      If you cut the distribution in half, you end up with around an 8% yield.

      That is a decent yield considering that the propane biz is much riskier that midstream, however, they get a better yield than some of the pure play propane ops because they also own the GP of NRGM and have some decent assets on the West Coast as well as storage in Texas (Tres Palacios is a great asset, but they overpaid for it).

      One thing is certain, the doom and gloomers always overreact.

      Inergy is struggling and a distribution cut is coming, but folks, if Inergy were going under, they wouldn't be paying a distribution at all.

    • Richardlee, I agree with your thoughts but yesterday "Unusual Volume Movers Bullish flow detected in Inergy (NRGY), with 2038 calls trading, or 6x the recent average daily call volume in the name." Why are calls going up so much. Maybe inside info or someone hedging themselfs ???. Maybe over a year or more waiting things may improve, but why jump the gun. Buy it at a lower price by waiting. It is crazy to believe cutting dividend will raise price, it will become an entry point for buying, but not until then.

      • 1 Reply to webesure
      • 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.