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Kinder Morgan Energy Partners, L.P. Message Board

donedealer 34 posts  |  Last Activity: Aug 27, 2014 1:26 AM Member since: Jul 2, 1998
  • Reply to

    ACAS as a Buyout Candidate

    by spokanimalbj Aug 25, 2014 1:49 PM
    donedealer donedealer Aug 27, 2014 1:26 AM Flag

    NMB

    Is the reason that management would not sell ACAS for NAV because they are trying to maximize shareholder value or is it because they wont to hold on to their salaries?.

  • Reply to

    Back of envelope NOI projection for ACAS

    by donedealer Aug 9, 2014 9:10 PM
    donedealer donedealer Aug 22, 2014 3:10 PM Flag

    NMI

    Stock valuations are far more dependent on PE ratios than dividend yields. The earnings yield (reciprocal of PE ratio) for ARES is about 13%. ARCC has an earnings yield of 12% and PSEC 11%. Most BDC's have dividend yields of around 10%.

    .

  • Reply to

    Back of envelope NOI projection for ACAS

    by donedealer Aug 9, 2014 9:10 PM
    donedealer donedealer Aug 18, 2014 3:49 PM Flag

    NMB

    The AM's such as BEN, TROW have low dividends but a double digit PE ratio Therefore, they have an earnings as a percentage of PPS of 6% to 8%. This means that they can pay a dividend and continue to reinvest and grow. ACAM pays 11% but that is 100% of earnings. You appear to be more focused on dividends which can be an apples to orange comparison rather than earnings yield which is more of an apples to apples comparison.

  • Reply to

    Back of envelope NOI projection for ACAS

    by donedealer Aug 9, 2014 9:10 PM
    donedealer donedealer Aug 11, 2014 2:48 PM Flag

    NMB

    Thank you for your input. I am heavily invested in ACAS and hope for a positive outcome.

    I am not drawn to a valuation based on dividends but instead focus on earnings. The comps you refer to as paying 2,3% dividends are retaining considerable cash flow for growth and are companies with long and successful track records. The sum of the annualized distributions by ACAS and ECAS is $218M. Theses may not be indicative of future distributions because of cyclicality. However, if I used these distributions and apply a 10 multiple I get $2,180M or 461M more than the values of ACAM and ECAS on the balance sheet ($892M and $827M, respectively). This would be a favorable outcome and a higher than 10 multiplier would be even better. My concern, expressed previously, is that the appropriate multiplies may be closer to 8 times with no accretion to book values. Obviously time will tell. So far the market does not appear to be overly optimistic.

  • Reply to

    Back of envelope NOI projection for ACAS

    by donedealer Aug 9, 2014 9:10 PM
    donedealer donedealer Aug 11, 2014 10:39 AM Flag

    dabqs

    Your points are well taken and I hope you are correct. However, I have done better when my investments are based on objective realistic projections rather than hope. Valueline today lowered the EPS projection for 2015 to 1.00, in the ballpark with other analysts. I hope that this can support a price of $20 pert share even though the PE ratio is above what I would pay.

  • Reply to

    Back of envelope NOI projection for ACAS

    by donedealer Aug 9, 2014 9:10 PM
    donedealer donedealer Aug 10, 2014 6:55 PM Flag

    You may be right but I would prefer that the future be based on projections rather than hope. Clearly, ACAS has been more successful with equity than debt investments, but are now strategically moving away from equities. Also, this recent avoidance of leverage coupled with emphasis on low risk floating rate debts appears to indicate that management plans to keep a low risk profile for the remainder of this business cycle. If so, then then the pps may not approach NAV for several years. There may be a significant time cap between management plans and market expectations.

  • Reply to

    Back of envelope NOI projection for ACAS

    by donedealer Aug 9, 2014 9:10 PM
    donedealer donedealer Aug 10, 2014 3:36 PM Flag

    PS

    Eight analyst's projections for 2015 range from a low of 73 cents to a high of 1.05 with an average of 84 cents.

  • Reply to

    Back of envelope NOI projection for ACAS

    by donedealer Aug 9, 2014 9:10 PM
    donedealer donedealer Aug 10, 2014 3:28 PM Flag

    How do you get EPS from appreciation in equities when the restructuring is designed to divest the equities to achieve a management fee? Historically, ACAS has made an attractive return on equities and no return on debt investments. Now equities are being divested. Are you suggesting that there will be appreciation in debt investments? The only growth (appreciation) factor going forward will be securing more fees for managing third party assets. .

  • I continue to be perplexed as to how a restructured ACAS is going to achieve more than about $1 NOI per share. This is far short of the $2 which I believe is necessary to support a $20 price I start with the $41 million NOI earned in Q3'14 . This is $164 million annualized or 61 cents per share. I then take all of the operating company equity of $961 million and sell it to a managed entity. This yield 7.5% (1.5% in management fees and 6% interest in floating rate debt) This yields $72 million or 27 cents NOI. Next I assume A take down of the full $750 million revolver to invest in floating rate debt at a net 4% spread (about 6% yield less about 2% cost of funds). This adds $30 million,11 cents share.This brings me up to 99 cents of NOI per share. I then add one years growth at 10% to the 61 cents base. This additional 6 cents brings me up to $1.05 of NOI per year.

    I have yet to see any other NOI projection on this board or,any financial rationale as to how this restructuring is going to produce an NOI necessary to support a price per share above $15. Granted, lot's of abstractions but nothing concrete.

  • Reply to

    book value discount

    by mm5002003 Aug 7, 2014 1:36 PM
    donedealer donedealer Aug 7, 2014 4:22 PM Flag

    I use a general rule that a single digit ROE company is not worth BV and that an ROE of about 10% will support BV. (A 15% ROE is usually good for about 2 times BV). I would quickly be drawn to a valuation of about $20 if I could see an ongoing annualized EPS of about $2.00 per share. .

  • Reply to

    book value discount

    by mm5002003 Aug 7, 2014 1:36 PM
    donedealer donedealer Aug 7, 2014 4:07 PM Flag

    You are entitled to your valuation. I also have concerns as to whether ACAM will have a market value greater than $3.45 on the books. This is no TROW or BEN with a double digit PE. It looks more like a KKR with a single digit PE. Understand, I am not disagreeing with ACAS, I am just cautious and taking a more conservative wait and see approach.
    Recall that many of the "true believers" on this board said that when ACAS disclosed restructuring plans the discount to NAV would be gone.

  • Reply to

    book value discount

    by mm5002003 Aug 7, 2014 1:36 PM
    donedealer donedealer Aug 7, 2014 3:28 PM Flag

    That's one computation. Mine is an 11.4% discount (at $15.25 price) to a tangible book value of $17,81 after deducting $1.61 OF deferred tax asset and $.70 of other non-earning non-cash assets. Most financial analysts would be drawn to a valuation closer to mine than the $20.12.

  • donedealer donedealer Aug 6, 2014 5:49 PM Flag

    25,000 contracts. Check the activity. Option Monster doesn't write about 25 contracts.
    This trade covers 2.5 million shares.

  • for 16 cents net of 1 cent credit for sale of August puts same strike price per Option Monster.
    This appears to be a hedge by a large nervous holder (covering 2.5 million shares or about 1% of shares outstanding) or a big bold bearish bet just before earnings release..

  • donedealer donedealer Aug 6, 2014 2:46 PM Flag

    Should read 25,000 August puts just bought

  • Reply to

    ACAS vs SLRC

    by youcanpickum Aug 5, 2014 2:35 PM
    donedealer donedealer Aug 5, 2014 3:12 PM Flag

    With ARCC at a 9% yield and PSEC at a 12.5% yield it is difficult to believe ACAS could yield under 10%.
    This would require $1.50 annualized EPS to support a price higher than about $15. I hope that I am wrong but fear that reality may set in after the upcoming earnings report.

  • donedealer donedealer Jul 24, 2014 11:57 AM Flag

    NMB

    In this press release ACAS states that since 1997 it has earned a compounded annual return of 10% on all its investment realization v 24% on the exit of its equity investments. This shows the superior returns on equity investment and implies a very poor return on debt investments. Yet the reorganization strategy is to move away from equity investments to debt investments. Granted it may smooth out the NOI results v lumpy EPS results but appears to be a strategic move from strength to weakness.

  • donedealer donedealer Jul 24, 2014 10:39 AM Flag

    fred

    You say that these options are likely to expire worthless, that is with a stock price no higher than $15. This would be a decline from the present price of about 15.25. Yet you say you are bullish?

  • donedealer donedealer Jul 24, 2014 9:02 AM Flag

    NMB

    I am not an option trader but have a question for you. The probable catalysts for increasing the pps are the earnings reports. The November 22 calls would be after the 2Q and 3Q earning releases. The January 15 calls would expire before the year-end results. Therefore, why not buy the November 22 calls and save about 16+ cents?

  • Reply to

    Earnings runup?

    by fred4267a Jul 22, 2014 9:27 AM
    donedealer donedealer Jul 22, 2014 10:17 AM Flag

    You are correct, the tape action is poor. There has been much optimism expressed on this board about the ongoing restructuring plans. There has been excellent micro analyses of every new move, (new borrowing agreement, new CLO's, equity sales and divestitures). What has been lacking on this board has been a focus on the macro picture: earnings per share. Yahoo shows the following analyst average estimates of earnings for ACAS: 2Q'14 17 cents (9 low 25 high), year 2014 69 cents (47 low 97 high), year 2015 92 cents (73 low 1.11 high). If these estimates are in the ball park it is hard to see much if any upside in the market price.

    What is needed is a substantial beat in earnings per share for 2Q'14 and for the current year.

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