Forum Archive Index - August 2002

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi Lindley,

>
>
>I think I've read from time to time that Molokai Ranch is very
>difficult to value. Sounds like it is not much more than a largely
>undeveloped island, so it's value could be . . . your guess is as
>good as mine. Is it possible that the book value is the purchase
>price plus capitalized development costs ie. nothing at all to do
>with it's market value.
>
>


Molokai Ranch may be difficult to value (anything that doesn't earn a 
profit usually is), but it is far from an undeveloped island.

Have a look here:  http://www.starwood.com

Starwood is the parent company of the 'Sheraton' hotel brand.  And 
Sheraton are now the managers of the Molokai resort.  If you navigate 
to the Hawaiian selection of hotels and pick out 'Molokai' you will 
even see some pictures!   It seems to be positioned as an adventure 
holiday destination.  

The figure in the BIL accounts for Molokai is at the lower end of the 
registered valuers band.  If the resort was sold at a fire sale I 
doubt if this figure could be achieved.  But then there are no plans 
to do that.


>
> 
>Can't be sure about the Bass Strait royalties, but years ago they
>sold them off in some form or another as they were a steady income
>stream. At the very least they should be able to get a pretty
>accurate picture of their value, but I don't know how they are 
valued >in the accounts.
>
>


I'd like to know more about those Bass Straight Royalties too.  Here 
is what I know so far.  The bit that was 'sold off', as you put it, 
is listed on the Australian sharemarket under the ticker 'BSO' (Bass 
Straight Oil Units).  BRY got hold of it through an Australian 
subsidiary called ACIL which owned 54% of the royalty rights.  The 
royalty itself is a cash amount equivalent to 2.5% of oil/gas sales.  
BRYs share of the royalty was floated as BSO in 1997 and the floated 
entity has a ten year life.   At the end of that time any residual 
royalty returns to BIL ownership.

According to my information, when the revenue stream was listed in 
1997 it achieved a 75% subscription level.  Does this mean that BRY 
retained 25% of the rights?  Or was the other 25% sold off later?  
I'd love to know!  Can anyone help?

I think the whole royalty might turn out to be a bit of a hidden 
jewel.  My sense is that there are still plenty of unprospected 
oil/gas fields out there in the Bass Strait.  This means that 
although the known reserves are depleting on paper, the royalty may 
be worth rather more than the book value indicates.



>
> 
> AIR and THO don't have any obvious buyers at the moment.
>
>



No they don't.  But they are listed, which means that we can value 
AIR and THO as the market values them.



>
> 
>Perhaps they should do a Fletcher Challenge ie. pay off a pile of
>the debt, and distribute the THO shares pro rata to existing
>shareholders. 
>
>


The problem with this theory is 'paying off the pile of debt'.  They 
just don't have the cashflow to do it.


>
> 
>FRN could continue too be sold off, 
>
>


Don't look now, but bit by bit I think they are doing it, even as you 
are reading this!


>
>BSR could be sold off, 
>



Essentially they have already done that (this is what BSO is), so I 
don't think they can do it again until 2007.  Or can they?  I'm 
afraid I don't fully understand what the $US69.1m as listed in the 
accounts y/e2001 under the heading 'Oil royalty' represents.  Can 
anyone help explain it?

>
> 
>Arguably shareholders would lose out on getting a top price if THO
>was then taken over, but we (yes, I've been in there for far too
>long) aren't exactly getting a good price at the moment.
> 
>

Sir Ron Brierley himself once advocated that everyone should have 
part of their portfolio as a 'fun' investment.  Something worth a bit 
of a punt.  It is ironic indeed that Brierley Investments itself 
turned into just such an investment in my own portfolio!  But hasn't 
it been a wild ride this year!

>
>
>That's my 2 NZ pesos worth, hopefully BIL shares will continue to be
>worth more than that. If not they can always consolidate the shares
>again. I'm still waiting for Paul Collins/Bruce Hancox's promise of
>$2/share from many years ago.
> 
>

Lindley you are the eternal optimist!  Wasn't that Ron Brierley 
himself who said, after the share price had plunged to $1, that he 
saw BIL as a $2 stock.   Got any grandchildren?   By the time *their* 
grandchildren get to retirement age the share price might be half 
way there.

SNOOPY

Disclosure:  Hold BRY

---------------------------------
Message sent by Snoopy 
e-mail  tennyson@caverock.net.nz
on Pegasus Mail version 2.55
----------------------------------
"Sometimes to see the wood from the trees, 
you have to cut down all the trees."



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