Forum Archive Index - August 2002

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

Following my extensive review of the BIL International assets and the
conclusion that on an NTA basis BRY is still cheap, one might ask the
question - why?  I believe the following forward looking cashflow
projection might help provide an answer.

As Andrew Shepherd, the former chief financial officer of BIL
International, stated his FY2001 financial report:

"As an investment holding company, the Group's sources of cash flow
are principally dividends received from associates and investment
companies plus the cash generated on disposal of investments.
Outflows include corporate overheads and debt servicing costs."

We can use this statement to figure out the prospective cash flow
position for the coming year.

Global assumptions:  $NZ1= $US0.475
                    $SGD1= $US0.85
                     $NZ1= £UK0.3
                     $NZ1= $A0.85

Number of BIL International Shares 1,368,000,000
Total Number of Thistle Hotel Shares 998,800,000
Total Number of Fraser & Neave Shares 295,572,803

-----------------------



Money In:

I1/ Molokai Ranch:  Despite the moving of the marketing of the
Molokai Ranch to Sheraton hotels, that doesn't mean it will suddenly
become a cash cow.  BIL International will still have to pay for the
ongoing development of the resort plus a management fee of some
$US500,000 per year to Sheraton.  I'm predicting a cash outflow (on
going losses for the hotel and development expenditure) of $US10.5m.

(-1.6c/share) - LOSS

I2/ Thistle Hotels (BIL has a 46% stake):  Despite a projected tough
year for this UK based Hotel business ,the strong 'Thistle' balance
 sheet should allow the dividend rate (5.1p per share) to be
maintained.

+5.6c/share

I3/ Fraser and Neave (BIL has 8.8% stake):  Recent acquisitions have
made it almost a conglomurate.  It is no longer a pure food play.
Nevertheless the strong balance sheet means they should have no
trouble maintaining dividend (30c per share after tax) whatever
happens.

+0.7c/share

I4/ Air New Zealand (BIL has a 5.4% stake):  Cash from here?  Forget
it!

0c/share

I5/ Bass Strait Oil Royalty (BIL has 25% stake):  BIL share is $A6.6m
per year, every year (over the next 5 years).

+0.6c/share


Total money in: SUM I1I5 = 5.3c/share

-----------------------


Money Out:

E1/ Head office expenses, $US10m

-1.5c/share

E2/ Borrowings (Footnote 20 annual report)

Capital Borrowed, Interest Rate, Interest due

$US300m         ,          6.5%,     $US19.5m
$US 98.3m       ,          8.1%,     $US 8.0m
$US 15.7m       ,          9.0%,     $US 1.4m
$US120.4m       ,          4.1%,     $US 4.9m
$US 92.9m       ,          8.5%,     $US 7.9m
$US121.1m       ,          8.75%,    $US10.6m

Total Interest Due                   $US52.3m

-8c per share

Total Money out SUME1E2= -9.5c/share

----------------------





Total Investment Cash Flows = 5.3 -9.5= -4.2c/share.

-4.2c/share is the amount that must be generated by asset sales just
to break even.  To cover this shortfall, BIL will have to sell one
quarter of of their Fraser and Neave shares to avoid going into the
red.  This, I believe, is what BIL is now doing in an ordered way.


Nevertheless the cash flow deficit shows us why there is no big rush
to buy BIL shares.  BIL international are slowly burning cash and I
can't see the situation turning around until 2007.  To end on a
positive note though, it seems like BIL International is now off the
critical list. Barring a catastrophic downturn in the British hotel
market from here on in, I think BRY will survive.

Since the departure of BRY from New Zealand the company has been
fairly superficially treated by the New Zealand media.  I think this
is poor considering how many of their shareholders remain in this
country.  Nevertheless on the strength of their restructuring effort
so far, my view is that they deserve upgrading from a 'sell' on most
broker lists to a speculative 'hold'.

SNOOPY

discl: 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."



----------------------------------------------------------------------------
To remove yourself from this list, please use the form at
http://www.sharechat.co.nz/chat/forum/