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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: TimbaBear who wrote (12643)	6/13/2001 1:29:56 PM
From: Paul Senior	Read Replies (2) \| Respond to of 78549

Spent a few minutes trying to understand KAB. Too tough for me to see it. Buying 300 sh. KAB @ 6.80 ea. = $2040 invested. Dividend, assuming it is maintained, = @ .3/quarter = $120/yr. for the 100 shares received. This thing is going to be a limited partnership, and dividends on l.p.'s are, imo, usually more generous than with standard companies. On the one hand, gas pipelines have apparently garnered market attention because of energy shortages, including pipeline shortages in some areas, so this argues for a high price to dividend valuation for the company (like 6%). OTOH, some pipeline companies (I don't understand enough to know which other pipeline companies would be comparable to Kaneb's, if any are) are selling at 7 or 8% yields. An attraction of l.p.s is that such companies pay out most(?) of their income to the partners (stockholders)in the form of dividends which make l.p's usually a dividend play (But not always.) If I am understanding these things right. Given there's no history of dividend consistency or dividend growth with Kaneb, I go with a higher dividend yield guess -- 7.5%. That means I guess the 100 shares will trade at 100 X 1.2/.075 = $1600. Net income for the other parts of the business was .373M for the quarter. That figure is after interest expense which I assume relates only to that specific part of the business, since I am assuming that because the pipeline line numbers are reported as discontinued operations, the pipeline interest expense numbers are included in the discontinued operations figure). Annualizing that net income figure (I am on dangerous ground here), and dividing by the 31M shares outstanding, that gets a per share figure of $.05. Arbitrarily giving that figure a p/e of 25 would have each share at $1.25. There are 300 shares in the investment, so that is $375. My take then is $2040 invested gets 375+1600. Looks to me like people on the Yahoo KAB thread all seem to see better prices and maybe a better or more accurate way of analyzing the stock. I have to defer to people who've spent more time analyzing the deal and know the company better. So I will assume I'm in error somewhere along the line. But for now, I'll have to pass on the stock. Paul Senior

To: TimbaBear who wrote (12643)	6/14/2001 9:44:11 AM
From: 249443	Respond to of 78549

TimbaBear, It's very tough to figure out all of the numbers on this Kaneb deal. Your figures look accurate to me. I listened to the conference calls on Kaneb's website. I couldn't access the March 2001 call, but the call prior (I believe November 2000) stresses that the firm: 1) is doing extremely well, and 2) the numbers don't reflect the strength of the business due to the restructuring. It was an interesting (albeit a little old) call and contains statements indicating management confidence in the firm's value. (What else would they say? But it was a good call, nevertheless.)