junto.investing Posted May 2, 2012 Share Posted May 2, 2012 Just came across this write up on VIC: http://www.valueinvestorsclub.com/value2/Idea/ViewIdea/64602 While KMI seems fairly valued to me at the moment, the 5 year warrants with a $40 strike (KMI currently at $36; KMIIV currently at $2.35) could make an attractive investment. There's been some really good discussion on the TARP warrants - would love to hear other people's thoughts on these particular warrants. You'll note the that the warrants are trading on a when-issued basis. So I'm assuming there's some deal risk (El Paso) there. But judging from Kinder's track record, I'd expect this deal to close in May. Link to comment Share on other sites More sharing options...
twacowfca Posted May 2, 2012 Share Posted May 2, 2012 Just came across this write up on VIC: http://www.valueinvestorsclub.com/value2/Idea/ViewIdea/64602 While KMI seems fairly valued to me at the moment, the 5 year warrants with a $40 strike (KMI currently at $36; KMIIV currently at $2.35) could make an attractive investment. There's been some really good discussion on the TARP warrants - would love to hear other people's thoughts on these particular warrants. You'll note the that the warrants are trading on a when-issued basis. So I'm assuming there's some deal risk (El Paso) there. But judging from Kinder's track record, I'd expect this deal to close in May. I think the trade in a when issued security should be canceled if the new security isn't issued. Check with your broker to verify this. The big risk is that the underlying securities will reverse their recent direction when the deal goes through because the arbitrage will be wound down. Will this hurt or help you? The long term fly in the ointment is that high dividend paying stocks can sap away the value of holding a LEAP over time. There is some protection adjusting the strike price after dividend increases, but this doesn't make up for the attrition on a security that is projected to pay a high dividend. Link to comment Share on other sites More sharing options...
enoch01 Posted May 24, 2012 Share Posted May 24, 2012 That didn't take long: http://finance.yahoo.com/news/kinder-morgan-announces-warrant-repurchase-010000561.html Link to comment Share on other sites More sharing options...
CorpRaider Posted December 4, 2013 Share Posted December 4, 2013 Bump. I've had this on my radar as a potential best in class play on north american energy distribution with an owner/operator at the helm and what morningstar describes as a moat due to scale (not sure I'm 100% with them on that). Anyway, it is selling off today on disappointing outlook from the recently (last year) acquired EP. Could be an opportunity created by integration/merger noise. Am just flagging it for further examination. Here's one of the stories attempting to explain today's action: http://finance.yahoo.com/news/kinder-morgan-falls-disappointing-forecasts-183901548.html Also note Hedgeye put out a negative report about their accounting practices, somewhat in the vein of the LINE report. I found neither analysis very compelling, but just FYI. Link to comment Share on other sites More sharing options...
gfp Posted December 4, 2013 Share Posted December 4, 2013 I've been adding to KMR all day. 7.4% yield for 2014 and more like 7.65% with the quarterly compounding. KMR/KMP was up last night after hours on the news of 5.58 distribution target for 2014 (which they will likely surpass) - but down big this morning once analysts chimed in. Link to comment Share on other sites More sharing options...
CorpRaider Posted December 5, 2013 Share Posted December 5, 2013 Thanks for the response. Yeah, probably a more astute move to pick up the KMR, since el paso doesn't feed into it and that was the real disappointment in the guidance. I'm hoping to get some KMI a little below its initial post IPO price from a couple years back so $30-ish. Link to comment Share on other sites More sharing options...
gfp Posted December 5, 2013 Share Posted December 5, 2013 I expect to see a few more of these, but here is the first insider purchase filing from this recent drop in KMI - http://www.sec.gov/Archives/edgar/data/1015883/000158474613000011/xslF345X03/primary_doc.xml I prefer KMR because of the yield, the reinvestment of distributions and the suitability for an IRA over large amounts of KMP. Also KMR tends to trade at a large discount to KMP. I added heavily again this morning for folks in or near retirement. Link to comment Share on other sites More sharing options...
buylowersellhigh Posted December 5, 2013 Share Posted December 5, 2013 Doesn't KMR make sense in a taxable account more than a tax-deferred account? With the stock distribution, you only have to worry about capital gains. Makes for an efficient use in a taxable account. Link to comment Share on other sites More sharing options...
CorpRaider Posted December 5, 2013 Share Posted December 5, 2013 You probably know this, buylow, but KMR is an LLC which has elected to be taxed as a C corp and pays essentially stock dividends. It does likely make more sense in a taxable account than KMP, but in a tax deferred (US) account he's probably worried about too much UBIT passing through from the subchapter K entity (KMP). I like the KMI because the GP is at least projected to get more of the growth (although that seems to be the problem in the guidance). Of course, all I'm really doing is sucking my thumb (as usual)... Link to comment Share on other sites More sharing options...
gfp Posted December 20, 2013 Share Posted December 20, 2013 I expect to see a few more of these, but here is the first insider purchase filing from this recent drop in KMI - http://www.sec.gov/Archives/edgar/data/1015883/000158474613000011/xslF345X03/primary_doc.xml I prefer KMR because of the yield, the reinvestment of distributions and the suitability for an IRA over large amounts of KMP. Also KMR tends to trade at a large discount to KMP. I added heavily again this morning for folks in or near retirement. Well, I said I expected to see a few more and it took a few days - but here's the recently reported $27 million purchase by Richard Kinder http://www.sec.gov/Archives/edgar/data/1031190/000158474613000012/xslF345X03/primary_doc.xml (Greehey bought $5m of NS reported today as well) Link to comment Share on other sites More sharing options...
fareastwarriors Posted January 16, 2014 Share Posted January 16, 2014 Why Oil Tycoon Rich Kinder Feels Undervalued http://blogs.wsj.com/corporate-intelligence/2014/01/16/why-oil-tycoon-rich-kinder-feels-undervalued/?mod=WSJBlog&mod=WSJ_corp_intel Link to comment Share on other sites More sharing options...
CorpRaider Posted January 16, 2014 Share Posted January 16, 2014 I listened to the call. He is awesome, he says "we are as far below intrinsic value as we were back in 2006, when we took the first kmi private." I bought x amt of shares in december, so you know how i feel. You keep selling and i'll keep buying and we will see who comes out ahead in the long run." Edit: oops wsj has almost all of that. Link to comment Share on other sites More sharing options...
bmichaud Posted January 17, 2014 Share Posted January 17, 2014 The wsj article was phenomenal. Just came on to post it but you beat me to it corpraider :) Link to comment Share on other sites More sharing options...
gfp Posted January 17, 2014 Share Posted January 17, 2014 2 million share block just traded… Wanna bet it was Kinder again? Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted January 27, 2014 Share Posted January 27, 2014 I'm honestly considering taking a huge position in KMI warrants. Read the shareholder letters, especially the ones from the early 2000s. Richard Kinder is somebody special. http://www.kindermorgan.com/investor/kmi_annual_reports.cfm He's very good at operating the business. His capital allocation is amazing. I like his integrity and $1 salary. However, I'm looking to test my thesis by invalidating it. In 2006 he wanted to take the company private. If I had owned KMI shares at the time, I think I would have been extremely disappointed in the takeover. It goes against what Kinder was saying about long-term shareholders. Anybody have thoughts on that? http://money.cnn.com/magazines/fortune/fortune_archive/2007/05/28/100034252/index2.htm Link to comment Share on other sites More sharing options...
CorpRaider Posted January 27, 2014 Share Posted January 27, 2014 Yeah, it does give one a little pause, in that you hate to be a forced seller at what management openly states is a discount to intrinsic value (i.e. getting "dell'd"), but I mean I suppose it is better than the typical CEO who pays only lip service to the valuation gap. Link to comment Share on other sites More sharing options...
gfp Posted January 27, 2014 Share Posted January 27, 2014 He's not exactly Warren Buffett in regard to shareholder fairness, but it's good enough in my book. Both Buffett and Kinder had the decency to clearly tell the investor base that they believed the company was undervalued. Buffett has come around to be morally OK with buying your shares from you now at 1.2x book since he feels he adequately got his message out and fair is fair. But Buffett would never force his shareholders out of their shares (and pay tax on a cash deal!). Since it was the GP and the other vehicles still existed for the public to participate in the assets, he probably felt it was fair. They offered a ~25% premium and then raised their bid further. He made out well because of the leverage more than the bargain purchase price of $107.5/share. If anything, it should teach shareholders to listen to what he says on valuation… (and on the warrants, listen to his explanation of why KMI is repurchasing warrants instead of ordinary shares - he believes the warrants are the better use of KMI repurchase funds at this point) Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted January 27, 2014 Share Posted January 27, 2014 (and on the warrants, listen to his explanation of why KMI is repurchasing warrants instead of ordinary shares - he believes the warrants are the better use of KMI repurchase funds at this point) I haven't seen that. Can you please provide a link? Thanks in advance. Link to comment Share on other sites More sharing options...
bmichaud Posted January 27, 2014 Share Posted January 27, 2014 When Value Trap says he is going to potentially "load up" on warrants in a company subject of a significant short attack, my attention is piqued.... The attached Jefferies initiation on KMI has some good discussion on MCAPEX pages 8-9. Long story short, I will be studying why KMP's MCAPEX is projected to be 4.7% of EBITDA in 2014, EPB's 3.7% versus 20.2% for closest peer Spectra.... Also - EPB's MCAPEX per mile is $3,386 versus $9,953 pre-acquisition and $14,150 for Spectra. On a "fully loaded" basis, KMI trades at 12.8X 2014E EBITDA. Due to its high quality, maybe it's worth 15 times - as such, the equity would be ~$49 per share. Perhaps this is how Mr. Kinder is evaluating the Company. 2013-09-04_KMI=US_Jefferies__C_Kinder_Morgan_Inc.__KMI__HOLD__Initiate_at_Hold__A_Left_Swipe_on_Kinder.643514271.pdf Link to comment Share on other sites More sharing options...
bmichaud Posted January 27, 2014 Share Posted January 27, 2014 was looking for a publicly traded GP comp for KMI...completely forgot about the Crosstex deal with DVN.... According to the attached Canaccord note, the implied EV/EBITDA of the newly-created GP was over 17X. 17 times 2014E fully loaded KMI EBITDA of 4,066 is 69,122. Equity is 58,529 after backing out net debt of 10,593, or $56.50. MCAPEX completely irrelevant from a valuation standpoint, as investors should look through to underlying EBITDA, IMO. canaccord_dvn_note.pdf Link to comment Share on other sites More sharing options...
gfp Posted January 27, 2014 Share Posted January 27, 2014 (and on the warrants, listen to his explanation of why KMI is repurchasing warrants instead of ordinary shares - he believes the warrants are the better use of KMI repurchase funds at this point) I haven't seen that. Can you please provide a link? Thanks in advance. I wish I could remember exactly where I heard it - but it was an audio track of Richard Kinder from a conference call. I think it might have been on a youtube video posted by this guy, but I apologize in advance because he's posted quite a few on Kinder Morgan - it was one of the presentations or conference calls that is overlaid with the powerpoint slides ---> http://www.youtube.com/user/Sumflows/videos Link to comment Share on other sites More sharing options...
CorpRaider Posted January 27, 2014 Share Posted January 27, 2014 Yeah it was two or three quarters ago. Basically you can tell which one they buy back (warrants versus common). Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted January 28, 2014 Share Posted January 28, 2014 Last quarter (Q4 2013) they bought back both. Or maybe they just bought back the warrants. http://phx.corporate-ir.net/phoenix.zhtml?c=93621&p=irol-newsArticle&ID=1891159&highlight= KMI repurchased 5.2 million shares of its common stock during the fourth quarter for approximately $172 million. KMI has fully utilized the $350 million share and warrant repurchase program authorized by the board of directors in July of 2013 and has $94 million remaining on the $250 million authorized by the board in October of 2013 for share and warrant repurchase. Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted January 28, 2014 Share Posted January 28, 2014 found it http://seekingalpha.com/article/1749622-kinder-morgan-energy-partners-ceo-discusses-q3-2013-results-earnings-call-transcript Craig Shere - Tuohy Brothers Okay. And last question, given some of the recent headwinds kind of affecting KMI’s share price from some market perceptions. How do you think about the alternatives of repurchasing warrants versus existing shares? And how much capacity do we have to keep renewing this equity repurchases every quarter? Richard D. Kinder - Chairman and Chief Executive Officer Well, we look at that based on growth projections and based on what we believe the return is on purchasing warrants versus shares. And as you see today, the board authorized an additional $250 million to be used for either shares or warrants at our discretion and we just continue to look at what makes the most sense to buyback shares or buyback warrants. Craig Shere - Tuohy Brothers I gotcha. And speaking with some clients Rich, that the comment was made that your own repurchases were not a large percentage of your annual distributions that you get, and I just wonder if you would like to opine on the value of the equity right now? Richard D. Kinder - Chairman and Chief Executive Officer That’s of course you guys expertise not mine, but I believe obviously the equity is undervalued at KMI. You have a stock that is yielding 4.5% now and has growth of 14% this year in declared dividends. We said we believe long-term, it’s 9% to 10%. And at KMP, you have a security that’s yielding 6.5% with growth of 7% this year. We said long-term we believe 5% to 6% there. So to me that’s a very good investment, but that’s again not mine to opine, I’m obviously prejudiced. I think the stock in units are tremendously underpriced in my view, but again that’s for the market to determine. Link to comment Share on other sites More sharing options...
bmichaud Posted January 28, 2014 Share Posted January 28, 2014 http://money.cnn.com/magazines/fortune/fortune_archive/2007/05/28/100034252/index.htm?postversion=2007051612 Link to comment Share on other sites More sharing options...
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