matisse capital management

Analyzing Macquarie Infrastructure Co. Trust - MIC

Macquarie Infrastructure is the creation of the Australian investment bank of the same name.   It has been recommended by many funds lately, largely because of its 5.8% dividend yield.  The company acquires and manages infrastructure businesses with the intention of creating stable dividend payouts and share price appreciation.  Holdings include airport parking lots, jet refueling, gas distribution and liquid storage.  In 2006, it sold of UK assets, which created a big increase for the bottom line.  However, at $43.81, I believe the stock is overpriced.   Using a discounted cash flow model, net income growth would have to exceed 25% each of the next three years, which I think is unlikely from the existing businesses, although it could be done through acquisitions.  MIC had a net loss in the third quarter 2006.  The company also has substantial long term debt, which currently approaches 70% of total assets.  And, the parent, Macquarie Bank gets 1.25% of the trust's market capitalization at year end, and a 20% bonus if it outperforms a utility index - money that could go to shareholders.  MIC would be more attractive well below $40.

Screen: High Dividend Yield Oil and Gas Stocks

APL - Atlas Pipe Partners - 7.02%                   KMR - Kinder Morgan - 6.31%      

EEQ - Enbridge Energy - 6.52%                       BPL - Buckeye Partners - 6.12%

TCLP - TC Pipelines - 6.34%                           TPP - Teppco Partners - 6.05%

Upcoming Auctions - Dorotheum, Vienna

European Furniture , May 29, 2007.  Contemporary Art, May 30, 2007.  Many items featured in the contemporary auction have very reasonable estimates. On the right glass montage by Marc Adrian, 1967, 2.5' x 2.5", estimate 4,000-6,00 Euros.  On the left, Biedermeier folding desk, 6,000 - 8,000 Euros.

Dorotheum, 1010 Wein, Dorotheergasse 17, Vienna

http://www.dorotheum.com/en/auctions.html

Recently Announced Share Buybacks - June

During the last two weeks, a number of stock buybacks were announced.  Buybacks may be done for a number of reasons: i) improving EPS results by reducing the number of outstanding shares, 2) acquiring shares for employee stock compensation, and 3) reducing future dividend obligations by lowering the number of shares when the price is low.  In the short term, buybacks can boost the share price.  Recently announced buybacks:

MEOH - Methanex, 10% of outstanding shares

PEP - Pepsi, $8 billion

ALL - Allstate, $1 billion

JPM - JP Morgan Chase, $10 billion

JCP - JC Penney, $400 million

Other buybacks:   LOW - Lowe's; TTC - Toro; IR - Ingersoll Rand; CATY -= Cathay General Bancorp.

Odyssey Marine: The Ultimate Speculative Stock

Shares of the marine treasure explorer Odyssey (OMR) were up more than 90% today (from $4.50 to $8.85 per share) on news of a discovery off the coast of Cornwall in international waters.  The exact location is being kept secret.  The company found a British ship that sunk in the 17th century and so far have recovered 17 tons of gold and silver coins, estimated to be only a small fraction of the total and worth at least $500 million.

http://www.thisislondon.co.uk/news/article-23397011-details/Treasure+hunters+find+the+richest+shipwreck+in+the+world+off+Land's+End/article.do

Friday, May 18 REIT Fire Sale

The dramatic drop in REIT prices seemed to attract little attention today in the media.  Here are ProLogis (PLD) and Simon Property Group (SPG) plotted against the Dow.  PLD was down 3% at one point today and fell below its 200 day moving average of $64.40. The causes are the sense that the Fed may not lower rates at all this year (two year treasuries yields climbed to their highest since February and, of course, the weak housing market.  Fed fund futures now show only a 37% chance of a rate cut this year.  See: http://www.bloomberg.com/apps/news?pid=20601087&sid=aWbrcz8Bp8Mk&refer=home)

I used the drop to buy shares of PLD, and will hold long.  The P/E at the current price is 15.3 X.  Other REITs today: VNO down 1.8%; BXP down 2.2%; AMB down 1.7%; GGP down 1.8%.

Contemporary Art Auction, May 24

Tajan, the well respected auction house in Paris, will have a contemporary art auction May 24. 

There will be works by Warhol, Miro, Dubuffet, Basquiat and other well known artists.  The catalogue is definitely worth a look.  At left is a Dubuffet, dated 1975, acrylic on canvas.  The auction estimate is 80,000 to 100,000 euros.

Tajan, 37, rue des Mathurins, F-75008, Paris.

http://www.tajan.com/en/index.asp

Beyond NYX: Deutsche Borse

Deutsche Borse (DBOEF.PK) operates in three primary areas: the Frankfurt Stock Exchange, its derivatives subsidiary Eurex, and Clearstream, which provides trading of fixed income securities. 

It recently entered into negotiations to buy the International Securities Exchange (ISE) in a $2.8 billion deal and acquired a 5.0% stake in the high growth Bombay Stock Exchange (BSE).  However, the ISE acquisition has been opposed by Atticus Capital, an activist hedge fund (from DBOEF's point of view anyway) which owns nearly 12% of Deutsche Borse shares.  Atticus previously blocked DBOEF's attempt to buy LSE, instead preferring the exchange repurchase shares to increase shareholder value.

The stock currently has a P/E ratio of 25 x, and has a dividend yield of 2.5 %.  I estimate that the current share price would require net income growth of 15% per year over the next three years, which seems very achievable through mergers and rising transaction volumes.  Also, the company is currently in the midst of a program to buy buck 10% of its shares.  The current share price in dollars is $222, which is down considerably from the mid-April high of $244, and appears to be a good value given long term growth potential.

Beyond NYX: LDNXF.PK

Now that the NASDAQ offer is past, LDNXF, London Stock Exchange, has retreated to a more reasonable price level. The current P/E of 32 x earnings is certainly more reasonable than the 53 x earnings of the New York Stock Exchange.  In addition, earnings per share have grown at a compound annual rate of nearly 20.0 percent over the last four years.  The exchange does have long term debt in excess of 50% of total assets, however, which needs to be improved.   Recently the company LDNXF.PK completed a $100 mm share buy back as part of an overall $500 mm buy back program.  In June, the exchange will launch "Trade Elect," which is promoted as the fastest trading execution engine available anywhere.  But of course, more substantial growth in the share price will come from any future exchange mergers which will, no doubt occur over the next one to two years.   The current dividend yield for LDNXF.PK is 1.4%.

REITs on the Radar: O, MAC, PLD

To the left are three REITS that I am currently following, with their performance charted over the last five years.  The first, O, Realty Income Corporation, I already own shares in.  The others are the primary performing stocks in the real estate funds of Goldman and T. Rowe Price.  MAC is Macerich Company, which owns shopping centers around the country.  PLD is ProLogis, a REIT that focuses on industrial warehouse and distribution space.  The plus to PLD is that it has operations in many countries around the world, including Eastern Europe and China.  This exposes the company to greater growth possibilities in the near term.  The dividend yields for these stocks are as follows:

O: 5.5%; MAC: 3.0%; PLD: 2.8%.

REIT prices have stalled recently, based on the Fed's unwillingness to lower rates.  I believe this makes the above three, in particular PLD with its international exposure, attractive buys, as I expect the Fed to lower rates later this year, if for no other reason than to salvage the housing market.