Author Topic: KMI - Kinder Morgan  (Read 136157 times)

fareastwarriors

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CorpRaider

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Re: KMI - Kinder Morgan
« Reply #11 on: January 16, 2014, 03:37:00 PM »
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.
« Last Edit: January 16, 2014, 04:06:54 PM by CorpRaider »

bmichaud

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Re: KMI - Kinder Morgan
« Reply #12 on: January 17, 2014, 05:41:26 AM »
The wsj article was phenomenal. Just came on to post it but you beat me to it corpraider :)

globalfinancepartners

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Re: KMI - Kinder Morgan
« Reply #13 on: January 17, 2014, 12:13:15 PM »
2 million share block just traded…  Wanna bet it was Kinder again?

ItsAValueTrap

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Re: KMI - Kinder Morgan
« Reply #14 on: January 27, 2014, 10:14:03 AM »
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
"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price. " -Buffett

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CorpRaider

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Re: KMI - Kinder Morgan
« Reply #15 on: January 27, 2014, 11:17:58 AM »
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.   
« Last Edit: January 27, 2014, 11:28:37 AM by CorpRaider »

globalfinancepartners

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Re: KMI - Kinder Morgan
« Reply #16 on: January 27, 2014, 11:47:18 AM »
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)

ItsAValueTrap

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Re: KMI - Kinder Morgan
« Reply #17 on: January 27, 2014, 01:27:31 PM »
(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.
"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price. " -Buffett

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bmichaud

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Re: KMI - Kinder Morgan
« Reply #18 on: January 27, 2014, 01:42:32 PM »
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.
« Last Edit: January 27, 2014, 01:45:58 PM by bmichaud »

bmichaud

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Re: KMI - Kinder Morgan
« Reply #19 on: January 27, 2014, 02:10:45 PM »
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.