Author Topic: PIF.TO - Polaris Infrastructure  (Read 17754 times)

bargainhunter

  • Newbie
  • *
  • Posts: 42
Re: PIF.TO - Polaris Infrastructure
« Reply #60 on: November 21, 2018, 07:37:13 AM »

If you can't handicap the odds of the Nicaragua asset being worth zero isn't owning this stock reckless in the first place?


Good discussion here. I am also long (but small speculative position only). My thinking is very similar to petec's. I like the deal for the same reasons. FWIW, I do think the Nicaragua risk is somewhat overstated. For one, the World Bank is financing their geothermal project. Never a good idea for a country like Nicaragua to earn the wrath of international lenders. That said, this is Latin America and anything can happen. I take some comfort from the fact that the risk of Ortega nationalizing this project should be almost totally uncorrelated to a lot of the other risks embedded in my portfolio -- Trump doing something else dumb on trade, oil falling further, or even a global recession. Relatively uncorrelated bets like this are not easy to find. So each to his own but I do not view this as a reckless investment.


petec

  • Hero Member
  • *****
  • Posts: 2366
Re: PIF.TO - Polaris Infrastructure
« Reply #61 on: November 21, 2018, 11:17:15 AM »
I didnít subscribe to the original thesis so no drift for me. As Iíve said I canít handicap the odds of the value of Nicaragua being impaired. The Perķ deal, however, materially reduces the odds of this being a zero which changes the odds sufficiently for me to make a small, somewhat speculative bet on its reaching fair value.

As Iíve argued, buybacks would be reckless in an asset where you canít handicap the odds of a zero. And I much prefer the Peru deal to dividends or sitting in cash.So, yes, on balance itís far better than a buyback.

If you can't handicap the odds of the Nicaragua asset being worth zero isn't owning this stock reckless in the first place?

I understand your thesis and even like it somewhat but I think you are too optimistic about how quickly Polaris becomes insulated from what happens in Nicaragua. Yes, if they buy back stock right now and Nicaragua goes to shit then Polaris likely goes bankrupt or something similar. However, if they expand in Peru and Nicaragua goes to shit the next few years then your investment likely won't work out either as Nicaragua generates the cash required to expand in Peru .. Maybe it goes down 80% instead of 100% but on the other hand you have the execution risk of completing large infrastructure projects in another foreign country - I don't think that that's a risk-free proposition either.

In short, if you are afraid of / can't handicap / can't peg a number on the Nicaragua asset I don't see how this is attractive either way.

I think whether youíre happy to own an asset where you canít handicap the risk is a very personal thing. Some might say the risk of a zero is offset by 10x upside potential. Not me - the risk of a zero puts me off an investment. But Iím happy with 50% downside risk that I canít assign a probability to, if the upside is 3-4x. I think thatís the case here.

On the downside, if Nicaragua is nationalised without compensation (the worst case) the debt also disappears. As a result, if the GA assets can be completed by 2H19 using cash on hand, which is my base case, then you have line of sight on $70m of equity value with no need for Nicaraguan cash. Add a year of Nicaraguan FCF and youíre at $100m. Add 2 years and youíre at the current market cap. Thatís a lot of downside, gone. Or to put it another way youíre paying a lot less for the Nicaraguan asset than you were a month ago.

As for building out the other assets without Nicaraguan cash, thatís a question we canít answer without knowing capex for each project. But I do know that you can borrow against PPAs locally. So once the PPA for Karpa is renegotiated, it may well be that cash flow from GA is enough to finance Karpa. (Or, they could sell GA.) Once Karpa is in, they think they can refinance the whole package which would help with another project. Thereís a lot of speculation here but itís somewhat informed speculation and it all assumes worst case, which is that Nicaraguan cash flows stop NOW. If they donít then every quarter adds to the cash pile.
FFH MSFT BRK BAM ATCO LNG IHG TFG CGT DC/A

NorteCapital

  • Newbie
  • *
  • Posts: 16
Re: PIF.TO - Polaris Infrastructure
« Reply #62 on: March 09, 2019, 04:20:19 AM »
Results in line with what I was expected. They delayed El Carmen one quarter but does not seem significant + Not much capex this year in San Jacinto.

Looks cheap imo.

peterHK

  • Full Member
  • ***
  • Posts: 238
Re: PIF.TO - Polaris Infrastructure
« Reply #63 on: March 18, 2019, 12:33:46 PM »
Results in line with what I was expected. They delayed El Carmen one quarter but does not seem significant + Not much capex this year in San Jacinto.

Looks cheap imo.

Would agree. It's going to take time for them to dig out of the valuation hole though, so it's likely to stay cheap for a while.

peterHK

  • Full Member
  • ***
  • Posts: 238
Re: PIF.TO - Polaris Infrastructure
« Reply #64 on: July 05, 2019, 06:21:26 PM »
Been a year since I posted this. Stock is now up ~7.6% + a 5.3% dividend, so considering all the crap, not a bad result!

Worth noting that EV/EBIT was 6x a year ago, is 5.5x today, so the valuation has compressed somewhat.
« Last Edit: July 05, 2019, 06:23:25 PM by peterHK »

Philbert77

  • Jr. Member
  • **
  • Posts: 57
Re: PIF.TO - Polaris Infrastructure
« Reply #65 on: Today at 01:44:58 PM »
Why is no one talking about PIF on here anymore? This is still a compelling investment. Cash flow is about to see a good bump in Q3/Q4 due to the nature of contracts in Peru. Debt likely refinanced at a much lower rate within a year. They sailed through COVID-19 relatively unscathed.

Q1 results: https://polarisinfrastructure.com/wp-content/uploads/2020/05/2020-Q1-Press-Release-FINAL.pdf

Q1 transcript: https://seekingalpha.com/article/4349428-polaris-infrastructure-inc-rampf-ceo-marc-murnaghan-on-q1-2020-results-earnings-call?part=single