back of envelope calculation I was doing some back of envelope calculation which show how oversold ipl was. It explains why brookfield's stink bid 16.5 still have plenty of value leftover for brookfield.
- Dec 2017 IPL gave green light to construct HPC with expected complete date at end of 2021
- 22.3 is the average share price just before the March 2020 market crash
- covid hit, ipl run up extra cost of ~ 500 million$. Let assume 600$ million over budget, divide by 430 million shares = $1.16 hit on share price
- IPL slashed dividend April 2020 from 14.25 to 4 cents, so 10.25 cent/mth in lost dividend. Let further assume 14 months of delay + debugging production kinks. So a total 26 months of dividend cut or a lost of 10.25 cent per month x 24 months = $2.66. Let me know if i missed any other discounting parameter.
So the theoretical ipl share price after i threw in pessimistic discount, is 22.3 - 1.16 -2.66 = $18.48 but ipl was trading at around $12.5 before BIPC made a run on ipl. Brookfield stink bid at 16.5 still way under value ipl. Even the calculated 18.48 is higher than today's ipl closing share price of 17.89. Remember, the 18.48 included the hit from HPC cost overrun but excluded the HPC value itself which is very close to start up. Brookfield not only ignored the HPC value 100%, it discounted the IPL's pipeline business by 10.7% on their 16.5 bid.