Ann: Chairman's Address to Shareholders, page-7

@Just_a_guy

My feedback probably won't amount to much, but I promise it will be a little more interesting than my prior post (ha ha).

First let me say that I sympathise with @Jimmy_C's comments.

I'm a fairly slow moving kind of creature. I've contemplated KOV, as I've contemplated a good many things (as I often contemplate my navel), ever since @madamswer brought it to my attention. But no, as with Jimmy, I have not given it any serious attention.

But yes, I had seen that alluring chart from Cimic before. I have substantially boosted my holdings in LYL over the last few months. I feel that this, together with my smaller position in MND, is giving me substantial exposure to any impending infrastructure gold rush.

There are a number of things that appeal to me about having my infrastructure eggs in the LYL and MND baskets. These "vehicles" have:

• A long track record of superior cash generation
• A long track record of prudent, shareholder friendly management
• Truly shareholder aligned management incentives (beyond corporate governance box ticking guidelines)
• A capital light structure (hence low capital consumption)
• Balance sheet that allows for a lot of missteps (heaps of cash!)

I think these factors vastly diminish the risks, and will likely amplify the rewards, and potentially deliver cash flow durability via structural growth which may moderate cyclical risks.

On top of this, I think LYL is currently delivering FCF yields that are vastly superior to what the P&L would indicate (for a couple of reasons).

Additionally, given the faith I have in the prudence, stewardship and skill of management (and the employee's generally), I have much more faith in LYL's and MND's ability to take advantage of the infrastructure boom (so to speak), than in my own ability to do so.

Finally, if things don't quite turn out as expected, and the infastructure promise does not quite deliver, then I expect these two businesses to do well when there is a re-kindling of mining capex.

So on balance, when I weigh up the time and effort that a slow moving animal like me will require to assess opportunities like KOV or BOL, which I suspect will require small positions due to inherent risks (though I may be wrong), I would rather increase my positions in businesses that I perceive will deliver similar outcomes with less risk. Said differently, I would rather have 20% of my portfolio in 1 or 2 businesses which I have a good deal of faith will deliver a 15% return per year over the next 5 years (for arguments sake), then to have 2% of my portfolio in an opportunity that might deliver +30% per annum over the next 5 years.

I am fully aware that MND and LYL come with their own risks, such as contract risk. I may be doing KOV an injustice here, as I have not given serious attention. But this is my thinking.