Quick bite: What makes a business investable? A CEO’s take

Curious how company leaders assess value?

In this Quick Bite, Susannah Batley asks Channel Infrastructure CEO Rob Buchanan which metrics matter most to him. Drawing on decades of experience in mergers and acquisitions (M&A), Rob shares the key indicators he uses to gauge performance, from dividend yield to free cash flow, and explains why cash generation often tells a clearer story than headline numbers.

Plus, he reflects on what makes a smart acquisition and why knowing your strengths is crucial before taking on something new.

For more or to watch on YouTube—check out http://linktr.ee/sharedlunch

Shared Lunch is brought to you by Sharesies Australia Limited (ABN 94 648 811 830; AFSL 529893) in Australia and Sharesies Limited (NZ) in New Zealand. It is not financial advice. Information provided is general only and current at the time it’s provided, and does not take into account your objectives, financial situation and needs. We do not provide recommendations and you should always read the disclosure documents available from the product issuer before making a financial decision. Our disclosure documents and terms and conditions—including a Target Market Determination and IDPS Guide for Sharesies Australian customers—can be found on our relevant Australian or NZ website.

Investing involves risk. You might lose the money you start with. If you require financial advice, you should consider speaking with a qualified financial advisor. Past performance is not a guarantee of future performance.

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Episode Transcript

Speaker 1 (00:00):
You're listening to a share these podcast. If you were
an investor thinking about channel infrastructure as an investment, what
would be the metrics that you would be looking at.
We talked about dividend, so divin yield is one, but
what are some of those other metrics that you would
think about tracking over time to assess whether channel of
structure is being well run and doing well.

Speaker 2 (00:23):
So the measure that I would look at so this
dividend and free cash flow? Right, and the reason that
free cash flow is so important and actually you look
at it across any business you invest in, not just channel.
You know that is a true measure for the cash
that the business is producing. And so you know ebit
DA can have. You know, when people talk about revenue

(00:43):
and ebit DAR, there's pros and cons with those measures,
but free cash flow is the earnings less the sustainable capex,
less your interest costs. So you know, it's a true
measure of the cash that the business is producing. And
I think cheerholders should look at that. I wouldn't want
to give anybody any financial advice, but I certainly look

(01:06):
at it at any investment that I look at, not
just not just channel and that's a metric that we
are focused on as a company because you know, we
need to balance the long term nature of our business
and making sure that we make good, disciplined investments in
our assets to ensure that they're there for a very
long period of time. So that's covered in the capex

(01:28):
part of it, and then there's the earnings part of it,
or the cash that the business generates as well, which
is a reflection of the enterprise or the job that
we do.

Speaker 1 (01:38):
Your background is that you've headed up M and A
for a large recent bank. Outside of maybe those terminal assets,
is there any other sorts of assets that could be
quite attractive, particularly because of maybe capabilities, expertise, other sort
of assets and experience that channel might have that they
could leverage.

Speaker 2 (01:57):
Yeah. One of the lessons that I've learned from I'm
doing twenty years of M and A is you need
to look really long and hard at what your own
capabilities are as a business and ask yourself, you know,
can you actually manage what you're buying better than the
person that's selling it to you? And I think in
relation to terminals sets, you know, I think we've got

(02:18):
we managed New Zealand's largest terminal by a country mile.
We've made some really good operational improvements over the last
couple of years. Really proud of the way the team's
delivered that, and I think, you know, that's earned us
the right to say, well, we are really good owners
and managers of those assets. And so I think we're
pretty disciplined about the types of sets that we'll look at, actually,

(02:39):
and I think focused on those where we can add
value as a management team and as as an operator,
and sticking sticking to those now. It might be in
the future that we build additional capability and we say, hey,
we've got a capability that we can go and export,
or you know, there's an asset that comes with the
team that has a great cape ability. But I think

(03:01):
for the business as it stands today, that's really our focus.

Speaker 1 (03:04):
So it's really asking the question, are we the highest
value owner of the sasset? It's right, I'm not just
trying to get a bargain for a sort of random
messet that might not be so strategically aligned.

Speaker 2 (03:13):
You shouldn't and you can't do M and A for
M and a's sake. You do it because you see
it gives you a competitive advantages of business help solve
your customers problems in our case, and that most importantly,
we can add value to shareholders. And if it doesn't
tack those boxes, then you know we shouldn't be doing it.
Investing involves the risk you might lose the money you

(03:35):
start with. We recommend talking to a licensed financial advisor.

Speaker 1 (03:39):
We also recommend reading product disclosure documents before deciding to invest.