Macquarie International Infrastructure Fund

[Nick]

There are two sets of research reports covering the latest results -

1) AM Fraser (BUY) - Results In Line With Expectations

http://www.remisiers.org/cms_images/rese...120810.pdf [Report]

2) DBSV (Hold) - Yield may not be sustainable

http://www.einvest.com.my/Archive-DailyF...gional.pdf [Report on pg 21]

Personally, I think 5.0 SG cents DPU remains sustainable assuming TBC is able to continue refinancing its loans and there is no major slowdown in China. At 55.0 cents, I speculate that investors are adding in the 5.5 cents DPU for FY 2012 to derive 50.0 cents net investment value for FY 2013 ie 10% yield. I doubt 5.5 cents dividends will be maintained in FY 2013 for the reasons DBSV mentioned.

(Not Vested)

[KopiKat]

DPU = 2.75ct, xd on 23-Aug
Share price will likely be supported in the short term by the above.

As they'd guided that DPU = 2.75ct will also be maintained (of course no guarantee) for 2H (Dec), I'm not expecting any major share price correction after it goes xd. There'll also be some support from their Share Buy-Back programme.

As for the HNE impact, they'd estimated a Revenue impact of 20% - 25%. My best case guess is a 10% to 25% impact on the Div they pay to MIIF (posted previously) and my best case guess on share price impact (assuming a 10% Yield expectation) is 50ct to 53ct.

Note that the above is only my best case guess.

I won't be losing too much sleep for the time being even tho' I don't quite like their approach of 'living-on-the-edge' by gearing to the max for 2 of their assets (HNE 73% ; TBC 49%). MIIF is definitely not my idea of a longer term investment but more for the short term 'thrills'...

[Nick]

As for the HNE impact, they'd estimated a Revenue impact of 20% - 25%. My best case guess is a 10% to 25% impact on the Div they pay to MIIF (posted previously) and my best case guess on share price impact (assuming a 10% Yield expectation) is 50ct to 53ct.

Hi Kopikat,

I do agree with your earlier posting - while I do like the idea of a well diversified infrastructure operator with substantial cash-flow available for distribution, I have always been a tad bit worried about their gearing. Granted, HNE and CXP repays their debt but TBC funding capex with debt isn't exactly comforting. The memories of Arqiva still haunts me !

I am not quite certain why you expect NPAT and distribution from HNE to drop by a lower percentage compared to its revenue ? Considering that amortization of toll operating rights, O&M expenses, finance expense are 'fixed' while tax expense is variable, wouldn't a drop in revenue lead to a much larger drop in NPAT ?

Thanks for the explanation in advance

[KopiKat]

I am not quite certain why you expect NPAT and distribution from HNE to drop by a lower percentage compared to its revenue ? Considering that amortization of toll operating rights, O&M expenses, finance expense are 'fixed' while tax expense is variable, wouldn't a drop in revenue lead to a much larger drop in NPAT ?

Oops.. it's just a Best Case Guess, perhaps wistful thinking...

My earlier post was using FY11 figures. From the 1H12 financials, it looks like there'd have been some growth for HNE had it not been for the Toll Cap. So, chances of my -10% to -25% Div impact (Best Case) may not be that impossible?

Here, I'm assuming that when the mgmt gave the 20% to 25% Revenue impact when the Toll Cap was announced, they'd have been using older, available figures ie FY11.

*Ahem* To cover myself, I'd also done my estimates in the previous post for a worst case scenario ie. become MiaoLi-II. So, for those who're thinking of putting in $$ here, they'd better be able to stomach that kind of possibility....

[Nick]

Thanks Kopikat. Actually, I am not certain whether are they using FY 2011 base-line or are they actually predicting FY 2012 revenue. A potential upside would be the lower toll rates boost the traffic volume in 2H 2012 mitigating the fall in revenue. Of course, a Miaoli situation can occur if the cash-flow proves insufficient in servicing the ever increasing debt repayment.

MIIF repurchased 1.888 million shares today reducing share float to 1,172.8 million shares.

Personally, a share price < 50 cents will be attractive but it will be tough to compete with MIMAL share buy backs.

[KopiKat]

Let's look at some figures for HNE. Using Q1 and Q2 Presentations, some observations,

1. For Q1, 12.6% Growth in Revenue
==> Revenue per mth = $137.2M / 3 = $45.7M

2. For 1H, 6.8% Growth in Revenue
==> Impact of Toll Revision from 1-Jun ie 1 mth

From (1) and (2), if I were to do a simple extrapolation,
=> Revenue for Jan to May = $45.7M * 5 = $228.7M
=> Revenue for June = $268.5M (1H) - $228.7M = $39.8M

Compare Est. Jun = $39.8M with $45.7M (Q1 mthly avg)
=> -13% drop in Revenue

Compare Est. Jun = $39.8M with $41.9M (1H11 mthly avg)
=> -5% drop in Revenue

So, what do you think? Yes, I know, overly simple...

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BUT, it could be,

Using (1), extrapolate 12.6% growth on 1H11 to 1H12
=> Revenue per mth = $251.5M * 1.126 / 6 = $47.18M
=> Jun-12 Revenue = $268.5M - $47.18M * 5 = $32.6M

In this case,
=> -23% vs 1H11 Mthly Avg Revenue

This falls within the MIIF mgmt guidance of -20% to -25% impact on Revenue. If so, then they are using FY11 figures as reference plus current latest Jun-12 actual Revenues ie. despite a 12.6% Revenue growth in 1H12, the Revenue is still impacted by -20% to -25%...

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Lastly, I think (my dream guess) if we were to take their -20% to -25% impact on Revenue to be wrt any point in time, then it'd be mitigated by the 12.6% growth for Q112 vs Q111

ie. if we were to reference FY11 and assume the same 12.6% growth seen in Q112 for FY12, this impact reduces to,

75% * 112.6% to 80% * 112.6%
=> -10% to -15% wrt FY11 Revenue

In the best case, if Revenue (ie. more vehicles using HNE toll roads) continue to grow for 2H12, the impact may be further reduced....

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[Image: inakbl.jpg]

Warning : For those who're not vested, especially newbies, the risk-reward may not be suitable for you (high chance of losing $$ if you don't know what you're doing)....

[KopiKat]

Reminder : Last day of cd for 2.75ct

[Nick]

Macquarie International Infrastructure Holdings : Attractive 10% yield is not expected to sustain in FY13 (NRA)

http://kfc1973-stock.blogspot.sg/2012/08...cture.html [Report]

(Not Vested)

[KopiKat]

Macquarie International Infrastructure Holdings : Attractive 10% yield is not expected to sustain in FY13 (NRA)

http://kfc1973-stock.blogspot.sg/2012/08...cture.html [Report]

(Not Vested)

Interesting contradiction...

...we raise our target price to S$0.575 (previously S$0.565)


Actually... it's the DPU = 5.5ct that's not expected to sustain in FY13. The Yield = 10% can still be possible.... cos' Share Price can drop to make that possible...

PS. I chickened out... not going to hang around for 3mths or 6mths... Wait for the HNE dust to settle and come back again if it's still offering 10% Yield...

<Not Vested>

[money]

Does anyone know for how long MIIF would get to run/manage CXP & HNE? I remember reading it somewhere but i couldnt find it in the prospectus and AR just now (i could have been blind, lol). Thanks in advance