Macquarie International Infrastructure Fund

[Nick]

AM Fraser: Strategic Review Could Serve As Positive Catalyst

http://www.remisiers.org/cms_images/rese..._-_AMF.pdf [Report]

DMG: Scoop of the Day

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

MIIF closed at 55.5 cents.

(Not Vested)

[Nick]

Am Fraser recently wrote a report titled - Are Investors Pricing In Too Much Uncertainty?

http://www.remisiers.org/cms_images/rese...121023.pdf [Report]

The report is a good summary of the issues discussed in this thread about the risk in this mutual funds ie sustainability of the dividend, high gearing at asset level, issues in HNE, concession assets etc.

(Not Vested)

[Nick]

APPOINTMENT OF INDEPENDENT FINANCIAL ADVISER

http://info.sgx.com/webcoranncatth.nsf/V...700582B8D/$file/MIIFIFAAppt30Oct12.pdf?openelement [SGX Announcement]

MIIF has appointed CIMB to undertake a strategic review and consider a range of initiatives to generate value for the Fund shareholders.

Lim & Tan wrote in its daily summary today:

MACQUARIE INFRASTRUCTURE (56 cents, down half): Has appointed CIMB as the financial advisor on strategic review (first announced on Oct 10) that seeks to enhance shareholders value. The fund’s buy-back program in the past 2 years has been one of the most aggressive we have seen: totaling 106 mln units between Mar ’11 and 4/4/12 at prices ranging from 46 cents and 61.5 cents; and 32.55 mln units between 16/4/12 and 9/10/12 at 52.5 - 58 cents. Dividend for 2011 was 5.5 cents, and interim for this year was maintained at 2.75 cents. That’s 9.8% yield. The latest NAV is 72 cents a share. We do not have a rating on the fund, which used to own stakes in infrastructure assets in various countries, but now largely focused on Taiwan. Looks like a BUY.

MIIF closed unchanged at 56.0 cents.

(Not Vested)

[propertyinvestor]

Last time they told shareholders they will payout the proceeds of the arqiva divestment back to us. Then they changed their mind to do share buyback instead. Now they waste more money to hire CIMB to think of ways to make money. Hopeless management only thinking about their own self interest. The company should just liquidate itself and return back capital to their shareholders.

[Nick]

Early this morning, MIIF released two very important announcements - their 3Q results and Requisition for SGM by shareholders.

3Q 2012 Key Highlights

- Net income of S$60.2 million up S$10.3 million on prior year
- Net Asset Value of S$813.2 million or S$0.70 per share, down S$0.01 per share on previous quarter driven by adverse foreign exchange movements
- Robust operational performance across the portfolio, however the adverse impact of the toll revisions at Hua Nan Expressway will continue
- Strategic review undertaken by the Board and CIMB Bank Berhad appointed as its independent financial adviser
- Suspension of share buy-back programme due to the strategic review process

http://info.sgx.com/webcoranncatth.nsf/V...E004F0506/$file/MIIF3Q2012Preso.pdf?openelement [PPT Slides]

http://info.sgx.com/webcoranncatth.nsf/V...E004F0506/$file/MIIF3Q2012Results.pdf?openelement [Press Release]

http://info.sgx.com/webcoranncatth.nsf/V...E004F0506/$file/MIIFSGXReport3Q2012.pdf?openelement [SGX Report]

MIIF assets continue to perform well operationally. TBC reported another year of revenue and EBITDA growth with 9M EBITDA increasing by 4.6% to S$149 million. This was driven primarily by substantial growth in the digital segment which recorded double digit growth. CXP reported stable EBITDA of RMB 110 million though the margin was compressed slightly. All eyes was on HNE after the toll standardization - it reported decline in revenue of 15% and EBITDA of 17% in 3Q 2012 which was better than the guided 20 - 25% decline due to significant growth in traffic volume. Miaoli Wind will generate incremental revenue from the sale of carbon credit but face loan maturity issue in Dec 2012.

This quarter is traditionally the cash quarter and CXP and HNE pays dividends only in this period. CXP increased its distribution from $5.3 mil to $6.9 mil, HNE reduced its distribution from $22.5 mil to $17.4 mil and HNE decreased its 3Q distribution from $19.0 mil to $18.3 mil. The total 9M cash distribution and interest income increased from $57.5 mil to $67.0 million. The net adjusted distribution stands at $60 mil or approx 5.2 cents per share. MIIF has guided 2H 12 DPU of 2.75 cents. TBC generated close to $1 mil cash distribution in 4Q 2011 - it is not certain whether this will be repeated in 4Q 2012.

Personally, I think this is a decent set of results with HNE surprising on the upside. Distribution income will be lower next year due to the decline in HNE income. The main catalyst lies in the Strategic Review and their plans for the $59 million cash hoard - M&A or special dividend ??? Share buy back has been suspended till the review is complete.

REQUISITION FOR A SPECIAL GENERAL MEETING

http://info.sgx.com/webcoranncatth.nsf/V...E004F38D7/$file/MIIFSGMRequisition.pdf?openelement [SGX Announcement]

On another note, a group of shareholders holding 10.27% of the shares has requisitioned a SGM to appoint 3 of their nominees as Directors of MIIF. No identity of the shareholders was given except that their shares are held under Raffles Nominee. I speculate that it could be the value funds who became substantial shareholders a year ago. Interestingly, MIIF has only 1 MIMAL director (the CEO) and 4 IDs. If the group of shareholders succeed in putting 3 of their directors inside - wouldn't they have control over MIIF ???

Please feel free to point out any mistakes / misconceptions on my part.

(Not Vested)

[weijian]

On another note, a group of shareholders holding 10.27% of the shares has requisitioned a SGM to appoint 3 of their nominees as Directors of MIIF. No identity of the shareholders was given except that their shares are held under Raffles Nominee. I speculate that it could be the value funds who became substantial shareholders a year ago. Interestingly, MIIF has only 1 MIMAL director (the CEO) and 4 IDs. If the group of shareholders succeed in putting 3 of their directors inside - wouldn't they have control over MIIF ???

Please feel free to point out any mistakes / misconceptions on my part.

(Not Vested)

Hi Nick,
After reading up on a boardroom tussle at iCapital.biz recently, i am guessing that what is brewing up at MIIF, will be similar.

http://biz.thestar.com.my/news/story.asp...c=business


MIIF's mgt fees are 1.5% of 'market cap minus cash' (we can forget about the outperformance fee), and with each director (total 4) drawing USD 72.5k/annum for a mid-cap fund --> my opinion is that it is NOT cheap.

Let's see what can be done here:

(1) Default on Miaoli's debt. The default will not affect the NAV, as there is roughly a similar amount of intangible assets of Miaoli recorded on the books.

(2) Return existing cash hoard to shareholders. When Arqiva/MEIF/CAC was sold, it coincided with a prolonged period of low interest rates (thanks to Helicopter Ben). Asset values rose as a result of too much $ (from low interest rates and QE) chasing after too few deals. Mgt had acted quite prudently, deploying part of the cash to TBC, and waited for better deals while doing sharebuybacks. With liquidity expected to be plentiful and a dwindling cash position (<100mil sgd), the best way forward may just be returning the cash. With 59mil+25(receivables from TBC/CXP)-10(payables) = 75mil of cash or ~6cents/share.

(3) Finally, liquidate the 3 assets and close shop. At current prices of 56cents, without considering the cash, the market is roughly valuing TBC/CXP @0.9x P/B and HNE @0.8x P/B. (with so many problems at HNE, i am assuming it should command a lower valuation metric than TBC/CXP). It may not be a good comparison, but in GFC, Arqiva was sold at ~0.8x NAV.

[Louhan]

Does it mean that if there are 3 more directors, management fees will increase by another 3 times $72.5k? Then minority shareholders should vote against 3 more directors? It will end up with more troubles at the board level at the expense of minority shareholders!!!

On another note, a group of shareholders holding 10.27% of the shares has requisitioned a SGM to appoint 3 of their nominees as Directors of MIIF. No identity of the shareholders was given except that their shares are held under Raffles Nominee. I speculate that it could be the value funds who became substantial shareholders a year ago. Interestingly, MIIF has only 1 MIMAL director (the CEO) and 4 IDs. If the group of shareholders succeed in putting 3 of their directors inside - wouldn't they have control over MIIF ???

Please feel free to point out any mistakes / misconceptions on my part.

(Not Vested)

Hi Nick,
After reading up on a boardroom tussle at iCapital.biz recently, i am guessing that what is brewing up at MIIF, will be similar.

http://biz.thestar.com.my/news/story.asp...c=business


MIIF's mgt fees are 1.5% of 'market cap minus cash' (we can forget about the outperformance fee), and with each director (total 4) drawing USD 72.5k/annum for a mid-cap fund --> my opinion is that it is NOT cheap.

Let's see what can be done here:

(1) Default on Miaoli's debt. The default will not affect the NAV, as there is roughly a similar amount of intangible assets of Miaoli recorded on the books.

(2) Return existing cash hoard to shareholders. When Arqiva/MEIF/CAC was sold, it coincided with a prolonged period of low interest rates (thanks to Helicopter Ben). Asset values rose as a result of too much $ (from low interest rates and QE) chasing after too few deals. Mgt had acted quite prudently, deploying part of the cash to TBC, and waited for better deals while doing sharebuybacks. With liquidity expected to be plentiful and a dwindling cash position (<100mil sgd), the best way forward may just be returning the cash. With 59mil+25(receivables from TBC/CXP)-10(payables) = 75mil of cash or ~6cents/share.

(3) Finally, liquidate the 3 assets and close shop. At current prices of 56cents, without considering the cash, the market is roughly valuing TBC/CXP @0.9x P/B and HNE @0.8x P/B. (with so many problems at HNE, i am assuming it should command a lower valuation metric than TBC/CXP). It imay not be a good comparison, but in GFC, Arqiva was sold at ~0.8x NAV.

[Nick]

On another note, a group of shareholders holding 10.27% of the shares has requisitioned a SGM to appoint 3 of their nominees as Directors of MIIF. No identity of the shareholders was given except that their shares are held under Raffles Nominee. I speculate that it could be the value funds who became substantial shareholders a year ago. Interestingly, MIIF has only 1 MIMAL director (the CEO) and 4 IDs. If the group of shareholders succeed in putting 3 of their directors inside - wouldn't they have control over MIIF ???

Please feel free to point out any mistakes / misconceptions on my part.

(Not Vested)

Hi Nick,
After reading up on a boardroom tussle at iCapital.biz recently, i am guessing that what is brewing up at MIIF, will be similar.

http://biz.thestar.com.my/news/story.asp...c=business


MIIF's mgt fees are 1.5% of 'market cap minus cash' (we can forget about the outperformance fee), and with each director (total 4) drawing USD 72.5k/annum for a mid-cap fund --> my opinion is that it is NOT cheap.

Let's see what can be done here:

(1) Default on Miaoli's debt. The default will not affect the NAV, as there is roughly a similar amount of intangible assets of Miaoli recorded on the books.

(2) Return existing cash hoard to shareholders. When Arqiva/MEIF/CAC was sold, it coincided with a prolonged period of low interest rates (thanks to Helicopter Ben). Asset values rose as a result of too much $ (from low interest rates and QE) chasing after too few deals. Mgt had acted quite prudently, deploying part of the cash to TBC, and waited for better deals while doing sharebuybacks. With liquidity expected to be plentiful and a dwindling cash position (<100mil sgd), the best way forward may just be returning the cash. With 59mil+25(receivables from TBC/CXP)-10(payables) = 75mil of cash or ~6cents/share.

(3) Finally, liquidate the 3 assets and close shop. At current prices of 56cents, without considering the cash, the market is roughly valuing TBC/CXP @0.9x P/B and HNE @0.8x P/B. (with so many problems at HNE, i am assuming it should command a lower valuation metric than TBC/CXP). It may not be a good comparison, but in GFC, Arqiva was sold at ~0.8x NAV.

Hi Weijian,

I think you hit the nail on the issue. The rationale behind such a Fund is outdated in light of the recent IPOs. If one wishes to invest in ports, one can easily purchase HPH Trust. If one wishes to invest in telcos, there are 4 listed telcos in SGX paying excellent dividend (DTAC, M1, Singtel, Starhub). If one wishes to invest in expressways, CM Pacific is a possibility. Essentially, it no longer makes sense to pay $10 mil a year to Macquarie to be able to participate in Asian infrastructure growth stories. One can do so directly through direct ownership of these assets in the equity market. Moreover, since this is direct ownership, I do not face cash leakage in the form of management fees. I don't pay anyone a cent to own CM Pacific or the telcos besides the initial brokerage fees. HPHT Management fees are extremely low since they are asset operators rather than fund managers. This means Macquarie have to re-invent itself to justify the high management fee. I was looking at Brookfield Infrastructure MLP - a US based global infrastructure partnership trust. Its share price has increased by over 50% since listing in 2008 and they have increased their dividends annually with a conservative 60 - 70% cash payout ratio. The growth in scale with numerous acquisitions across the globe and consistent growth in dividend justify their fees and the market rewards their effort. MIIF will have to do the same. The strategic review will probably address this.

On another note, Amfraser has written a report - http://www.remisiers.org/cms_images/rese...112012.pdf - titled A Superior Yield Play With Strong Potential Upside.

Of course, this represents my own personal views. Feel free to contradict me !

(Not Vested)

[weijian]

In the good old days, MIIF could justify its hefty price tag, by doing alot of asset churning, capital structure optimization (aka refinancing/taking on more debt to squeeze cash out of the asset) and simply just advertising that it has the 'lobang' (aka expertise) through its parent Macquarie Group to find new acquisitions. But since GFC2008, debt is just not sexy as before.

Finally, i think the whole asian infrastructure growth story is over rated - Infrastructure assets like utilities/transport requires a large initial capital overlay or long term financing is required but these assets are highly politically sensitive. It is therefore a huge risk to put up a big chuck of money upfront and then subjected to such political changes. The recent toll rate standardization and toll-free on 4 major holidays in China is an excellent example.

[Nick]

http://finance.yahoo.com/news/macquarie-...00544.html

Seems LIM Advisors and Metage Capital are behind the SGM requisition. I wonder how MIIF Board will react.

(Not Vested)