LAST CLOSE: S$0.193
All eyes are now on Hua Nan Expressway
• Proposed 9.5c per share return of capital on divestment of Changshu Xinghua Port (CXP). On 14 August 2013, Macquarie International Infrastructure Fund (MIIF) announced its proposed divestment of its 38% stake in CXP for a total cash consideration of S$112.2mil. This comes closely on the back of its recent divestments of its 47.5% interest in Taiwan Broadband Communications via an IPO of Asian Pay Television Trust and its 100% stake in Miaoli Wind.
The divestment price of CXP represents a 5.3% premium to its valuation as at 31 March 2013 and the amount of net proceeds to be distributed to shareholders from the proposed divestment is expected to be 9.5c per share.
• Hua Nan Expressway (HNE) implied to be trading below book. Following the proposed divestment of CXP, all eyes are now on the eventual sale of its 81% stake in HNE. Keeping in mind that MIIF has declared a 0.7c DPU, that is payable on 12 September 2013, and has proposed a return of capital of 9.5c per share, we estimate the theoretical ex‐ entitlement price post the successful divestment of CXP to be 9.1c per share, based on its latest price of 19.3c. Stripping out the estimated cash balance of 0.45c per share (post‐distributions in Sept), the market is currently valuing HNE at 8.65c per share, compared to its book value of 13.2c per share.
• A potential 36% return in store. At current book value, the asset is estimated to provide potential buyers with aractive yields of around 8.6% to 11.2% (net of debt amortisation costs) between 2014 – 2017. Should MIIF be able to divest HNE at book value, shareholders can therefore look forward to an aractive net 36% return in the form of distributions (after a 1.3c divestment success fee) within the next 6 – 12 months.
• Ceasing coverage on MIIF. Following the proposed capital return of 9.5c per share and distributions of 0.7c per share, MIIF’s estimated ex‐entitlement market capitalisation is estimated to be just slightly above S$100mil. Taking this into consideration, as well as the eventual divestment of HNE, we will be ceasing coverage on the counter.
Publish date: 18/06/13