MIIF – AmFraser

9.5% yield. What’s not to like?

No news in the financial results: As mentioned before, the most important quarter for MIIF is 3Q when the bulk of its income flows in from the assets. FY2011 revenues are up 33% to $59.2m, and the adjusted net profit is up 47.4% to $47.9m, both exactly in line.

 

Real meat is in operational performance at the asset level: Revenue and EBITDA numbers were within 4% of our estimates in general, but the volume and subscriber numbers showed a little more character. For Changshu Xinghua Port (CXP), the logs segment grew by 52% in one year, topping our estimate by 40%.

 

We were too pessimistic on traffic volumes for Hua Nan Expressway (HNE) due to the detolling of the competing Xinguang Expressway, with actual traffic coming in 2-6% higher than our estimate across all segments. However, management has flagged the risk of a 20% downward revision in the tariffs for Phase I of the expressway, which for conservativeness we have incorporated into 2012F-2026F projections.

Taiwan Broadband Communications’ (TBC) Digital TV segment delivered a terrific 63% growth to 90,632 subscribers, in line with our 90,000 estimate. The Cable TV and Broadband segments also showed in-line growth of 1.4% and 7.5% respectively (See Page 2 for the detailed treatment).

 

Another 2.75c dividend: We continue to expect MIIF to pay 2.75c every half-year, for a full-year yield of 9.5%. This exceeds the current EPS of 3.8c, but is backed by 9c per share in net cash. EPS is growing at a rapid clip, and should exceed 5.5c by 2014, at which point we forecast dividend growth. We maintain that this 5.5c dividend is sustainable.

 

Annual revaluation summary: MIIF revalued CXP up by $11.5m, reflecting strong growth in current and forecast volumes across most of its cargo types. HNE’s value was lowered by $17.6m, reflecting the adverse effect of the detolling of Xinguang Expressway and the possible tariff reduction. TBC’s value was raised $40.5m, mostly the revaluation of the newly-acquired 20% stake.

 

Share buybacks to resume: MIIF suspended its share buybacks prior to releasing the results. We expect buybacks to continue today, supporting the share price.

 

What’s not to like? Maintain BUY, raise FV to $0.690: Overall, MIIF’s assets have delivered stronger growth than expected. Our valuation methodology remains unchanged – DCF of the individual asset dividends to MIIF, less fund-level expenses, at (rather high) discount rates of 14%-19%. Updating our model with the latest volume numbers, our valuation rises to $0.690. MIIF offers both high sustainable dividends with some capital gains potential. BUY.

MIIF – AmFraser

9.5% yield. What’s not to like?

No news in the financial results: As mentioned before, the most important quarter for MIIF is 3Q when the bulk of its income flows in from the assets. FY2011 revenues are up 33% to $59.2m, and the adjusted net profit is up 47.4% to $47.9m, both exactly in line.

 

Real meat is in operational performance at the asset level: Revenue and EBITDA numbers were within 4% of our estimates in general, but the volume and subscriber numbers showed a little more character. For Changshu Xinghua Port (CXP), the logs segment grew by 52% in one year, topping our estimate by 40%.

 

We were too pessimistic on traffic volumes for Hua Nan Expressway (HNE) due to the detolling of the competing Xinguang Expressway, with actual traffic coming in 2-6% higher than our estimate across all segments. However, management has flagged the risk of a 20% downward revision in the tariffs for Phase I of the expressway, which for conservativeness we have incorporated into 2012F-2026F projections.

Taiwan Broadband Communications’ (TBC) Digital TV segment delivered a terrific 63% growth to 90,632 subscribers, in line with our 90,000 estimate. The Cable TV and Broadband segments also showed in-line growth of 1.4% and 7.5% respectively (See Page 2 for the detailed treatment).

 

Another 2.75c dividend: We continue to expect MIIF to pay 2.75c every half-year, for a full-year yield of 9.5%. This exceeds the current EPS of 3.8c, but is backed by 9c per share in net cash. EPS is growing at a rapid clip, and should exceed 5.5c by 2014, at which point we forecast dividend growth. We maintain that this 5.5c dividend is sustainable.

 

Annual revaluation summary: MIIF revalued CXP up by $11.5m, reflecting strong growth in current and forecast volumes across most of its cargo types. HNE’s value was lowered by $17.6m, reflecting the adverse effect of the detolling of Xinguang Expressway and the possible tariff reduction. TBC’s value was raised $40.5m, mostly the revaluation of the newly-acquired 20% stake.

 

Share buybacks to resume: MIIF suspended its share buybacks prior to releasing the results. We expect buybacks to continue today, supporting the share price.

 

What’s not to like? Maintain BUY, raise FV to $0.690: Overall, MIIF’s assets have delivered stronger growth than expected. Our valuation methodology remains unchanged – DCF of the individual asset dividends to MIIF, less fund-level expenses, at (rather high) discount rates of 14%-19%. Updating our model with the latest volume numbers, our valuation rises to $0.690. MIIF offers both high sustainable dividends with some capital gains potential. BUY.

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