MIIF – AmFraser

Results In Line With Expectations

  • Results in line with our expectations: MIIF exhibited a strong showing in its 1HFY12 results, with net income up by S$15.2mil to reach S$19.6mil.
  • Major overreaction view played out well for us: In an earlier company update, we noted that a sharp decline in MIIF’s share price from exdiv 57c to 50c on 5 June 2012 was a major overreaction to the estimated impact of the enforced reduction of toll rates from CNY0.75/km to CNY0.60/km on HNE. At that point, we highlighted that this would present an attractive entry point. MIIF is currently trading at 54.5c. Factoring in the impact of lowered tariffs and the opening of Guanghe Expressway, we are presently valuing HNE at S$128.3mil.
  • Taiwan Broadband Communications (TBC) records improvement in margins: TBC recorded a 3.7% YoY growth in its overall revenues in 1HFY12 on the back of increases in subscriber numbers across all product segments. More noteworthy is TBC’s improvement in its EBITDA margin, which we believe can be attributed to the robust digital subscription and broadbandsubscription uptake. We believe TBC’s continued initiatives toward ramping up its share of the Digital TV market in Taiwan would pose upside pressure on its margin prospects. TBC raised an additional TWD1.5bil capital expenditure facility to facilitate its push into the Taiwanese Digital TV market and the management believes that initiatives on this front would help increase penetration rates going forward.
  • A mixed showing for Changshu Xinghua Port (CXP): Despite clocking in a 6.0% YoY increase in revenue, EBITDA margin fell by 6.7% YoY in 1HFY12. While this was partly a result of a oneoff expense due to the construction of a temporary stacking yard, we believe this can also be linked to the gradual shift of cargo composition towards lower margin products such as logs and paper & pulp. We maintain our margin expectation at 48%.
  • Expect 5.0c dividend in FY13F: We maintain our view that a 5.0c dividend would be a sustainable level for MIIF going forward given its existing large cash balance. A reduction in dividend to 5.0c would still present an attractive yield of 89%.
  • A tantalizing 10% yield: MIIF has declared a 2.75c dividend in the halfyear ending June 2012 and has guided for a 2.75c dividend in the second half. This translates into a very enticing yield of 10.2%. Our fair value now stands at S$0.655, which means that MIIF offers capital gains potential of 20%. This, coupled with a 10% yield, makes MIIF an attractive play in the current market climate. BUY.

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