MIIF – AmFraser

Maintain HOLD on limited capital upside

Divestment resolution approved. MIIF has obtained its shareholder approval for the proposed divestment of its 47.5% stake in Taiwan Broadband Communications (TBC) to Asian Pay Television Trust (APTT) on 30 April. Unitholders will be entitled to MIIF APTT units in proportion to the number of issued shares held as at the Record date of 9 May. The exentitlement date falls on 7 May and APTT units are expected to commence trading on 29 May.

APTT has an indicative yield of 7.298%. According to its preliminary prospectus, APTT’s initial public offering comprises 1.44bil units. The indicative price range was set between S$0.92 and S$1, representing a projected FY13 yield of 7.298%.

Factoring in our assumption of a fair value yield of 7.5% for APTT, we estimate that MIIF would receive S$527.4mil from its divestment of TBC to APTT, or 45.85 cents per share. This represents a gain of 2.85 cents per share over TBC’s current book value of 43 cents per share.

Maintain HOLD. We raise our fair value to S$0.66 after factoring in our estimated divestment proceeds for MIIF. We have also adjusted our valuation model to assume a divestment timeframe of 3 years for the remaining assets Hua Nan Expressway and Changshu Xinghua Port. Our TP of S$0.66 represents a capital upside of only 7.2% over its last closing of S$0.615. Hence, we maintain our HOLD call on MIIF given the limited scope for capital appreciation.

Unitholders who wish to invest in APTT should remain vested in MIIF. We estimate that MIIF’s Unitholders would be entitled to around 472 shares in APTT for every 1000 shares they hold in MIIF. Assuming a theoretical ex-entitlement price of 21.4 cents, this translates into an overall cost of $401 for 472 shares in APTT. This is relatively lower than the cost of subscribing to the IPO of APTT directly or purchasing APTT’s shares on the open market, which is estimated to be around $459 on a yield of 7.5%. Moreover, we note that a direct purchase of APTT shares would incur additional transaction costs.

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