Month: November 2007
SPAusNet – BT
SP AusNet plans to raise A$3.02b in share sale
Proceeds will fund purchase of assets from parent
SP AusNet, the Melbourne- based power distributor 51 per cent owned by Singapore Power Ltd, plans to raise A$3.02 billion (S$4.08 billion) by selling shares to help fund the purchase of Australian assets from its parent.
The price of the new shares will be no less than A$1.1 apiece and details of the sale will be announced later, SP AusNet said in a statement to shareholders yesterday.
The utility will borrow A$4.33 billion to contribute to the cost of acquiring the assets, formerly owned by Alinta Ltd.
The A$8.32 billion transaction will make SP AusNet Australia’s largest energy transmission company.
Parent Singapore Power bought the assets from Alinta in August, including Alinta’s energy distribution networks and pipelines in New South Wales, Victoria and Queensland.
‘The transaction is expected to be distributions accretive and have a positive impact for securityholders,’ SP AusNet chairman Ng Kee Choe said in a separate statement.
It ‘provides access to new capabilities and enhanced opportunities for growth through asset expansion, increased energy demand and the provision of asset management services’.
The power distributor’s shares fell 0.4 per cent to A$1.245 by 2.43 pm in Sydney, trailing the 0.1 per cent drop in the exchange’s benchmark utilities index.
The balance of the funds needed for the acquisition will come from the assumption of Alinta debt and hedge liabilities, it said.
Dividend payments will increase by an estimated 2.5 per cent in 2009, SP AusNet said.
Shareholders are scheduled to vote on the transaction on Dec 11 and the transaction is expected to be completed by Dec 21.
SP AusNet’s credit rating will be cut should shareholders approve the transaction and the equity raising proceed to ‘A-‘ from ‘A,’ Standard & Poor’s Ratings Services said yesterday. SP AusNet remains on ‘CreditWatch’ with negative implications.
‘Although SP AusNet will benefit from business, geographic, and regulatory diversity, the group’s cash-flow metrics will deteriorate substantially because of the proposed high debt levels,’ Standard & Poor’s analyst Parvathy Iyer said.
Morgan Stanley Australia Securities Ltd, Goldman Sachs JBWere Pty Ltd and UBS AG are the proposed underwriters of the share sale, SP AusNet said. — Bloomberg
MIIF – BT
Why MIIF decided against rights issue
Shareholders raise concern about European asset sale
MACQUARIE International Infrastructure Fund (MIIF) did consider a rights issue to pay for its Asian assets instead of selling its European assets, the fund’s chairman John Roberts said yesterday.
But it decided a rights issue was not in the best interest of the fund or its shareholders, he told shareholders concerned by the fund’s switching from stable mature infrastructure holdings to buying assets in Asia’s high-growth but more volatile economies.
About 120 MIIF shareholders turned up yesterday at a special meeting to vote on a proposal to sell the fund’s 3.2 per cent interest in Brussels Airport and a 100 per cent interest in German oil tank storage business TanQuid.
Shareholders also voted on a proposal to receive their dividends in scrip.
The proceeds from the European sales will help finance the purchase of an 81 per cent stake in Hua Nan Expressway in Guangdong, China for about four billion yuan (S$778.7 million), MIIF’s first toll road investment in the world’s fastest-growing major economy.
One shareholder cautioned about investing in Guangdong given his own personal ‘difficult’ experience.
Another shareholder wondered if MIIF could have raised funds from the market through a rights issue instead of selling its stake in Brussels Airport.
Others asked about the pricing of the assets to be divested, given no tender was called and the buyers are Macquarie-related entities. They also noted that the two assets to be sold have given high returns of 9.2 per cent and 16 per cent.
Mr Roberts said that the returns from Hua Nan will be very strong, that he is confident MIIF will maintain and grow distributions consistently and that the acquisition is expected to be value-accretive.
He said the prices of the businesses to be sold exceed their book value and will contribute to a healthy internal rate of return.
The board did consider going to the market to raise funds for its Asian investment strategy, but decided this was not the time to do so, he said.
‘We felt that if we were to embark on public capital raising, when you included the costs of underwriting fees, issuing prospectuses, and a discount to the current market in order to attract the capital, that it was likely we would be issuing shares that would be probably closed to $1 type of price,’ he told shareholders. ‘We would be more comfortable seeing the share price appreciate a bit higher before we come back to the market.’
The board is ‘very protective of the share price’, he said.
MIIF was listed in May 2005 at $1 a share, which raised $800 million. A secondary exercise six months later in November at 96 cents a share brought in another $435 million.
The stock closed four cents lower at $1.04 yesterday.
Including this week’s purchase of Hua Nan Expressway, Asian assets now make up 35.8 per cent of MIIF’s portfolio, versus zero when it listed in 2005.
Mr Roberts assured shareholders that Hua Nan has a track record of paying distributions to shareholders since it was opened in 1999.
Use of the expressway has grown 13.7 per cent a year and currently some 37,000 cars use it, said Gavin Kerr, managing director of MIIF’s manager.
Shareholders passed all resolutions yesterday.
SingTel – Phillip
Better-than-expected Results
2Q Results. SingTel reported 2Q operating revenue of S$3,695m (+10.9% yoy) and net profit of S$988m (+3.3% yoy). Moreover, EBITDA increased to S$1,742m (+2.3% yoy). The better-than-expected results were mainly attributed to the strong performances by SingTel and the regional associates.
In view of the excellent performance, SingTel announced an interim ordinary dividend of S$891m or 5.60 cents per share (+51.8% yoy).
Strong Performances. In Singapore, SingTel continued to post double-digit revenue growth due to success in its growth segments such as mobile communications, data and internet as well as IT and engineering. Moreover, in Australia, Optus achieved a slight increase in operating revenue of 3.7 percent to A$1.93 billion despite a highly competitive market.
The regional mobile associates also posted better-than-expected results for the quarter. Pre-tax earnings gained 21 percent to S$600m while post-tax earnings increased 21 percent to S$477m. These results were due to the better performances from Bharti Telecom Group.
FY 2008 Outlook. Management remains optimistic about its business in 2007. In Singapore, operating revenue is expected to grow at single-digit level and capital expenditure to revenue ratio is expected to be in low double-digits. The revenue growth for Optus is likely to be to 2.5 to 3 percent and capital expenditure is approximately A$1.1 billion.
Meanwhile, the pre-tax profit contribution from the regional mobile associates is expected to grow at double digits levels and cash dividends from associates are likely to increase.
Maintain BUY recommendation, target price raised from S$3.90 to S$4.22. SingTel is definitely a BUY for investors. This is because it pays good dividends. Moreover, its business continues to grow in Singapore and Australia with strong contributions from its regional mobile associates. The stock has performed well after the market correction in August 2007.
STEng – CIMB
Quality stock
• Net earnings below expectations but operationally in line. 3Q07 net earnings of S$125m (+9% yoy) were 17% below our expectation and 11% below consensus due to lower investment gains and interest income. 9M07 earnings account for 67% of our full-year estimate. Operating profits, however, were exactly within expectations. EBITDA and EBIT grew 13% yoy to S$180m and S$144m respectively. Sales rose 7% to S$1.2bn, led by a stronger Marine division.
• Aerospace margins shaped up; expect stronger 4Q07. 3Q07 pretax margin rose to 19% from 17% in 3Q06 thanks to a better product mix including redeliveries of two PTF aircraft to Boeing and UPS. The margin improvement was also helped by a turnaround at SAS Components. 3Q07 revenue was flat at S$443m due to the timing of deliveries but 4Q07 could be boosted by more deliveries.
• No growth for first the time in Land Systems. 3Q07 PBT of S$14.5m (down 20% yoy) was a contrast to the strong growth achieved in the previous three quarters. The weaker performance was due to higher R&D spending, lower sales and the product mix. Softness in the US housing market also affected the specialty vehicle business. Management believes the slowdown in the US could continue in 4Q07.
• Outlook remains positive, dividend yield sustained. Management has guided for higher PBT for Aerospace, Electronics and Land Systems in FY07 while Marine earnings are expected to be comparable to FY06. We believe the record-high order book of S$9.91bn and consistent earnings growth (3-year CAGR of 14%) will sustain its dividend yield of 5%.
• Maintain Outperform, target price raised from S$S4.10 to S$4.36, still based on blended valuations. Our earnings estimates remain intact on expectations of a stronger 4Q07. We have rolled forward our P/E valuation to CY09, which raises our target price to S$4.36. The stock’s defensive qualities stand out in the current market with a prospective dividend yield of 5% and ROE of 33% vs. peers’ (SCI and Keppel) averages of 3% yield and 23% ROE. Key risks include a weakening US$ and a slowdown in the US which could hurt its US operations.
SingTel – BT
Foreign currency gains help lift SingTel Q2 profit 3.3%
Regional associates continue to deliver double-digit earnings growth
SINGAPORE Telecommunications (SingTel) yesterday reported a 3.3 per cent rise in second-quarter net profit to $988 million, helped by foreign currency gains.
SingTel also declared an interim dividend of 5.6 cents, up 52 per cent from 3.69 cents a year earlier. The total dividend payout of $891 million represents 50 per cent of the group’s underlying net profit.
Underlying earnings per share for Q2 ended Sept 30 rose 17 per cent to 5.74 cents.
SingTel’s regional associates – especially Bharti and Telkomsel, the largest telcos in India and Indonesia – continued to deliver double-digit earnings growth, up 24 per cent to a pre-tax profit of $633 million.
For the first half, SingTel’s net profit was $1.9 billion, up 6.6 per cent on a 10.7 per cent gain in operating revenue to $7.3 billion.
The telco, which gets 74 per cent of its earnings from outside Singapore, benefited from the stronger Australian dollar and Indian rupee.
SingTel chief financial officer Francis Heng said the Australian dollar and Indian rupee strengthened 8 and 9 per cent respectively against the Sing dollar from a year earlier.
But there was some negative impact from the 6 per cent depreciation of the Indonesian rupiah, he said.
SingTel chief executive Chua Sock Koong said: ‘The group has a policy of hedging all its foreign currency commitments and does not take part in any trading activity . . . that should allay any concern the public may have on that front.’
For Q2, the stronger Australian dollar lifted operating revenue and net profit by $176 million and $11 million respectively.
At home, SingTel’s focus on gaining market share, especially in the mobile segment, helped it achieve double-digit revenue growth, but at the expense of margins.
Revenue rose 10 per cent to $1.2 billion but operating expenses increased a faster 17 per cent to $717 million.
Operational Ebitda (earnings before interest, tax, depreciation and amortisation) margin fell 4.1 percentage points to 42.2 per cent.
The lower margin reflected a change in revenue mix as the lower-margin IT business grew faster than the telecom business, SingTel said.
In addition, it incurred higher acquisition costs and spent more on various initiatives, though these are expected to contribute to revenue and earnings in subsequent years, it said.
SingTel launched mio TV in Q2 and has now signed up 10,000 customers.
Revenue from mobile phones rose 13 per cent to $322 million as the telco added a record 185,000 customers and grew market share 1.3 percentage points to 40.3 per cent.
Australian unit Optus recorded 3.7 per cent revenue growth to A$1.9 billion. Growth in Sing-dollar terms was 12 per cent to S$2.5 billion, as the Aussie dollar strengthened 8 per cent from a year earlier.
But SingTel’s efforts to maintain its position in the competitive market saw its margins fall, with operational Ebitda margin down 1.3 percentage points to 24.7 per cent. Net profit was 5.6 per cent lower at A$123 million.
Overall, SingTel’s pre-tax profit from associates was up 24 per cent to $633 million, driven mainly by Bharti which contributed $197 million.
On SingTel’s overseas acquisition strategy, Ms Chua declined to comment on a reported bid last month for a majority stake in state-owned Ghana Telecom, the West African country’s dominant operator.
‘Clearly we continue to look for investment opportunities, the focus remains in Asia where we think it’s a region we understand best,’ she said.
‘At the same time we are in the process where we are trying to learn new markets whether its in Central Asia or some of the Middle Eastern markets, and we’ve been shown various opportunities in Africa as well, but those markets are still in the stage where we’re learning them.’