Author: tfwee
MPS – Macquarie (BT)
MacarthurCook Property Securities Fund
Sept 14 close: A$1.07
Macquarie Research, Sept 13
RIGHTS issue to fund future growth: MPS has announced a one-for-three renounceable rights issue to existing unitholders. Full take-up from unitholders would result in the issue of a further 48.7 million units, equivalent to around A$51.1 million (S$65 million).
Impact: The rights issue applies to MPS units listed on both the ASX and SGX. The Australian issue price of A$1.05 represents a 4.2 per cent discount to 10-day VWAP prior to announcement, while the S$1.32 Singapore issue price represents a 1.5 per cent discount. New units will rank equally with existing units from the allotment date, expected Oct 19, and will be entitled to the December quarter distribution.
MacarthurCook in its own capacity will underwrite up to 4.8 million units of any shortfall at A$1.05 per unit. This represents just under 10 per cent of the full rights issue, or a A$5 million minimum raising.
Issue proceeds will initially be used to pay down existing debt. Repayment of a portion of MPS’ now fully drawn A$68 million cash advance facility with OCBC will enable the fund to invest in further opportunities as they arise.
We flagged the potential for MPS to raise further capital after its FY07 result, in light of management’s indication that it saw opportunities presenting themselves amidst current market volatility.
The impact on our forecasts is subject to numerous variables, including proportionate take-up by unitholders, the prevailing SGD/AUD exchange rate, timing of investment in new opportunities, as well as distribution yields and placement fees earned on new investments. If MPS is able to reinvest relatively quickly in investments generating yields of at least 9.5 per cent (around MPS’ distribution yield), this would have a neutral impact on EPS. But as a bear case scenario, if 50 per cent of the rights issue were taken up and only used to pay down debt, the impact would be a 4.1 per cent dilution in FY08 EPS.
Earnings revision: No change to earnings – subject to rights issue acceptance levels.
12-month price target: A$1.15 based on a DCF methodology.
Catalyst: Reinvestment into new funds at high yields and negotiated placement fees.
Action and recommendation: MPS’ high 9.5 per cent yield and high tax deferred combination remains an attractive combination for investors. Given the potential dilution of the rights issue, we have revised our recommendation to ‘neutral’ until evidence of successful reinvestment becomes apparent.
NEUTRAL
MIIF – BT
MIIF buys Taiwan’s infraVest for 13.3m euros
THE lure of the renewable-energy market has taken Macquarie International Infrastructure Fund (MIIF) to Taiwan, where it has invested 13.3 million euros (S$28 million) to acquire an operator of wind farms. The acquisition of infraVest Wind Power Co Ltd from Asia Wind Co Ltd and Meihui Windpark GmbH & Co KG is subject to regulatory approval and customary closing conditions, said MIIF.
The purchase offers MIIF the opportunity to participate in the emerging Taiwanese renewable-energy market, said Gavin Kerr, managing director of MIIF. ‘We anticipate that the acquisition will be yield accretive to MIIF,’ he said. ‘MIIF is well-positioned to make further investments in the Taiwanese renewable-energy sector as further opportunities emerge.’
The acquisition is priced at an EV/Ebitda (enterprise value/earn-ings before interest, tax, depreciation and amortisation) multiple of nine times, based on a forecast Ebitda of NT$296.2 million (S$13.6 million) for the 12 months ending Dec 31, 2008. The EV (gross debt plus acquisition price) is 58.6 million euros (S$123.4 million).
The payment will be funded by MIIF’s existing committed borrowing facilities, with final settlement expected to occur by the end of this year. infraVest Wind Power operates some 25 wind turbines in Miaoli County in Taiwan with a cumulative installed capacity of 49.8 megawatt, providing an essential service to the local communities. It benefits from long-term power purchase agreements at fixed tariff with Taiwan Power Company.
Besides stable and high Ebitda margins, infraVest also has predictable operating costs arising from long-term operations and maintenance contract with a subsidiary of Enercon Group – the world’s third-largest supplier of wind turbines – and minimal development capital expenditure, MIIF noted.
According to data from the Taiwan Bureau of Energy, renewable energy is estimated to increase to 10 per cent of total electricity capacity by 2010, of which wind generation is expected to make up 80 per cent of that renewable capacity by 2010.
The acquisition is the second Asian asset that MIIF has acquired this year. Including infraVest Wind Power, 17.7 per cent of MIIF’s portfolio will be located in Asia.
‘MIIF continues to develop a strong pipeline of Asian investment opportunities, which it expects will lead to further investments in high-quality Asian infrastructure assets this year,’ Mr Kerr said.
To this end, MIIF said due diligence is underway on a number of acquisition opportunities, while at the same time, it is looking to progressively divest some of its non-Asian assets to fund its Asian acquisition pipeline.
SingTel – CIMB
The tough gets going
• Reliable associate earnings + risk aversion = outperformance. Reliable earnings growth from SingTel’s blue-chip regional associates should find favour with investors as risk aversion heightens. Earnings growth for SingTel’s associates is based on solid domestic market fundamentals and should be relatively insulated from a US economic slowdown.
• Singapore growth re-rated. Singapore operations surprised with 10% yoy topline growth in 1QFY08 after years of sluggishness. Singapore is poised to deliver multiyear EBITDA growth of 4-5% p.a. with new service offerings.
• 4.6% yield limits downside risks. Our above-consensus yield expectation is backed by free-cash-flow yields of 4.6% and premised on a 70% payout ratio.
• Raising earnings estimates by 1-2% for FY08-10. Robust topline growth for Singapore operations in 1FY08 has convinced us that rising costs from the launch of new initiatives should weigh less on margins than earlier expected.
• Upgrading to Outperform from Neutral; raising target price to S$4.05. Our sum-of-the-parts valuation is raised from S$4.02 on the back of our earnings upgrade. SingTel is poised to outperform the STI, with heightened risk aversion being the key catalyst. It is now our top Singapore telco pick, offering reliable earnings growth and limited downside from a 4.6% yield. This highly-liquid stock is an attractive proxy for regional telcos in a risk-averse environment, in our view.
SMRT, SBS – BT
Bus fares to go up from Oct1, no change for train
Rise of 1 to 2 cents; PTC says majority of commuters will see no increase or small increase
LISTED public transport operators (PTOs) SMRT Corp and SBS Transit have succeeded in their application to raise bus fares but not train charges. Bus fares will go up by one to two cents from Oct 1 after the Public Transport Council (PTC) approved a 1.8 per cent increase, but train fares will remain unchanged.
The PTC said the majority of commuters will see no increase or a small increase. It said 52 per cent of all public transport trips by bus and rail will see no increase. But for 10 per cent, there will be a rise of one cent, while the remaining 38 per cent will see an increase of two cents.
In August 2007, SMRT and SBS Transit – which is part of the ComfortDelgro group – had applied to the PTC to increase bus and rail fares.
The council approved an overall fare increase of 1.8 per cent for adult EZ-link bus fares, but no rise for rail fares this year, after taking into account the fare adjustment cap formula introduced in 2005. ‘The PTC has to strike a balance between safeguarding commuters’ interests and ensuring the financial viability of the public transport operators so that they can continue to improve their services over time and sustain their capital investments,’ said PTC chairman Gerard Ee.
He said as part of PTC’s deliberations, the council compared the PTOs’ Rota (return on total assets) with the prevailing Rota figures of companies with similar industry and risk profiles. ‘The comparison suggests that our rail industry is doing much better. Hence, on balance, the PTC decided against raising rail fares, to the benefit of commuters,’ said Mr Ee.
The council also considered Singapore’s economic outlook and the affordability of public transport. It said the economic outlook is positive with the latest GDP growth forecast for 2007 revised upwards to 7 to 8 per cent and the unemployment rate for June 2007 at 2.4 per cent, the lowest in five years.
The public transport affordability indicator has also been on a downtrend for the past four years, indicating that fares have remained affordable for most commuters.
SBS Transit, which operates three-quarters of the public bus fleet, said that one in three of its commuters will not have to pay more. It said that the fare adjustment will yield $9.3 million for a full year but that will only bring partial relief from higher costs. Fuel costs, for example, rose 21.5 per cent or $18.2 million in 2006.
As for SMRT, it said that about 30 per cent of its bus trips will be unaffected by the fare revision.
‘Bus fares continue to remain affordable for the general public even with the 1.8 per cent increase as this is considerably lower than the annual increase in average monthly income per household of 5.7 per cent in 2006,’ said SMRT chief operating officer Yeo Meng Hin. ‘However, the adjustment does not cover the cost increases posted by the two-percentage-point increase in GST and the 1.5-percentage-point increase in employers’ CPF contribution.’
SBS Transit and SMRT have jointly contributed $0.6 million worth of transport vouchers to help needy families. Together with $2.4 million from the government’s Public Transport Fund, vouchers worth $3 million will be given out this year.
MPS – SGX
MacarthurCook Property Securities Fund Renounceable Rights Issue
The Directors of MacarthurCook Fund Management Limited (the “responsible entity”) are pleased to announce a 1 for 3 Renounceable Rights Issue (the “Rights Issue”) for holders of units in the MacarthurCook Property Securities Fund (the “Fund”).
The Issue price for new units issued under the Rights Issue will be A$1.05 (S$1.32, calculated using the Australian-Singapore exchange rate of as at 1.2610, which was the exchange rate as at 7 September 2007).
The Rights Issue will be available to unitholders who are resident of Australia, New Zealand, or Singapore as at the Record Date.
The Rights Issue seeks to raise up to A$51.08 million before expenses. Proceeds from the raising will be used to repay debt. However, the Fund will redraw debt in order to take advantage of attractive investment opportunities as they arise.
MacarthurCook Fund Management Limited (in its personal capacity) will underwrite any shortfall in the subscription for New Units under the Rights Issue at the Australian Issue Price of A$1.05, up to a maximum subscription of 4,761,905 New Units, for an underwriting fee of $50,000 (plus any applicable GST). Therefore, the minimum subscription amount under the Rights Issue will be A$5 million (subject to the terms of the underwriting agreement).
The Rights Issue will enable investors in the Fund to increase their unitholding at a potential discount to the prevailing market price of the Fund’s units, without incurring transaction charges such as brokerage. New units issued under the Rights Issue will rank the same as ordinary units of the Fund. New units will not be entitled to the distribution for the period ending 30 September 2007, as they will be issued after the record date for that distribution, but will be entitled to the distribution for the period ending 31 December 2007 and to all distributions after that date.
Based on the increased forecast distribution for the 2008 financial year of 10.5 Australian cents per existing unit and the Rights Issue unit price of A$1.05, an Australian unitholder that is issued a new unit under the Rights Issue is expected to receive distributions totalling 7.875 Australian cents on the new units for the remainder of the 2008 financial year. This represents a forecast annualised income return of 10.38% pa per new unit for Australian investors (assuming distribution reinvestment).
A Singapore unitholder that is issued a new unit issued under the Rights Issue is expected to receive distributions totalling 8.74 Singapore cents on the new units for the remainder of the 2008 financial year (based on a S$/A$ exchange rate of 1.2610, assuming a 60% tax deferred status and after applying 30% withholding tax). This represents a forecast annualised income return of 8.80% pa per new unit for Singapore investors (with no distribution reinvestment assumed).
A Rights Issue document and personalised application form for the Rights Issue will be despatched to unitholders on or about 25 September 2007. The offer period will close on 12 October 2007. Subject to the terms of the Rights Issue, all Australian, New Zealand and Singaporean unitholders who are registered at 7.00pm on 20 September 2007 (the “Record Date”) will be sent the information brochure and are eligible to participate in the Rights Issue.
Full details of the unitholders entitled to participate are set out in the Rights Issue document. The material terms of the underwriting agreement are also set out in the Rights Issue document.
Participating unitholders will also be entitled to trade their rights on the ASX on and from Friday, 14 September 2007 and on the SGX on and from Tuesday, 25 September 2007.
Applications must be made on the application form accompanying the Rights Issue document. Full details of terms and conditions of the Rights Issue are contained in the Rights Issue document which will be forwarded to all unitholders shortly.
2007 Financial Result Highlights
In a separate announcement made to the ASX and SGX on 31 August 2007, the 2007 financial year results were released.
The Fund has posted a net profit for the year of A$34.3 million – an increase of approximately 136% over the previous 12 month period. For the 2007 financial year earnings were A25.6 cents per unit compared with A13.4 cents per unit in the previous year, on a weighted per unit basis.
It was also announced on 26 June 2007 that ordinary distributions to unitholders (before any withholding tax) for the 2008 year are forecast to increase to A10.5 cents per unit.
2007 Results Highlights:
• Total Return of approximately 19% to Australian Investors for the year to 30 June 2007.
• Total Return of approximately 14% to Singapore Investors since listing 22 December 2006.
• Total Net Profit for the period to 30 June 2007 increased by approximately 136% when compared to the previous year.
• Earnings per unit (weighted basis) exceeded distributions made to unitholders by approximately 169%, or 16.1 Australian cents per unit.
• Net Tangible Asset backing has grown by approximately 13% from A$0.98 at 30 June 2006 to A$1.11 per unit as at 30 June 2007.
• Market Capitalisation has increased approximately 29% from A$122 million on 30 June 2006 to A$158 million at 30 June 2007.
• Closing Unit Price on the ASX increased 10% for the year to 30 June 2007.
• Closing Unit Price on the SGX increased 9.6% since listing 22 December 2006 to 30 June 2007.
• Distributions per unit for the 2007 financial year for Australian investors were on a par with the forecast at 9.5 Australian cents.
• Distributions per unit for the 2008 financial year for Australian investors are forecast to increase to 10.5 Australian cents, or for Singapore investors this equates to approximately 11.65 Singapore cents, assuming an A$/S$ exchange rate of 1.2610, a tax deferred status of 60% and after 30% withholding tax.
The results for this period are a result of the successful investment strategy employed by the Fund. With the Fund’s secondary listing on the Singapore Stock Exchange, the Fund was able to expand its portfolio. The results for the financial year show a significant increase in earnings per unit and we are also pleased to see the growth in value of the Fund’s investments.
Source : SGX