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.

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 Q3 earnings up 40.7% to $33.2m

Increased earnings due to higher investment income

MACQUARIE International Infrastructure Fund (MIIF) yesterday reported net profit attributable to equity holders of $33.2 million for the third quarter, up 40.7 per cent year on year.

The earnings boost was on higher investment income. Total revenue for the three months ended Sept 30 was $35 million, up 37.7 per cent from $25.4 million for Q3 last year.

For the nine-month period, however, net profit fell 35.9 per cent to $33.2 million. And total revenue fell 23 per cent to $43.8 million.

MIIF said the falls were in line with expectations and follow the disposal of interests in Macquarie European Infrastructure Fund during Q4 2009, and Arqiva and the Canadian Aged Care in the current year. Arqiva is a communications infrastructure and media services company with a presence in Ireland, mainland Europe and the US.

MIIF said its core Asian infrastructure businesses, such as its Chinese port and expressway units, continue to perform strongly. ‘Revenue at Changshu Xinghua Port is up significantly due to continued cargo diversification, while Hua Nan Expressway has witnessed strong growth in traffic due to continuing economic recovery in the Guangdong region and the opening of phase three of the road,’ said John Stuart, CEO of MIIF’s manager, Macquarie Infrastructure Management (Asia).

‘Management continues to focus on executing MIIF’s strategy of acquiring Asian infrastructure businesses,’ he said. ‘We have reviewed a number of investment opportunities in which to deploy MIIF’s significant cash balances. However, none of these have met the strict investment criteria that we apply.’

MIIF said in its financial statement that it has cash and cash equivalents of $487.7 million.

MIIF units lost half a cent yesterday to close at 58 cents.

MIIF Q3 earnings up 40.7% to $33.2m

Increased earnings due to higher investment income

MACQUARIE International Infrastructure Fund (MIIF) yesterday reported net profit attributable to equity holders of $33.2 million for the third quarter, up 40.7 per cent year on year.

The earnings boost was on higher investment income. Total revenue for the three months ended Sept 30 was $35 million, up 37.7 per cent from $25.4 million for Q3 last year.

For the nine-month period, however, net profit fell 35.9 per cent to $33.2 million. And total revenue fell 23 per cent to $43.8 million.

MIIF said the falls were in line with expectations and follow the disposal of interests in Macquarie European Infrastructure Fund during Q4 2009, and Arqiva and the Canadian Aged Care in the current year. Arqiva is a communications infrastructure and media services company with a presence in Ireland, mainland Europe and the US.

MIIF said its core Asian infrastructure businesses, such as its Chinese port and expressway units, continue to perform strongly. ‘Revenue at Changshu Xinghua Port is up significantly due to continued cargo diversification, while Hua Nan Expressway has witnessed strong growth in traffic due to continuing economic recovery in the Guangdong region and the opening of phase three of the road,’ said John Stuart, CEO of MIIF’s manager, Macquarie Infrastructure Management (Asia).

‘Management continues to focus on executing MIIF’s strategy of acquiring Asian infrastructure businesses,’ he said. ‘We have reviewed a number of investment opportunities in which to deploy MIIF’s significant cash balances. However, none of these have met the strict investment criteria that we apply.’

MIIF said in its financial statement that it has cash and cash equivalents of $487.7 million.

MIIF units lost half a cent yesterday to close at 58 cents.

MIIF sells Arqiva stake

SHARES of Macquarie International Infrastructure Fund (MIIF) rose 3.7 per cent yesterday after it announced that it has agreed to sell its 8.7 per cent interest in Arqiva in the UK for a total cash consideration of £116.5 million (S$244.9 million).

The net proceeds are expected to total $240.1 million, said MIIF, which is now targeting acquisitions in Asia.

The announcement, made before the start of trading, led the stock to close up two cents at 56 cents, after touching an intraday high of 58 cents.

The divestment will be made to three infrastructure investors, all of which are existing shareholders of Arqiva.

‘Following the sale of MIIF’s interest in Arqiva, its portfolio will comprise entirely of direct investments in Asia. This will be a significant milestone for MIIF,’ said John Stuart, CEO of MIMAL, MIIF’s manager. ‘Importantly, the proposed sale is at a significant premium to the value implied by MIIF’s prevailing share price.’

Assuming the sale of MIIF’s interests in Arqiva as well as Macquarie European Infrastructure Fund and Canadian Aged Care, MIIF is expected to have a cumulative cash balance at the end of May this year of approximately $474.0 million which equates to 35 cents per share. The value of MIIF’s remaining investments is $523 million, or 39 cents per share, according to the fund.

‘MIIF’s management is now focused on identifying attractive acquisition investments in Asia. With this significant cash balance, MIIF is well positioned to capitalise on these opportunities should they arise in the course of the year,’ said Mr Stuart.

Other options include a share buy-back or payment of a special dividend, he added.