MIG 0.00% 4.4¢ a.c.n. 059 457 279 limited


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    Some more data:
    MIG reported an overall consolidated result of $860m after tax, driven by large revaluations on Highway 407 and other Cintra assets, Midland Expressway, Eastern Distributor and M5 Motorway.

    MIG also reported unconsolidated accounts (ie, on a 'holding company' basis) for the first time. This showed net operating cashflows to MIG of $72m after subtraction of all fees.

    Net asset value per share before deferred tax was $3.14 (prev. $2.69). Distributions for the next three years will be 7.5c pa partially franked.

    Reported NPAT was $509m (MRE forecast $596m), the difference being primarily due to a higher forex impact on revaluations. MIG continues to take a conservative approach to valuing its assets (eg, 7.0% risk premium on Midlands vs MRE 4.5%; H407 4.4% vs MRE 4.0%) and, as such, further large revaluations are expected over the next 12-18 months as H407 continues rampup on new sections and Midlands opens to traffic.

    The most important aspects of the result were:

    ~ Increased disclosure of results on individual assets (EBITDA and DSCRs). This eliminates the previous issue of a lack of transparency in the accounting for MIG. The release of unconsolidated accounts shows the true net operating cashflows to MIG as the holding company ($72m for the period), with a positive growth outlook.

    ~ Demonstration of growth and strength of assets. All roads showed good growth in revenue and EBITDA as well as conservative interest coverage ratios. The weighted average growth in EBITDA for MIG overall was 37%, which compares very favourably with other tollroad stocks. With future performance fees being taken as scrip and the roads continuing to record strong traffic and revenue growth (and Midlands coming on line in late 2003), this number will increase rapidly going forward.

    ~ Clarity on the cash position and distributions. MIG has $373m in cash at the moment, which will be sufficient to fund all current projects being considered (SR-125, Western Sydney Orbital and possibly a road in Greece). As such, there will be no capital raisings for at least 12 months. Management has confirmed that distributions will be 7.5c pa plus franking credits going forward, above MRE's previous expectations of around 5.0c pa.

    The focus on MIG has now shifted from disclosure and gearing issues towards the underlying growth fundamentals of MIG's assets and, consequently, we believe the stock will rally strongly. The NAV of $3.14 is the short term price target for MIG (+8% on current levels), as the share price has regularly re-rated to NAV post-result. As MIG demonstrates the power of the flexible tolling on Highway 407 over the next six to 12 months and Midlands opens in September 2003, the share price will push towards our fair value range of $4.00-4.40.
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Currently unlisted public company.

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