Macquarie International Infrastructure Fund

[Nick]

MIIF initiated its unit buy-back program in March 2011 as an initiative to return capital to unit-holders, support the unit price and raise the NAV by repurchasing units at a discount. To date, MIIF has repurchased 29.2 million shares from open market which would cost approximately S$18 million. This represents 2.25% of the outstanding unit float at the start of the year. I must applaud the Management for using excess cash to repurchase units (which benefit both parties) rather than simply taking the easy route of keeping the cash in the bank till it makes an acquisition.

MIIF has forecast a S$0.055 DPU for FY11 in the previous M&A deal. Based on the current outstanding unit float, this will amount to $69.8 million distributable income annually. In other words, the Fund must receive close to S$80 million worth of distributions from its investments annually. The key question therefore is whether can the Fund sustain this performance for the next few years ?

Personally, I believe HNE could distribute at least S$20 million in FY 12 as long as earnings remain at this level. It should distribute a bonanza distribution in FY 11 due to the spectacular performance in 2010. CXP is likely to distribute around $5 million annually if earnings continue to be stable. This implies that TBC will have to generate at least S$55 million distribution in the next few years in order to meet the S$80 million mark. Loan repayment kicks in 2014 which would imply that TBC needs to generate at least $275 million EBITDA in order to maintain this level of distribution. TBC generated $185 million EBITDA in FY 2010. Perhaps when TBC growth trajectory becomes clear, this issue will be answered with more certainty.

On another note, MIIF would still have S$130 million worth of cash after taking into account the recent unit buy backs. If they continue to repurchase units and hit the 129 million unit mark, they would have succeeded in reducing the distributable income needed to meet the DPU guidance by $5.5 million. In some sense, this is a much safer way of maintaining (or growing) the DPU as opposed to new acquisitions. Time will tell whether the Management initiatives will bear fruits.

(Not Vested)

[KopiKat]

From their SGX announcement on 11 Apr 11,

http://info.sgx.com/webcoranncatth.nsf/V...E005B83EC/$file/MIIFCircularApril2011.pdf

under 2.2 Senior Loan Amendments, they gave a schedule of the Loan Repayment for TBC which will recommence on 2013 (small amount of S$6.5M) and larger amounts of S$100M+ for the next few years. I think that'll impact the FCF of TBC and the amount of dividend they can pay to MIIF from 2014 onwards.

(Vested) - but too lazy to check for TBC financials to analyse the above. Will likely sell before 2014 if I find time to confirm the above but in the meantime, will try to enjoy the semi annual 2.75ct div from Jun 11.

[Nick]

From their SGX announcement on 11 Apr 11,

http://info.sgx.com/webcoranncatth.nsf/V...E005B83EC/$file/MIIFCircularApril2011.pdf

under 2.2 Senior Loan Amendments, they gave a schedule of the Loan Repayment for TBC which will recommence on 2013 (small amount of S$6.5M) and larger amounts of S$100M+ for the next few years. I think that'll impact the FCF of TBC and the amount of dividend they can pay to MIIF from 2014 onwards.

(Vested) - but too lazy to check for TBC financials to analyse the above. Will likely sell before 2014 if I find time to confirm the above but in the meantime, will try to enjoy the semi annual 2.75ct div from Jun 11.

Agreed. I used those figures to make some estimations. I am not very keen with this structure. Unless TBC generates $275 million EBITDA by 2014, it won't be able to sustain the proposed DPU going forward. Granted, TBC EBITDA has been growing annually so let's see whether the rate of growth can achieve this target. HNE is also another potential problem - the debt repayment profile kicks in significantly after 2013. HNE growth starting to slow down. Meanwhile, the big leap in DPU will be kindly welcomed by unit-holders !

(Not Vested)

[Nick]

http://www.remisiers.org/cms_images/July...sideup.pdf - a rare report on MIIF by KE Research

As of today, MIIF has repurchased 30,869,954 units from open market. This represents 2.3% of the original unit float at the start of the year. While MIIF can easily maintain its proposed annual DPU of 5.5 cents for the next 2 years, there are questions whether it can continue to do so from 2014 onwards when major loan repayment kicks in. The key catalyst will be the EBITDA growth of its underlying assets which if large enough may give unit-holders faith that loan repayment can be carried out with minimal disturbance to the overall DPU in the years to come. As of 28 June 2011, MIIF has $137.8 million cash with no debt at Fund level. It currently owns 81.0% of HNE Expressway which has concession rights to 2026, 38% stake in CXP Port with concession rights to 2046 and 47.5% stake in TBC (a telco in Taiwan).

(Not Vested)

[Nick]

http://info.sgx.com/webcoranncatth.nsf/V...B002F515F/$file/MIIFHY2011ResultsDate.pdf?openelement - MIIF will release its 1H 2011 results on 10 August 2011. The Fund has provided a 1H dividend guidance of 2.75 SG cents.

MIIF has repurchased 41,172,954 units from open market this year. This represents 3.1% of MIIF's outstanding units at the start of the year. The fund saves on $2.26 mil worth of distributable income by the reduction of the unit float thereby making it easier to sustain dividends in the future.

It must be noted that certain assets are concession based so the cash-flow are by no means indefinite.

(Not Vested)

[Nick]

MIIF: Good Assets Run Deep (SIAS)

http://kfc1973-stock.blogspot.com/2011/0...-sias.html [Report]

This is a very comprehensive report written after a site visit to the 3 income generating assets owned by MIIF. Considering how volatile the economy is, would investors consider Asian infrastructure businesses to be a viable defensive play ?

(Not Vested)

[Nick]

MIIF ANNOUNCES FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2011

Key Highlights

• Strong results at Taiwan Broadband Communication and Changshu Xinghua Port
• Decline in traffic at Hua Nan Expressway relative to 2010
• Strong balance sheet maintained with cash balances of S$137.9 million and no corporate-level debt
• Declared interim dividend up 83 per cent to 2.75 cent per share
• Net Asset Value of S$996.7 million or S$0.79 per share, down from S$0.80 per share in the previous quarter

http://info.sgx.com/webcoranncatth.nsf/V...700541FAD/$file/MIIFHY2011Preso.pdf?openelement [Presentation Slides]

http://info.sgx.com/webcoranncatth.nsf/V...700541FAD/$file/MIIFHY2011Results.pdf?openelement [Press Release]

http://info.sgx.com/webcoranncatth.nsf/V...700541FAD/$file/MIIFHY2011SGXReport.pdf?openelement [SGX Report]

A decent set of result with TBC and CXP reporting steady growth and posting a good outlook for 2H 2011. HNE result took a slight decline but the Management is optimistic about its performance in 2012 when another connecting tollroad opens up to boost its demand. MIIF continues to re-purchase its shares since it trade at a discount to its NAV. It will continue to do so unless they find an attractive investment. The B/S at fund level remains sound with no corporate debt and over $137 million cash. At asset level, the debts have been refinanced and continues to be amortized on a regular basis. NAV has declined slightly but this isn't surprising since HNE is a self liquidating investment and partially offset by valuation gains in CXP.

MIIF closed at 55.5 cents giving rise to an annualized yield of 9.9% and a slight discount to its NAV of 79.0 cents. Since both HNE (expires in 2026) and CXP (expires in 2046) are concession assets, its real yield will differ.

(Not Vested)

[freedom]

there is reason why MIIF must be in a net cash, no debt position. Its investments are in high leverage situation already. In a way, if MIIF intends to hold its investment for long, it must be ready to inject cash into those high-leverage investment at any time. therefore, certain leverage of its investment should count as part of MIIF's leverage. Assuming MIIF was not in a good financial position and situation became so bad, its investment would have to do cash call, either MIIF could inject the cash and keep it as a longer investment or sell it at substantial loss because of cash call. I believe that's what happened in 2009 between CapitaLand and CapitaMall/CapitaComm.

[Jared Seah]

For Reits I go to AK, for telecom stocks I go to Drizzt. And for infrastructure trusts, now I go to you!

Thanks Nick for the postings on infrastructure trusts! Very informative

[egghead]

Strong results from CXP means Pan United will also benefit...