Macquarie International Infrastructure Fund

[Nick]

MIIF repurchased 3.329 million units this week reducing its total unit float to 1,246,595,154 units. Since the start of the year, MIIF has repurchased 51,208,954 units or 3.95% of the original unit float. If they continue to distribute 5.5 SG cents annually, the share buy-back so far has reduced their distribution cash out-flow from $71.34 million to $68.56 million.

http://kfc1973-stock.blogspot.com/2011/0...lance.html - An analyst report with a 'Neutral' rating.

I do share similar sentiments about its investment in HNE toll road and whether it would be able to sustain sufficient EBITDA growth over the next decade to offset the loan repayment increase in 2013 onwards. More clarity on the financial position of the underlying assets will be more helpful in valuing the Fund.

MIIF is unique since it is the only infrastructure trust listed here that repays its debt regularly. I don't see much upside unless the Management acquires another asset or if MW turns around when the sale of carbon credits are approved (if).

(Not Vested)

[d.o.g.]

Since the start of the year, MIIF has repurchased 51,208,954 units or 3.95% of the original unit float. If they continue to distribute 5.5 SG cents annually, the share buy-back so far has reduced their distribution cash out-flow from $71.34 million to $68.56 million.

Considering that they have probably spent $25m to buy back the 51m units, I don't think saving money on distributions enters into the consideration at all.

We should probably look at the incentive structures in place for management - why would they favour buybacks (which may increase the share price) over acquisitions (which will increase management fees)? Or is the higher share price needed to support a future fundraising, to make the proposed acquisitions yield-accretive?

[Nick]

Since the start of the year, MIIF has repurchased 51,208,954 units or 3.95% of the original unit float. If they continue to distribute 5.5 SG cents annually, the share buy-back so far has reduced their distribution cash out-flow from $71.34 million to $68.56 million.

Considering that they have probably spent $25m to buy back the 51m units, I don't think saving money on distributions enters into the consideration at all.

We should probably look at the incentive structures in place for management - why would they favour buybacks (which may increase the share price) over acquisitions (which will increase management fees)? Or is the higher share price needed to support a future fundraising, to make the proposed acquisitions yield-accretive?

Hi d.o.g.

Glad to hear your views on this intriguing share buy back.

I have been thinking about their motives behind the share buy-back since it is not typical of a biz trust manager to willingly return capital back to unit-holders in the form of capital reduction or unit buy backs. MIMAL fee structure is pegged to the market capitalization of the Fund - net corporate cash. Share buy backs reduce the market capitalization unless it manages to shore up the share price. But it didn't work since share price has dropped from 62 cents to 52 cents in the past 6 months. This will reduce their Management fee. I believe that this is due the market's uncertainty over the sustainability of the guided 5.5 cents DPU in the years to come. The market would have reacted positively if MIMAL had used the $25 mil cash spent on unit buy back and the current $130 mil cash hoard (and possibly their untapped $100 mil corporate facility) to make an acquisition to boost distributable income. A $130 million acquisition of an asset with 50% gearing and 5% asset yield could generate $13 million revenue for MIIF.

Alternatively, the Management could mean well and would much rather repurchase and cancel shares than pay a one off special dividend. MIMAL said they evaluated 60 acquisition opportunities and only bidded for 2 (but lost out due to pricing). Is there a need to raise funds ? I don't think its likely since they have yet to deplete their cash nor touch the loan facility. Plus, since Management fees is pegged to Market Cap (and not AUM), they must ensure the share price don't dive in case of rights/placement.

Would appreciate your views in this matter. MIMAL is certainly an enigma with a radically different fee structure !

[weijian]

when MIIF sold it's non asian assets from 2008-2010, it had ~420mil cash hoard, that translated to ~0.37cents/share and i guess many people took a position in MIIF in anticipation of a 1 time special payback. When they realize it was never going to happen, they sold it out and i guess this is also 1 reason why current manager's actions, despite been value-added, did not translate to support of share price. In addition, MIIF has fierce competition with REITS and other trusts for dividend yielding stocks

Management fee structure: Market Cap - cash + total external borowing + committed future investments
Taken from: http://www.macquarie.com/mgl/miif/invest...ement-fees

(vested in mIIF)

[Nick]

MIIF resumed share buy-backs after a 3 week break by re-purchasing 5.813 million shares over the past two days. This brings down its total outstanding shares to 1,240,782,154 units.

In recent weeks, its substantial unit-holder Asset Value Investors scooped up over 13 million shares to boost its effective stake to 7.15%. Asset Value Investors became a substantial unit-holder of MIIF on 26 June 2011.

Share price closed at 46.5 cents.

(Not Vested)

[Nick]

MIIF repurchased 2.207 million shares over the past 3 days reducing its outstanding float to 1,238,575,154 units. It will announce its 3Q 11 results on 10 Nov 2011 before trading hours. 3Q is a pretty important period for MIIF as it is the quarter where the bulk of its revenue flows in with distributions coming from HNE, CXP and TBC.

(Not Vested)

[Nick]

MIIF repurchased 4.297 million units this week thereby reducing its outstanding float to 1,234,278,154 units. This year MIIF repurchased and cancelled 63,525,954 units and its share price closed at 49.0 cents today.

(Not Vested)

[Qiaofeng]

when MIIF sold it's non asian assets from 2008-2010, it had ~420mil cash hoard, that translated to ~0.37cents/share and i guess many people took a position in MIIF in anticipation of a 1 time special payback. When they realize it was never going to happen, they sold it out and i guess this is also 1 reason why current manager's actions, despite been value-added, did not translate to support of share price. In addition, MIIF has fierce competition with REITS and other trusts for dividend yielding stocks

Management fee structure: Market Cap - cash + total external borowing + committed future investments
Taken from: http://www.macquarie.com/mgl/miif/invest...ement-fees

(vested in mIIF)

I have some very negative views. In principle, I dun wish to talk down a share after divesting.
So my views are meant only for sharing from a value investing point. see blog; if interested.

Those adverse to bad news, should avoid.


My 1c Gibberish

[Nick]

Hi Qiaofeng,

I have been puzzled by the share buy backs as well since it isn't typical of a business trust to return capital to unit-holders. In your post, you mentioned that share buy backs can increase A ie the market capitalization. But how does that work out ? Wouldn't share buy back reduce the market capitalization of the Company (assuming rationale market behaviour) since the company profit generating ability remains unchanged but its cash position would have declined slightly thereby making it less valuable than before ? Would appreciate your view in this matter.

Do agree about the Arqiva disposal. Wiped out the 2006 - 08 profits. Previous CEO rode the credit boom and failed to exit before the bust. New CEO have streamlined it to just 3 core assets. Personally, now its more of an asset owner/operator than an asset trader (their old strategy). They should increase the transparency of their underlying assets as well.

Please feel free to post contrary views here. It would be great to see different perspectives on the same company and will therefore help investors (especially those who are not vested like myself) learn more about the biz model and their prospects.

(Not Vested)

[Drizzt]

The share buy backs essentially shows that the management think there I'd nothing on the market that will generate more cash flow than teir own asset.

Buying back own undervalue shares does 2 things. It improves shareholders return yet increases their Mamagement fees