Macquarie Infrastructure Group (MIG) Shares

Submitted by Craig Strzelecki on 22 October, 2007 - 07:12

Macquarie Infrastructure Group (MIG) have a retained Outperform recommendation from Australian sharemarket analyst Macquarie Research Equities. Shares in Macquarie Infrastructure Group (MIG) have underperformed the broader market in recent months, and are currently down over 26% since reaching their highs in March. Late last week, the 407 reported its September quarter results, with EBITDA up 21.0% to $118m on the back of a 19.2% increase in revenue to $144.9m. MIG indicated M6 Toll reported 5.7% EBITDA growth.The analysts remain bullish on the long term outlook for MIG and believe at current prices, Macquarie Infrastructure offers excellent value to investors. The strength of the 407 result reflects the lane widening combined with seasonally stronger summer. The revenue growth of 19% is not surprising as natural growth would be 16–17%. The additional 3% comes from a high proportion of non-transponder users during the summer period. Combined with a strong cost discipline, EBITDA margins expanded to 81%. M6 Toll’s weak traffic growth was anticipated thus the EBITDA growth of 5.7% is not surprising and is consistent with the analysts expectation of 6.7% for the half. The effect of the road works is starting to diminish where EBITDA growth is likely to normalise at +10% post December. Driving the growth should be a steady rebound in traffic combined with another 50p price rise. The departure of Stephen Allen is disappointing to the extent that he has overseen the improvement in the roads operational performance, continued the asset rationalisation, and collectively bought well. The latter may be disputed, but APRR is simply a stunner (if only he had bought more), and the US assets have already realised a degree of value. John Hughes comes from a similar background with experience in both toll road acquisitions and broader asset class. There is scope for a minor upgrade to our 2007 407 EBITDA expectation of c$218m given the strength of 3Q at c$118m, although this translates into a very small change in our MIG forecasts. At a 26% discount to NPV and a 22% discount to prospective NAV, MIG is still offering excellent value to investors. The quarterly results should help to underline the inherent value in these two key assets.

Macquarie Infrastructure Group Limited is listed on the Australian Stock Exchange (ASX) under stock code MIG. You can view their investor website here. MIG was listed on the ASX on 16 December, 1996. Stephen Allen is the CEO for Macquarie Infrastructure Group and Mark Johnson the Chairman. Macquarie Infrastructure Group (MIG) is one of the largest developers and operators of toll roads in the world. MIG has a geographically diversified portfolio of 11 toll roads across seven countries, and a track record of successfully integrating significant, complex businesses. Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. You can use Instalment Warrants to trade MIG. Check your charts and good luck with your share trading!

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