Macquarie Infrastructure Group (MIG) Update

Submitted by Jim Thesiger on 21 May, 2008 - 17:12

Macquarie Infrastructure Group (MIG) has an Outperform recommendation with a 12 month price target of $4.10 from Australian Stockmarket analyst Macquarie Research Equities.

Macquarie Infrastructure Group (MIG) – Deal Provides Valuation Clarity

A significant event has occurred overnight with the announcement of a successful bidder for the Pennsylvania Turnpike. Despite Macquarie Infrastructure Group (MIG) not winning the bid, the sale price of 12.8 Billion has provided clarity on the valuation of MIGs portfolio and reassured analysts as to the health of the infrastructure sector. Today, Macquarie Research Equities (MRE) reviews the Pennsylvania Turnpike deal and the impact on MIGs valuation.

The Pennsylvania Turnpike deal represents tight pricing in the U.S with an estimated equity IRR of 10.6%. The tight return on the deal shows that there is strong demand for similar assets such as MIGs investment the 407 M6 along with its US and French road assets. From a valuation perspective, the winner of the bid for the Pennsylvania Turnpike, Abertis is valued on a multiple of 23.1 - 26 times. MIG on the other hand is currently valued on a multiple of 20.9 times. When MIG is valued on a 23.1 times multiple a valuation of $4.15 is reached

MRE has maintained their outperform recommendation with a 12 month price target of $4.10 which is similar to the valuation reached when using Abertis’ 23.1 times multiple. The Pennsylvania Turnpike deal has proved that there is strong demand for infrastructure assets and that MIG is particularly attractive considering their concessions provides more flexibility to exploit future strong demand.