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Non-Tech : SPIN-OFFS "secret hiding places of stock market profits"

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To: 249443 who wrote (959)	5/25/2006 8:11:14 PM
From: 249443	Read Replies (1) of 1185

Macquarie: MIG - Demerger the Nearer-Term Catalyst 26/05/2006 egoli.com.au "Earlier in the week, Macquarie Infrastructure Group announced that the “UK Government has acknowledged the refinancing of the M6 Toll is to proceed”. Such a refinance has been well flagged. The new news is that MIG has also agreed to invest up to £112m (2006 figures) into the road network around the M6 Toll – it will construct a link from the M54 to M6 Toll, improving the M42 slip road to provide an extra lane, as well as providing ongoing operating and maintenance on both. This is obviously a positive for the stock as it should encourage traffic onto its wholly-owned M6 road. Shares in MIG have slumped almost 16% since touching its calendar year closing high of $3.94 early in April. Macquarie Research Equities (MRE) continues to remain bullish on the outlook for MIG, and reiterate their 12-month price target of $4.21. Including yield, this target price implies a 12-month total shareholder return of ~35%. The polite action to take. It is important to note that MIG did not need to get government approval for its refinancing. Agreeing to re-invest some refinancing proceeds into feeder roads is diplomatic (as was fixing tolls for 2006), however it also appears to be a solid investment. Only a relatively small conversion of traffic is required. On a simple cashflow analysis, MRE estimate a 7–8 year payback for MIG. This would require conversion of 10–12% of M54 traffic to continue on the M6 Toll which appears reasonable. This demonstrates the option value inherent in toll roads. No other party could find this investment as attractive as the incumbent toll road operator, being the equivalent of a bolt-on acquisition. MIG has not yet confirmed the size of the refinancing. MRE still expect a refinance of ~A$700m using a similar capitalising debt structure to ITR and Skyway. It is now subject to a bank tender process and the size and structure will be confirmed in the coming months. The bond environment might be hostile, however this appears priced in. Gaining financial flexibility through the M6 Toll refinance is a positive for MIG – the quantum is the key now. The nearer-term catalyst appears to be the demerger of the Australian assets. MRE reiterate their outperform recommendation. Traders looking for maximum exposure to short-term movements in MIG should consider the following equity warrants for a high-risk, high-return strategy. Investors and traders looking for short to medium-term leveraged exposure to MIGshould consider Macquarie Instalments for a higher risk, higher return alternative to direct share investment. Long term, more conservative investors looking for a simple, "set and forget" investment should consider the Self Funding Instalments over MIG. SFI's are moderately geared, have no annual resets and a maturity date in up to five years..."

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