Australian company predicts strong earnings on U.S. Toll roads
February 22, 2007
The Age (Australia)
International tollroad operator Macquarie Infrastructure Group (MIG) is banking on the US market to underpin strong earnings growth and says Australian motorists need to be re-educated about toll rates.
The company on Thursday reported a 76 per cent surge in first half net profit to $1.44 billion, but conceded the result was influenced by gains from the demerger of three Sydney toll roads and the sale of a fifty per cent stake in its US operations.
Together, the deals swelled the profit by $644.8 million.
But MIG chief executive Stephen Allen said he expected the company to achieve double digit growth in earnings before interest, tax, depreciation and amortisation (EBITDA) in the next 12 months, largely on the back of its US investments.
"It continues to emerge as the most interesting market for private toll road operators and in the medium term, remains a place we will be able to generate returns for our security holders," Mr Allen said.
Traffic gridlock and chronic under investment in roads in the US was pushing demand for private investment, although public opposition to foreign ownership was a hurdle some US rivals would exploit.
"I fully expect those who are based in the US will continue to play to the foreign ownership card, it's effective in every market," Mr Allen said.
A major deal on the immediate horizon for MIG is the SH 121, a 22 kilometre tollroad to be built near Dallas, Texas.
MIG and partner Macquarie Infrastructure Partners will learn whether they're successful bidders by the end of the month.
The company's existing US assets performed well in the first half and all reported EBITDA growth.
MIG's Indiana toll road was the stand out with EBITDA increasing by 57.7 per cent during the period.
Non-US assets generally performed less impressively.
Earnings for the 407 ETR in Toronto rose 9.7 per cent due to lower costs while the M6 in England enjoyed EBITDA growth of 27.5 per cent, but was a beneficiary of roadworks.
Mr Allen said traffic growth for MIG's remaining Australian asset, the M7 Westlink tollroad, was below expectations and motorists may need to be educated about how the toll worked.
"Getting people aware that if they only travel five kilometres they only get charged for five kilometres," he added.
Mr Allen the spin-off of Sydney's Eastern Distributor, M4 and M5 assets into the recently listed Sydney Roads Group had been successful for security holders, delivering an internal rate of return of 27 per cent.
The company was happy, too, with its current on-market share buyback, with $303 million of $1 billion worth of shares acquired since October.
The company maintained its previous distribution guidance of 20 cents per stapled security for 2006/07 and gave preliminary guidance of 20 cents for 2007/08.
It will pay an interim distribution of 10 cents for the six months ended December 31, in line with last year.
MIG stapled securities closed two cents higher at $3.85 on Thursday.
© 2007 AAP:
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