Friday, August 22, 2008

Poor traffic numbers shock Macquarie Investors

MIG bashed for value cut

August 22, 2008

Scott Rochfort
The Age (Australia)
Copyright 2008

MACQUARIE Infrastructure Group has suffered one of its worst one-day drubbings after the toll-road group slashed the book value of its assets by $1.7 billion.

Securities in MIG closed down 14¢ at $2.49, having slumped as much as 44¢, or 17%, in morning trade, after the company shocked investors by announcing the book value of its portfolio of toll roads had fallen from $10.2 billion to $8.6 billion in the second half. This had led to a fall in MIG's net asset value per share from $4.59 to $3.84. The company blamed the devaluation on changing "risk premiums" on several of its roads.

MIG also said it would sell its 50% stake in Sydney's M7, to help fund the buyback of 10% of its stock. But MIG chief executive John Hughes denied it was part of a wider strategy by Macquarie eventually to delist underperforming funds.

"We've told the market for two-odd years that we're a developer of roads," said Mr Hughes, arguing MIG never intended to hold on to its 50% stake in the M7 for the long term. "It makes good sense to see what value we can crystallise in an economy that's doing really well," he said.

Speculation of a possible privatisation of Macquarie's various infrastructure funds has gathered pace since mid-June, when the investment house announced plans to privatise its underperforming cashbox Macquarie Capital Alliance Group.

The share price fall was exacerbated by MIG reporting a bigger than expected 55% fall in net profit to $767 million. But MIG said its final distribution would be unchanged at 10¢ a security.

The biggest contributor to the $1.7 billion cut in the value of MIG's roads was the slashing of the book value of its stake in Britain's longest toll road, the M6, from $3 billion to $2.2 billion, which was partly blamed on poor traffic numbers.

MIG said it expected to conclude the sale of the Sydney M7 stake — worth $802 million on its books — by January. It is also looking to divest its stake in the Portuguese Lusoponte toll road worth $188 million.

But Mr Hughes rejected speculation MIG could also sell its remaining stake in its various US toll roads. It sold a 50% stake to the unlisted Macquarie Infrastructure Partners in late 2006.

© 2008 The

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