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MIIF: Asian Pay Television Trust (APTT).

Thursday, April 4, 2013

MIIF is calling for a special general meeting on its plan to spin off its stake in Taiwan Broadband Communications (TBC) through the setting up of a new business trust, Asian Pay Television Trust (APTT).

The idea is that this will further unlock value for unit holders who could either accept new units in APTT or cash in payment. Overseas unit holders can only accept cash in payment. The minimum valuation of MIIF's stake in TBC puts it at S$469.5 million or S$0.408 per unit, net of costs.

This is probably the fund's most valuable asset. In terms of proportion to the fund's NAV, it is approximately 60%. In terms of earnings contribution, it accounts for about 76% of the fund's earnings. So, it is obvious that TBC is the star performer in the fund's portfolio.

Could unit holders profit from this spin off?

1. For a business that is worth at least S$469.5 million, it generates an income of about S$44 million. That gives us a raw yield of 9.37%. What would the final distribution yield be like, after costs? 8%? In a yield hungry world, we could possibly see distribution yield compressing to under 7% which means the market value of unit holders' investment in APTT could then see a gain of approximately 15%.

2. A sell off of MIIF units by Mr. Market could happen, post spin off. Since TBC accounts for some 76% of the fund's earnings, MIIF's unit price could decline proportionally. However, Mr. Market doesn't behave rationally all the time. We could take advantage of drastic mispricing to sell or buy units in MIIF then as there could be some confusion as to the valuation of MIIF, post spin off.

For now, we can only wait to see how things will turn out.

See MIIF's full 2012 results: here.

Related post:
MIIF: Realising value.


wirbelwind said...

Regardless whether we are the current shareholders of MIIF or interested parties in subscribing the IPO of APPT, I think both will get a yield of around 8.4% (assuming IPO pricing at NAV, which is $494 million).

Sounds like getting the share option offer is better than getting cash instead. I would rather sell the shares on the first day of IPO for capital gains, as you have pointed out ;)

AK71 said...

Hi wirbelwind,

As minority shareholders, we can only wait and see for now. Whatever the outcome, we will have to do what is in our best interest. :)

CS said...

Hi AK,
Finally there is some real action from MIIF. After spinning off TBC and say we get back cash or new APTT shares worth S$0.408 per MIIF share, the remaining assets in MIIF would be the toll way, part of the port and miao li wind turbine which together contribute a small faction of what MIIF could generate before the spin-off. Based on your good analytic ability, what is the reasonable NAV of MIIF post IPO of APTT? I just wonder whether it is better to sell MIIF pre-IPO and at what price. Quite confused at this point.

AK71 said...

Hi CS,

Yes, I am betting on some confusion which could likely persist on the part of Mr. Market to present opportunities to make some money.

Well, the easiest way to arrive at a new fair value would be to simply lop off 60% of the fund's current NAV which is about 68c a unit. Take 60% off and we get 27c or so.

If we want to have the current distribution yield from MIIF maintained after TBC has been removed from MIIF's portfolio, then, a 76% reduction from the current market price would provide fair value.

Today, the unit price hit a high of 60c. Based on this, the new fair value, post spin off of TBC, is only 14.5c.

Between 27c and 14.5c is a pretty big range. ;)

Poh Soon said...

I am wondering, is it really beneficial to us the minority shareholder by divesting TBC to APPT? I.e. from a business trust to another business trust?

Who will managed this new trust? So, will it end up that same management that managed MIIF now, will end up managed APPT as well? So, the management got the bonus for divestment of TBC, and also fees for manage APPT, eventually?

To really benefit the minority shareholder via divestment, isn't it make more sense to divest it to third party for a price higher than valuation?

AK71 said...

Hi Poh Soon,

I have the same questions in my mind but, apparently, to divest to another party requires regulatory approval and it seems complicated (if the explanation given by MIIF's management is to be believed).

I won't be able to attend the SGM. So, if you are attending, please ask the questions and share with us their response. Thanks. :)

shuaka said...

when is the ipo listed
i am keen to buy small lots for dvd yield .

shuaka said...

i am keen to apply for the ipo
when is it last day ?

AK71 said...

Hi shuaka,

Rather enthusiastic, I see. :)

We will just have to wait for the SGM to be convened first. ;)

Poh Soon said...

Hi AK,

I doubt that i would have time to attend the SGM either.

AK71 said...

Hi Poh Soon,

Let us hope that fellow unit holders who will be attending the SGM will ask some questions. :)

Jay said...

Hi AK and CS:

Confusion is the right word, although also happy that things are moving. I have been trying to get rid of my MIIF units and was hoping for a post-div rebound, but didnt happen.

Do you know if the remaining share of the Taiwan network (held by a Korean fund, I believe) will also be placed into the APPT, or just the MIIF share? If the latter I dont see the rationale either, apart from potential legal/ compliance issues, or management money-making machine..

Depending on when the SGM is I will try to attend. I can take your questions then.. ;-)


AK71 said...

Hi Jay,

Hope you are able to attend the SGM and ask the questions. :)

MIIF is selling their businesses with the intention to wind up. So, I believe it is only their stake in TBC that is being sold to APTT.

AK71 said...

Macquarie International Infrastructure Fund (MIIF) has informed its shareholders that it will hold a special general meeting on April 30.

This is to seek their approval on its sale of its 47.5% stake in Taiwan Broadband Communications to another Macquarie unit, Macquarie APTT Management.

The meeting will be held at Fairmont Singapore, Raffles City Convention Centre on April 30 at 9.30 am.

Shareholders will also vote on a proposed capital reduction to cancel up to $1 billion in MIIF's share premium account to be distributed to the members of the company in proportion to their shareholding.

The EDGE, 8 April.

AK71 said...

Asian Pay Television Trust, an investment vehicle for one of Taiwan’s biggest pay-TV operators, has started testing appetite for an up to 1 billion dollar listing that is set to be the city’s second-biggest flotation so far this year.

The Taiwanese company plans to list in the form of a trust, people with knowledge of the deal said Wednesday. Singapore is a hub for trust listings, which appeal to investors seeking assured yields from investments rather than short-term capital gains.

Taiwan Broadband Communications is owned by two funds managed by Australia’s Macquarie Group --the Macquarie International Infrastructure Fund, known as MIIF, and Macquarie Korea Opportunities Fund-- which plan to sell their stakes to Asian Pay Television Trust.

The trust has received listing approval from Singapore Exchange, and plans to release a preliminary IPO prospectus by mid-May, according to one of the people with knowledge of the deal. The trust would then start taking orders from institutional investors, ahead of a planned listing at the end of May, the person added.

MIIF’s shareholders would stand to receive at least $0.408 per share if the fund successfully sells its stake. As of Dec. 31, Taiwan Broadband Communications accounted for 61% of MIIF’s portfolio value.

Dow Jones & Co, Inc
Wednesday, 17 April 2013 17:13

AK71 said...

Asian Pay Television Trust, an investment vehicle for one of Taiwan’s biggest pay-TV operators, has secured commitments from as many as eight cornerstone investors to take up nearly a third of its planned initial public offering, which is expected to raise 1.4 billion dollars, people with knowledge of the deal said Wednesday.

Cornerstone investors commit to holding a significant stake for a certain length of time, demonstrating their confidence in the shares. The cornerstone investors that have committed to Asian Pay Television Trust’s IPO include insurance companies, long-only funds and hedge funds, the people said, without naming the investors.

Asian Pay Television Trust will be an investment vehicle of Taiwan Broadband Communications, which is owned by two funds managed by Australia’s Macquarie Group-the Macquarie International Infrastructure Fund, or MIIF, and Macquarie Korea Opportunities Fund. Both funds plan to sell their stakes in the company to Asian Pay Television Trust.

The trust is seeking to pay a yield of 8.25%-9.0% in 2014, one of the people said.

Dow Jones & Co, 2 May 2013.

Jay said...

Sorry, didnt manage to attend the SGM after all.. Now I intend to sell, around 64-65c.. ;-)

AK71 said...

Hi Jay,

I guess we are all busy with our own stuff. Unless we are full time investors, it is difficult to find time to attend all or even most of the AGMs. :)

No chance to sell at 64-65c now. ;p

opal said...

On 6 May 2013, MIIF announced its intention to voluntarily suspend trading in MIIF shares for eight market days to commence before the market opens on Tuesday, 7 May 2013 and to end after the market closes on Thursday, 16 May 2013 (the “Suspension Period”).

AK71 said...

Macquarie Group backed Asian Pay Television Trust (APTT) has priced its Singapore IPO at $0.97 per unit, at the bottom of a narrowed marketing range, people familiar with the matter told Reuters on Thursday, raising US$1.14 billion ($1.83 billion).

APTT, which used the business trust structure for the deal, is betting on investor demand for high-yield securities to finance the purchase of Taiwan’s third largest cable TV operator.

APTT had initially marketed the IPO in a $0.92-$1.00 per unit price range, but tightened it $0.97-1.00 on Wednesday. The company set the base offer at 1.39 billion units, but including an overallotment, the IPO would raise US$1.14 billion, one of the sources said.

JPMorgan and Macquarie are the joint global coordinators for the offer and joint bookrunners alongside CIMB and DBS.


AK71 said...

According to its final prospectus, Asian Pay Television Trust managed to price its shares at 97 Singapore cents each - slightly above the mid-point of its indicative range.

The business trust has a forecast distribution yield of 7.5 per cent for 2013 and 8.5 per cent for 2014.

Up to 936 million units will be offered under the placement and the public offer, subject to an over-allotment option.

The public offer of 70 million units for retail investors opens on Friday and will close on May 27.

Trading will start on May 29.

AK71 said...

No PRC Person shall hold or control Units in Asian Pay Television Trust in breach of the PRC Investment Restrictions and no Restricted Party shall hold or control Units in breach of the Taiwan Government Ownership Restrictions.

"PRC Person" means a PRC individual or corporate entity for purposes of the Measures Governing Investment Permit for the People of Mainland China Area. A corporate entity registered outside the PRC would be considered a PRC corporate entity if 30% or more of its equity interest or its actual control is directly or indirectly held by a PRC individual or entity/organisation/institution.

"PRC individual" means (1) the individuals who have household registrations in the PRC, which excludes the Hong Kong and Macau Special Administrative Regions, and (2) the individuals from PRC who reside outside the PRC, which include individuals who were born in foreign countries and hold passports issued by PRC, but exclude the following individuals from PRC who have resided abroad for four years or longer and have either: (i) obtained citizenship of the country where they reside; or (ii) obtained permanent residency status of the country where they reside and hold valid passports issued by the Taiwan government.

"PRC Investment Restrictions" means the provisions under the Measures Governing Investment Permit for the People of Mainland China Area that a PRC Person can only invest in certain business areas allowed by the Investment Commission of the Ministry of Economic Affairs of Taiwan, which currently does not include the cable television industry.

"Restricted Person" means a Taiwanese political party worker, political appointee or elected public official.

"Taiwan Government Ownership Restrictions" means the restrictions under the Cable Radio and Television Act of Taiwan that Restricted Entities and the Restricted Persons shall not directly or indirectly invest in a cable television system operator and that the aggregate shareholdings held by the spouses or relatives of the Restricted Persons shall not exceed one per cent. of the total outstanding shares of a cable television system operator.

- from APTT's website

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