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MIIF: Lower fair value with lower income distributions.

Thursday, May 16, 2013

With MIIF divesting TBC, unit holders will no longer be getting income distributions twice a year from the Fund in future.

This is because MIIF receives income from TBC in March and September while it receives income from HNE and CXP in September only.

MIIF will have a DPU of about 0.7c in August 2013 which is from the final income received from TBC. A DPU of about 1.2c will be paid out in March 2014 which will be for income received from HNE and CXP.

In future, we should expect only once a year distribution from MIIF for income received from HNE and CXP. Also, do not expect 1.2c to be the norm either as it is expected that the tolling revisions for HNE will adversely affect DPU for the full year starting in 2014.

What would be a fair value per unit for MIIF when it resumes trading?

In recent past, MIIF was trading at about 63c a unit and with an annual DPU of 5.5c, unit holders were enjoying a distribution yield of some 8.73%. For ease of calculation, let us be generous and assume that an annual DPU of 1.2c will be the norm. This would give us a fair value of 14c per unit, thereabouts, in order to have a similar yield. This would mean a decline in price of some 49c per unit!

If this estimate should gel with Mr. Market, unit holders would have been better off selling at 63c a unit prior to the voluntary trading suspension since unit holders are only getting 44.329c per unit from the divestment of TBC either in cash or in APPT units (priced at 97c per unit).

It would also mean that anyone with a purchase price of 58c or lower per unit, prior to the trading suspension, is quite "safe" while anyone with a higher purchase price could lose money.

Of course, there is a chance that APPT could see higher unit price when trading starts and there is also a chance that MIIF might not see its own unit price plunging to 14c per unit. If this should be the case, then, this effort by the management to unlock value for unit holders could be declared a success.

Anyway, now that we have some ballpark figures, we will be able to make some snap decisions tomorrow, if required, keeping in mind that any investment at the right price is a good investment.

See: MIIF dividend guidance.
See: APPT offer price and MIIF APPT units.

Related post:
MIIF: Asian Pay Television Trust (APTT).


ivan said...

Hi AK,

I believe my secondary-level maths is much worst than yours ... so appreciate if you could help me with my dumb questions here ;)

Q1. If my entry price for MIIF is $0.54xx, and if i opt to receive cash ($0.44329), then my actual outlay (discounting dividends so far), would be $0.098573 per unit. Based on an estimated future dividend of say $0.01, the effective annual yield is still slightly > 10%, right?

Q2. Opt for cash, i don't need to do anything, right?

Thanks in advance,

AK71 said...

Hi Ivan,

I think your math is good. :)

If you want cash instead of APTT units, you would have to fill up the cash election form and mail it back to CDP, iirc.

havefund said...

Is the form out ?

Unknown said...

Hi AK71
I really enjoy your blog and would like your thoughts on this..
I have 10 lots of MIIF at ave price 0.51c. If I take cash, I would get .44c per share.. would that make my ave price 0.07c?
And if today's trading price is about 0.19c, I would still be up right?
However, if I opt to convert, I may end up with odd lots that would make subsequent trading more difficult..
Would appreciate your thoughts on what you would do... take cash or convert?

AK71 said...

Hi havefund,

The cash election form? Yes, I received it a few days ago. :)

AK71 said...

Hi Francis,

If you are going to trade actively, then, odd lots is a pain.

Also, if you are investing for capital gains and not investing for income, your line of reasoning makes good sense. :)

Unknown said...

Thanks...will prob take cash then..;-)

AK71 said...

Hi Francis,

You are welcome. Usually, if we examine our motivations for being invested, we will know what to do. :)

seefei said...

from SGX website:
dividend guidance is 1.9ct... so if 10% price should be 19cts... if 6% then 31cts...

If IPO fail, price go back to 63cts... either way, we win...

AK71 said...

Hi seefei,

We have to remember that 0.7c will not recur because that is from TBC. So, to be more accurate, we have to consider MIIF's future annual DPU as 1.2c or lower.

seefei said...

the 0.7 is to be paid out before the divestment. It is the last dividend payout from TBC.

The dividend guidance is dated 16 May 2013, so cant be wrong. MIIF should be around 21cts to be in the region of yield of about 8%.

So, there is a likely upside of 2 cents at today closing price of 19 cents.

opal said...

Thx for the write up. I will definitely participate in the IPO exercise. Hope to get some more.
Meanwhile, I will hold on my existing MIIF lots and if it goes below 12cts, I hope to grab some too.

AK71 said...

Hi seefei,

Yes, if I remember correctly, that 0.7c is being paid out in August 2013. However, it will not recur.

It doesn't seem to make much sense to use a one off income distribution in a valuation exercise.

AK71 said...

Hi opal,

With APTT IPO priced at 97c/unit and estimated distribution yields of 7.5% in the first year and 8.5% in the second year, expectations are for the response to be quite good. We could possibly see unit price going higher on the first day of trading.

As for MIIF, with only HNE and CXP the only viable businesses left, for it to be a more compelling offer, I will need a much higher distribution yield.

We have to remember that HNE's performance is likely to take a hit next year with controls imposed by the Chinese government. CXP is not a particularly exciting asset when it comes to income growth.

Also, what about HNE's debts which have to be repaid. Remember HNE is a concession and it will run out. So, the debts must be amortised. This will probably start next year which means less money to be distributed to MIIF unit holders from 2015, I dare say.

So, although the guidance from the management is for a DPU of 1.2c to be paid in March 2014, we could possibly see the DPU dip from 2015.

TBC was the jewel in MIIF's portfolio and now that it is gone, even at 19c a unit, MIIF is overvalued for the income it is expected to distribute in future.

opal said...

Thx for pointing that out. :)

AK71 said...

Hi opal,

You are welcome. :)

In case you are wondering, HNE's concession expires in 2026 and CXP's concession expires in 2044.

Garfield75 said...

AK, are you electing cash or units?

AK71 said...

Hi Garfield,

7.5% yield in the first year and 8.5% yield in the second year seem pretty decent. So, units for me. :)

I suspect that unit price could go higher on the first day of trading too. So, I did something I have not done in a long time. Maybe, I will blog about it later. ;)

Garfield75 said...

Cool... I think I will do the same too.;)

AK71 said...

Hi Garfield,

Good luck to both of us. ;)

Bruce said...

good analysis from both quality & quantity perspectives

AK71 said...

Hi Unknown,

If this blog post has helped you in some way, I am glad.

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