Asian Pay Television Trust (APTT): IPO.

Usually, when people ask me about IPOs and if I would take part, I would answer in the negative.

Subscribing to what Warren Buffett thinks about IPOs and that is IPOs of stocks are almost always bad investments, I have not taken part in IPOs in many years. Warren Buffett is of the opinion that IPOs are rarely undervalued offers.

What about the IPO of APTT? Is this an exception?

Well, APTT will be holding TBC which was a business in MIIF's portfolio and we know that TBC was the crown jewel of MIIF's portfolio of businesses. With TBC removed from its portfolio, MIIF saw its unit price tumbled almost 70% yesterday.

At a unit price of 97c, APTT's distribution yield is estimated to be 7.5% in the first year and this is estimated to increase to 8.5% in the second year. With relatively high yields like these waved around, the IPO has attracted a high level of interest from institutional investors.

Indeed, Dow Jones Newswires reported in an article dated 2 May 2013 that 8 cornerstone investors were secured. These are investors who are willing to commit to holding significant stakes which shows their confidence in the Trust.

In a yield hungry world, investors fed up with a low interest rate environment could push up the unit price of APTT when it starts trading on 29 May 2013. Of course, there is no way of telling if this would happen but look at how Croesus Retail Trust saw its unit price rose 23% on its first day of trading recently and we get an idea of just how things could turn out for APTT. Although not really comparable, it suggests that Mr. Market could be quite happy with distribution yield compressing to just 6.5%.

In case you are wondering about gearing (and you should), APTT's gearing is about 40%, while Croesus Retail Trust's gearing is at 47%.

If a distribution yield of 6.5% is what Mr. Market is willing to accept, APTT could trade at $1.12 per unit. If Mr. Market demands a minimum of 7% yield in the first year, we could see APTT trading at $1.03 to $1.04 per unit. If news that the placement tranche was 3 times oversubscribed by institutional investors is reliable, chances are we will see APTT trading higher.

If you are interested in participating in the IPO, take note to do so by 12 noon, 27 May 2013.

Related posts:
1. MIIF: Asian Pay Television Trust (APTT).
2. MIIF: Lower fair value.

MIIF: Lower fair value with lower income distributions.

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).

MIIF: Asian Pay Television Trust (APTT).

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.

MIIF: Realising value.

The last time I blogged about MIIF was more than two years ago although I would reply to readers' comments or emails about the counter from time to time since. I have a long history with MIIF. It was recommended to me by a friend and I got in at a unit price of $1.00. Yes, no kidding.

See the elusive Mt. Fuji?
It seems that MIIF's value will elude unit holders no more.

Through the GFC, MIIF's unit price sank and the lowest unit price I bought some at was 29.5c on 6 January 2009, if my records are accurate. I bought more over a 6 months period from then as its unit price rose to 35.5c. Coming out of the GFC, MIIF strengthened its balance sheet through certain divestments, rationalised its portfolio and concentrated on Asian assets. Its DPU also improved.

As I was convinced that S-REITs were deeply undervalued and, for me, they are also easier businesses to understand, my investment in MIIF was not nurtured further.

By middle of this year, undervalued S-REITs were hard to find except for a small window of opportunity when Saizen REIT's unit price sank 15% in May/June. As regular readers know, I was also putting money into stocks looking for possible capital gains by then since it was harder to expect that from S-REITs going into the future.

It was around the same time that I increased my investment in MIIF at 51c/unit. Relatively strong balance sheet, NAV/unit at about 70c and a DPU of 5.5c per annum. Frankly, if not for the lack of options in S-REITs, I would probably not have increased my investment in MIIF as the fund owns myriad businesses in various countries and it is not as easy to understand as the S-REITs in my portfolio.

Today, I received an email from MIIF:

The Board of Macquarie International Infrastructure Fund Limited (MIIF) today announced the completion of the Strategic Review which was initiated in June 2012.

The Strategic Review, which included an assessment by CIMB Bank Berhad, Singapore Branch (CIMB) and consultation with a cross section of shareholders, generated a number of key observations. After considering these observations and assessing the alternatives available to MIIF, the Board has concluded that in order to maximise value for MIIF’s shareholders the strategy for MIIF should change.

As a result, the Board has decided to undertake the following initiatives:

• Distribute existing excess cash to shareholders as a one-off special dividend;
• Commence a joint process with Macquarie Korea Opportunities Fund (MKOF), MIIF’s TBC co-shareholder, to realise maximum value for their investment in TBC;
• Pursue the orderly divestments of MIIF’s interests in HNE, CXP and Miaoli Wind;
• Distribute proceeds from any divestment to shareholders as soon as practicable; and
• Allow MIIF’s corporate-level debt facility to lapse upon maturity.

These initiatives have been formulated with a focus on maximising and returning value to MIIF shareholders. The Board will endeavour to execute these initiatives in a timely manner; however, these initiatives involve complex processes which will require active management and prudent actions to safeguard the interests of MIIF shareholders.

Good news for unitholders. Well, Mr. Market seems to like it anyway.

Related post:
MIIF: Seeing value.

MIIF: Springboarding or diving?

The question I have now is whether MIIF is going through a correction using time, waiting for the 20dMA to catch up before moving higher in price. The 20dMA is fast approaching 54.5c and to any chart watchers, it is quite obvious that this price is the immediate support.

The Bollinger Bands look like they are in the early stages of squeezing, signalling the onset of lower volatility and a possible springboarding (or diving) of MIIF's unit price to come. The OBV has been continually moving higher while the MFI is approaching 50% which could serve as support.  RSI suggests that the buying momentum has weakened but the MFI which takes into account volume as well shows that demand has been rising.

If the immediate support at 54.5c should give way, the next support is at 53c, a many times tested resistance level.  This is where the 50dMA is approximating as well.  Strong support is at 51c which is also where the rising 100d and 200d MAs would be in time.

MIIF: Seeing value.

I used to have a very large position in MIIF about a year ago but I've divested most of it.  I still have a smallish investment left in the trust but I am not really doing anything with it.  It broke out yesterday and I blogged about it.  See: MIIF: Breakout.

Today, I received this very interesting email from The EDGE and it seems that we could see MIIF's price going higher in the near future:

Market punters have been fixated on Macquarie International Infrastructure Fund of late, a mutual fund which owns four assets. After selling British broadband operator Arqiva for $238.4 million and Canadian Aged Care for $91 million this March, the fund now owns primarily Asian assets. These are a 38% stake in Changshu Xinghua Port (Jiangsu), an 81% interest in Hua Nan Expressway in Guangdong, 20% stake in Taiwan Broadband Communications (TBC) and a 100% stake in Miaoli Wind, a wind farm in Taiwan.
                   

For 1H10, MIIF announced a distribution of 1.5 cents per share which will be paid on Sept 9. The fund has no borrowings at the corporate level, cash of 36 cents per share, and NAV is 80 cents. Dividends for 2H10 are expected to be maintained, and Macquarie Research has forecast a full-year dividend of three cents for FY10, rising to 3.4 cents for FY11.
 

Why have investors suddenly woken up to the value in MIIF? In a tough market, investing in an infrastructure trust offers yield potential and turnaround potential if it sells its assets. And it isn’t quite the same as investing in property via REITs. For one thing, China isn’t clamping down on infrastructure investment. On the contrary, the country continues to build roads, railroads, renewable energy assets and money is still available to fund their construction.

However, the real reason for the interest in MIIF is probably not China but Taiwan. In the past few months, there has been corporate activity in the broadband and cable TV industry on the island. Taiwan-exchange listed Kbro, owned by Carlyle, was sold in July to the Tsai family, who are Taiwan Mobile’s shareholders. Reuters reported that the price was around NT$65 billion ($2.7 billion), implying a 12–13x EV/EBITDA multiple.
                

Macquarie Research says such pricing implies that TBC is worth NT$51 billion. If so, MIIF’s interest is worth $221 million, the research report states. In 2007, the fund acquired the stake for just $161 million. Meanwhile, another Taiwanese broadband company, CNS, is being auctioned off by MBK Partners and Macquarie Bank and Providence Equity Partners were identified by Reuters as bidders. Macquarie Research says that MIIF could sell its stake in TBC to Macquarie and Providence which could use TBC to acquire CNS. A sale of TBC would add 14 cents to MIIF’s cash balance, Macquarie Research says. TBC accounts for 17% of MIIF’s asset base.
 

Already, MIIF’s discount to its NAV has been narrowing, from almost 70% to the current 30%. Macquarie Research has a target of 70 cents for MIIF. On Aug 26, MIIF announced that Macquarie Bank had raised its stake from 8.88% to 9.06%.

The EDGE Weekend Comment Sept 3, Goola Warden.
Disclaimer: The Edge Publishing Pte Ltd does not accept any liability whatsoever for any direct, indirect or consequential losses or damages that may arise from the use of information or opinions in this newsletter. The information and opinions are not to be considered as an offer to buy or sell any of the companies discussed.

MIIF: Breakout.

There was a sudden rush to accumulate units in MIIF today as volume expanded and price touched a high of 56.5c before closing at 55.5c.  The many times tested resistance of 53c could possibly be the new support. This needs confirmation.  In case of a breakdown, the 50dMA would be a crucial MA to watch as it served as support very nicely before pushing the price up.

The MACD which was declining until two sessions ago has turned up, completing a bullish crossover. A rising MFI with higher lows shows rising demand and a rising OBV shows accumulation. None of the momentum oscillators are overbought and we could see price go higher if the volume continues to expand.  We could even see a retest of the 12 months high of 58c.  Good luck to fellow unit holders.

MIIF: Very high volume up day.

MIIF had a very high volume up day, forming an impressive white candle to close at 52.5c. In the last 12 months, the only time volume was higher was in October 2009.  MACD histogram has a buy signal as momentum oscillators turned sharply upwards. Immediate support is a band between 49.5c to 50c.  Drawing an uptrend support from the low of 44.5c hit on 7 Jun approximates the position of the 20dMA which establishes this MA as an important support to watch. Any upside targets? Using Fibo lines, 138.2% approximates a many times tested candlestick resistance at 55c.  So, I expect this to be a strong resistance.  If this is taken out, we could see price go higher to 56.5c, the 161.8% Fibo line.

MIIF +5.1%; Under pressure to return cash: BGC Partners
Tuesday, 13 July 2010

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